I am still putting the finishing touches to my series, I decided to report on the latest Wall Street scandal involving Texas billionaire and cricket entrepreneur, Sir R. Allen Stanford.

The Securities and Exchange Commission filed civil charges against Texas billionaire Sir Robert Allen Stanford, his offshore bank, Antigua-based Stanford International Bank (SIB), two of his Houston-based companies, Stanford Group Company (SGC) and Stanford Capital Management (SCM), for orchestrating a multibillion-dollar investment fraud scheme on certificates of deposit. The agency also charged SIB’s Chief Financial Officer James Davis and SFG’s Chief Investment Officer Laura Pendergest-Holt.

Stanford, CEO of the Stanford Financial Group, was named in a complaint filed at a US federal court in Dallas and accused of “orchestrating a fraudulent, multi-billion dollar investment scheme,” one of the largest alleged financial frauds in US history.

Also at issue is the credibility of the bank’s stated investment returns. SIB reportedly returned 6% last year, while the S&P 500 declined 38%. According to the SEC complaint:

… recent misrepresentations are made even more suspicious by extensive and fundamental misrepresentations SIB and its advisors have made to CD purchasers in order to lull them into thinking their investment is safe. SIB and its advisers have misrepresented to CD purchasers that their deposits are safe because the bank: (i) re-invests client funds primarily in “liquid” financial instruments (the “portfolio”); (ii) monitors the portfolio through a team of 20-plus analysts; and (iii) is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff’s massive Ponzi scheme, SIB has attempted to calm its own investors by claiming the bank has no “direct or indirect” exposure to Madoff’s scheme.

These assurances are false. Contrary to these representations, SIB’s investment portfolio was not invested in liquid financial instruments or allocated in the manner described in its promotional material and public reports. Instead, a substantial portion ofthe bank’s portfolio was placed in illiquid investments, such as real estate and private equity. Further, the vast majority SIB’s multi-billion dollar investment portfolio was not monitored by a team ofanalysts, but rather by two people – Allen Stanford and James Davis. And contrary to SIB’s representations, the Antiguan regulator responsible for oversight ofthe bank’s portfolio, the Financial Services Regulatory Commission, does not audit SIB’s portfolio or verify the assets SIB claims in its financial statements. Perhaps most alarming is that SIB has exposure to losses from the Madoff fraud scheme despite the bank’s public assurances to the contrary.

In short, R. Allen Stanford and two colleagues, working through a web of firms in Houston and the Caribbean, lied to customers about how their money was being invested and how the firms’ investment portfolios had performed in the past and lost money due to Bernard Madoff’s $50 billion Ponzi scheme. I guess there is no honor among thieves.

Last fall, in an interview with Forbes, Stanford shed some light on the firm’s apparent investment success. Stanford predicted further shocks to U.S. financial markets and advised readers with $100,000 in liquid assets to put the money in 12-month CDs.

In a statement, Linda Chatman Thomsen, the SEC’s enforcement-division director, said, “Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical-return data to prey on investors.”

SIB’s investment committee is made up of Stanford himself; Stanford’s father, who resides in Mexia, TX; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford’s college roommate.

Unfortunately, law enforcement can’t find this Texan turn Brit. People like Madoff and Allen Stanford have no problem cheating and robbing people dry, but when caught and its time to pay the piper, they scurry like the rats they are.

Udpdate: Venezuela Seizes Stanford Bank
Venezuela has taken control of a bank run by huckster R. Allen Stanford and his Stanford International Group, according to The New York Times.

Stanford moved heavily into Venezuela in 2005, even as most companies were fleeing the country as Hugo Chavez began his nationalizing his country.

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