SEC INVESTIGATION

The Stanford pyramid saga

03-06-2009 | CAPITAL STAFF

10 years of fraudulent activities have caused problems for customers worldwide including Panama where accounts are frozen

Panama Star PANAMA. By the end of 2008, Standford International Bank (SIB), with headquarters in Antigua and an affiliated company of Standford Financial Group (SFG), had sold more than $8 billion in deposit certificates through a marketing strategy that promoted the solidity and security of the bank, its good shares performance and the fact that it offered higher interest rates than any other US commercial bank.

The scam has caused problems for customers of the bank in Panama where accounts are frozen.

According to the findings of the US Securities Commission (SEC), the Texan multimillionaire Allen Stanford and the vice-president of the financial group, James Davis, operated for more than 10 years a pyramid scheme that diverted thousands of millions of dollars of investors money to other accounts as well and falsified the balance sheets to hide their fraudulent activities.

Laura Pendergest-Holt, vice-president of Group Investment,facilitated the fraud by given false figures to investors about the real value of their portfolios, of which 80 percent were handled exclusively by Stanford and Davies.

According to SEC, by February 2009, Stanford and Davis had diverted $1.6 billion in loans to themselves and other thousands of millions were used in speculative investments and private businesses.

Additionally to this, in an effort to hide their fraudulent conduct and continue sending money to Antigua, they manufactured the portfolio behavior.

Every month, said the report, Stanford and Davis decided how much the public return of the bank portfolio was going to be and over that figure the SIB accountants produced the financial statements, as a way of showing a return that had nothing to do with reality.

Apart from the deposit certificates, SGC advisors since 2004 sold more than $1 billion in an investment program called “Stanford Allocation Strategy” SAS, using false material and financial information Because of that it grew from less than $10 million in 2004 to more than $1.2 billion in 2009.

For this program high profile financial advisors were recruited, they were given monetary incentives way about the going rate, their aim was to convince their clients to transfer their accounts to Antigua.

After confirming the existence of the pyramid and the falsification of the financial statements SEC asked the court to issue a warrant against Stanford, Davis and Pendergast and freeze their assets.