Regulatory Investigation
During the week of February 13, 2009, Stanford issued a letter to clients saying: "Regulatory officers have visited our offices and have stated that these are routine examinations". On February 17, 2009, U.S. Federal agents entered the company's Houston and Memphis offices. Law enforcement officials placed signs on the office doors stating that the company was temporarily closed: "The company is still in operation but under the management of a receiver".
"The company is still in operation but under the management of a receiver." —Signs placed February 17, 2009 at Houston office by law enforcement)
The Securities Exchange Commission's (SEC) charged Allen Stanford, Pendergest-Holt and Davis of fraud in connection with Stanford Financial Group's US$8 billion certificate of deposit (CD) investment scheme that offered "improbable and unsubstantiated high interest rates". This led the Federal government to freeze the assets of Allen Stanford, Stanford International Bank, Stanford Group Co., and Stanford Capital Management. In addition, Stanford International Bank placed a 60-day moratorium on early redemptions of its CDs.
On February 18 and 19, 2009, Ecuador and Peru suspended the operations of local Stanford units, and, in Venezuela and Panama, the governments seized local units of Stanford Bank. Mexico's financial regulator announced on February 19 that it was investigating the local affiliate of Stanford bank for possible violation of banking laws.
On February 27, 2009, Stanford official Laura Pendergest-Holt was arrested by Federal agents in connection with the alleged fraud. On that day the SEC said that Stanford and his accomplices operated a "massive Ponzi scheme", misappropriated billions of dollars of investors' money and falsified the Stanford International Bank's records to hide their fraud. "Stanford International Bank's financial statements, including its investment income, are fictional," the SEC said.
United States District Judge David Godbey froze all of the Stanford personal and corporate assets. Godbey gave them to Ralph Janvey, a Dallas receiver; Janvey will retain control until the SEC suit is resolved. A British receiver took the Antigua-based Stanford International Bank.
On July 1, 2009, James M. Davis, the CFO of the company, agreed to change course from his not guilty plea and plead guilty to three charges related to the Ponzi scheme fraud, once details can be worked out.
On November 13, 2009 The US District Court Ordered Brokerage Accounts to be transferred to Dominick & Dominick LLC. The transfer became effective on January 20, 2010.
In 2011, an auction of Stanford's goods was held in Houston.
On March 19, 2012 the 5th U.S. Circuit Court of Appeals overturned a federal judge’s ruling from last year that threw out three class action lawsuits that are trying to use state laws to recover investor losses resulting from Stanford’s scheme. The ruling allows lawsuits by investors who lost millions in Stanford Ponzi scheme to go forward against several 3rd parties.
Read more about this topic: Stanford Financial Group