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HOUSTON—R. Allen Stanford, the formerboard of directors chairman of Stanford International Bank (SIB), has beensentenced to a total of 110 years in prison for orchestrating a 20-year investmentfraud scheme in which he misappropriated $7 billion from SIB to finance hispersonal businesses.
The sentencing was announced byAssistant Attorney General Lanny A. Breuer of the Justice Department’s CriminalDivision; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBIAssistant Director Kevin Perkins of the Criminal Investigative Division;Assistant Secretary of Labor for the Employee Benefits Security AdministrationPhyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Chief RichardWeber, Internal Revenue Service-Criminal Investigations (IRS-CI).
Stanford, 62, was convicted on 13 of 14counts by a federal jury following a six-week trial before U.S. District JudgeDavid Hittner and approximately three days of deliberation. The jury also foundthat 29 financial accounts located abroad and worth approximately $330 millionwere proceeds of Stanford’s fraud and should be forfeited.
Speaking on behalf of the victims in thecase during the sentencing hearing today were Angie Shaw, the director andfounder of the Stanford Victims Coalition, and Jaime Escalona, who representsStanford victims from Latin America.
“Mr. Stanford, you took advantage of thetrust that is placed in U.S. companies and caused losses that prevented familiesfrom being able to pay for medical and basic living expenses,” said Escalona.
“This was not a bloodless financialcrime carried out on paper,” furthered Shaw. “It was and is an inconceivablyheinous crime, and it has taken a staggering toll on the victims. Innocentinvestors from around the world sacrificed and saved for decades to build asolid foundation for their futures. That foundation crumbled beneath them whenthe news of the Stanford Financial Group Ponzi scheme became public. Many ofthe victims had lived the proverbial American Dream, only to have it snatchedaway from them in the name of greed.”
In handing down the sentence, JudgeHittner remarked that “this is one of the most egregious frauds ever presentedto a trial jury in federal court.”
After considering all the evidence,including more than 350 victim impact letters that were sent to the court,Judge Hittner sentenced Stanford to 20 years for conspiracy to commit wire andmail fraud; 20 years on each of the four counts of wire fraud, as well as fiveyears for conspiring to obstruct a U.S. Securities and Exchange Commission(SEC) investigation; and five years for obstruction of an SEC investigation.Those sentences will all run consecutively. He also received 20 years for eachof the five counts of mail fraud and 20 years for conspiracy to commit moneylaundering, which will run concurrent to the other sentences imposed today, fora total sentence of 110 years.
As part of Stanford’s sentence, thecourt also imposed a personal money judgment of $5.9 billion, which is anongoing obligation for Stanford to pay back the criminal proceeds. The courtfound that it would be impracticable to issue a restitution order at this time.However, all forfeited funds recovered by the United States will be returned tothe fraud victims and credited against Stanford’s money judgment.
According to court documents andevidence presented at trial, the vehicle for Stanford’s fraud was SIB, anoffshore bank Stanford owned based in Antigua and Barbuda that sold certificatesof deposit (CDs) to depositors. Stanford began operating the bank in 1985 inMontserrat, the British West Indies, under the name Guardian InternationalBank. He moved the bank to Antigua in 1990 and changed its name to StanfordInternational Bank in 1994. SIB issued CDs that typically paid a premium overinterest rates on CDs issued by U.S. banks. By 2008, the bank owed its CDdepositors more than $8 billion.
According to SIB’s annual reports andmarketing brochures, the bank purportedly invested CD proceeds in highlyconservative, marketable securities, which were also highly liquid, meaning thebank could sell its assets and repay depositors very quickly. The bank alsorepresented that all of its assets were globally diversified and overseen bymoney managers at top-tier financial institutions, with an additional level ofoversight by SIB analysts based in Memphis, Tennessee.
As shown at trial, that purportedinvestment strategy and management of the bank’s assets was followed for onlyabout 10-15 percent of the bank’s assets. Stanford diverted billions indepositor funds into various companies that he owned personally, in the form ofundisclosed “loans.” Stanford was thus able to continue the operations of hispersonal businesses, which ran at a net loss each year totaling hundreds ofmillions of dollars, at the expense of depositors. These businesses wereconcentrated primarily in the Caribbean and included restaurants, a crickettournament, and various real estate projects. Evidence at trial establishedStanford also used the misappropriated CD money to finance a lavish lifestyle,which included a 112-foot yacht and support vessels, six private planes, andgambling trips to Las Vegas.
According to evidence presented attrial, Stanford continued the scheme by using sales from new CDs to payexisting depositors who redeemed their CDs. In 2008, when the financial crisiscaused a slump in new CD sales and record redemptions, Stanford lied aboutpersonally investing $741 million in additional funds into the bank tostrengthen its capital base. To support that false announcement, Stanford’sinternal accountants inflated on paper the value of a piece of real estate SIBhad purchased for $63.5 million earlier in 2008 by 5,000 percent, to $3.1billion, even though there were no independent appraisals or improvements tothe property.
The trial evidence also showed thatStanford perpetuated his fraud by paying bribes from a Swiss slush fund atSociete Generale to C.A.S. Hewlett, SIB’s auditor (now deceased), and LeroyKing, the then-head of the Antiguan Financial Services Regulatory Commission.
In addition to Stanford, a grand jury inthe Southern District of Texas previously indicted several of his allegedco-conspirators, including: James Davis, the former chief financial officer;Laura Holt, the former chief investment officer; Gil Lopez, the former chiefaccounting officer; Mark Kuhrt, the former controller; and King. Davis haspleaded guilty and faces up to 30 years in prison under the terms of his pleaagreement. The trial of Holt, Kuhrt, and Lopez, which was severed fromStanford’s trial, is scheduled to begin before Judge Hittner on September 10,2012. They are presumed innocent unless and until convicted through due processof law.
The investigation was conducted by theFBI’s Houston Field Office; the U.S. Postal Inspection Service; IRS-CI; and theU.S. Department of Labor, Employee Benefits Security Administration. The casewas prosecuted by Deputy Chief William Stellmach and Trial Attorney Andrew Warrenof the Criminal Division’s Fraud Section, former Assistant U.S. Attorney (AUSA)Gregg Costa of the Southern District of Texas. AUSA Kristine Rollinson of theSouthern District of Texas and Trial Attorney Kondi Kleinman of the AssetForfeiture and Money Laundering Section in the Justice Department’s CriminalDivision assisted with the forfeiture proceeding, and AUSA Jason Varnado andFraud Section Jeffrey Goldberg assisted with the sentencing proceeding.
The Justice Department also wishes tothank several countries for their ongoing cooperation during the investigationand prosecution of Stanford and his co-conspirators, including the governmentsof Antigua and Barbuda, Switzerland, the Cook Islands, the United Kingdom, andthe Isle of Man.
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