Highlights of the SEC Complaint Against Stanford

The SEC complaint against Stanford is quite astonishing. Here are some of the highlights, which include a slew of outright lies and even an investment with Bernie Madoff.

• Impossibly, Stanford's portfolio managed to rack up identical 15.71% back-to-back returns in 1995 and 1996 -- which implies that this fraud has been going on for at least 13 years.
• Stanford, and his CFO James Davis, have "wholly failed to cooperate with the Commission's efforts to account for the $8 billion of investor funds purportedly held by" Stanford International Bank.
• Stanford told at least one customer that the SEC was freezing the CDs, rather than Stanford itself.
• Stanford's public statements about its investments "are false":

A substantial portion of the 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 of analysts, but rather by two people - Allen Stanford and James Davis.

• "SIB has exposure to losses from the Madoff fraud scheme despite the bank's public assurances to the contrary": Stanford invested money with Tremont Partners, which in turn invested more than 6% of that money with Madoff. One analyst came up with an estimate of $400,000 in Madoff losses.
• "Since 2005, SGC advisers have sold more than $1 billion ofa proprietary mutual fund wrap program, called Stanford Allocation Strategy, by using materially false and misleading historical performance data."
• Both Stanford and Davis "refused to appear and give testimony in the investigation."
• "Tier 3" assets of SIB -- "unknown assets under the apparent control of Stanford and Davis" -- accounted for 81% of the Bank's investment portfolio as of December 2008.
• Stanford's senior investment officer did what he was told by Laura Pendergest-Holt, the CIO:

The SIO followed Pendergest's instructions, misrepresenting that a team of 20-plus analysts monitored the bank's investment portfolio. In so doing, the SIO never disclosed to investors that the analysts only monitor approximately 10% of SIB's money. In fact, Pendergest-Holt trained the SIO "not to divulge too much" about oversight of the Bank's portfolio because that information ''wouldn't leave an investor with a lot of confidence."

• "SIB's accountant, C.A.S. Hewlett & Co., a small local accounting firm in Antigua, is responsible forauditing the multi-billion dollar SID's investment portfolio. The Commission attempted several times to contact Hewlett by telephone. No one ever answered the phone."
• "SCM, with the benefit ofhindsight, picked mutual funds that performed extremely well during years 1999 through 2004, and presented the back-tested performance ofthose top-performing funds to potential clients as ifthey were actual returns earned by the SAS program."
• In any case, the performance claims were simply false: "(e.g., a claimed return of 18.04% in 2000, when actual SAS investors lost as much as 7.5%)."

The only thing missing here is any indication of how much money Stanford really has. If he's really a billionaire, then maybe all his personal cash can be put towards making his depositors whole. But I suspect that if you have a Stanford CD, you'll end up with pennies on the dollar. Or maybe a really nice new home in Antigua.