U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20901 / February 17, 2009
Securities and Exchange Commission v. Stanford International Bank, et al., Case No. 3-09CV0298-L (N.D.TX.)
SEC Obtains Temporary Restraining Order, Asset Freeze, and Other Relief Against Defendants
The United States Securities and Exchange Commission announced that on February 16, 2009, the Honorable Judge Reed O’Connor, a federal judge in the Northern District of Texas, in response to the Commission's application for emergency preliminary relief, entered a temporary restraining order against Robert Allen Stanford and three of his companies, the Antiguan-based Stanford International Bank (SIB), Houston based broker-dealer and investment adviser, Stanford Group Company (SGC) and investment adviser, Stanford Capital Management. The court’s order also extends to SIB chief financial officer James Davis, and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group. The temporary restraining order restrains the defendants from violating certain antifraud provisions of the federal securities laws, as well as provisions of the Investment Company and Investment Adviser Acts. Also, Judge O’Connor froze all assets of the defendants until further notice, ordered that assets outside the U.S. be returned to the court’s jurisdiction, appointed a receiver to marshal the defendants’ assets and granted other relief.
The SEC's complaint, filed in federal court in Dallas, alleges that the defendants have committed an $8 billion fraud and violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act of 1940, and Section 7(d) of the Investment Company Act of 1940. The complaint alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called “certificates of deposit” to investors by promising improbable and unsubstantiated high interest rates, supposedly earned through its unique investment strategy, which has purportedly allowed the bank to achieve double-digit returns on its investments over the past 15 years. According to the Complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in “liquid” financial instruments (the “portfolio”); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff’s massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no “direct or indirect” exposure to the Madoff scheme.
The Commission continues to seek, among other things, a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and civil money penalties.
The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter.