BOSTON Feb 17 Shouting reverberated through
the hallway of a Houston office building as one investor
demanded the return of the $250,000 he had invested with
Stanford Financial Group.
In the company's Baton Rouge office, another banged his
fist on a desk, insisting he get his money back.
Then there were the hundreds of telephone calls to
Stanford's army of investment advisers from anguished clients
who just wanted to know where their money was.
Emotions, already running high last week on news that
regulators were probing Stanford, exploded on Tuesday when the
U.S. Securities and Exchange Commission charged that
billionaire Allen Stanford and three of his companies had run
an $8 billion "massive ongoing fraud," offering and paying
unusually high interest rates for certificates of deposit.
The charges come only two months after regulators arrested
Wall Street investment manager Bernard Madoff for allegedly
masterminding the biggest-ever Ponzi scheme.
"On a scale of one to 10, infinity," said Brett Zagone in
Houston, describing the anxiety she was feeling about the
whereabouts of the life savings and inheritance from her mother
that she had entrusted to Stanford.
Houston-based Stanford, which sold CDs issued by its
Antigua-based Stanford International Bank, promised Zagone an 8
percent return, a tantalizingly high rate at a time U.S. banks'
yields on these types of investments are far less.
"People are frightened, panicking and looking for help,"
said Jacob Zamansky, an investor lawyer and founder of law firm
Zamansky & Associates in New York.
Just a few weeks ago, some investors had heaved a sigh of
relief when Stanford officials told them it had not bought
subprime mortgage debt and had avoided investing with Madoff.
Madoff, who is accused of running a $50 billion fraud,
cultivated an exclusive image and hunted for customers at tony
golf courses and charity events.
Allen Stanford, on the other hand, made nearly everyone
feel welcome to invest.
MONEY LOCKED UP
The flamboyant Texan, who ran the firm founded by his
grandfather, attracted investments via television commercials
and built a wide-reaching network of financial advisers hired
from prominent firms like U.S. Trust and Wachovia.
Stanford also underwrote sports events ranging from golf
and tennis to sailing and cricket.
In turn, a wide swath of investors including retired
businessmen, young entrepreneurs and middle-class Americans put
their money into the short-term CDs that promised the high
returns. Many expected the CDs would be federally insured.
Lawyers for the investors said they had not received
Stanford documents that indicated the products were insured.
In the United States, CDs are often insured by the Federal
Deposit Insurance Corp.
"Many people automatically thought Stanford CDs were
insured," said William Shepherd, a partner who specializes in
securities fraud at law firm Shepherd Smith Edwards & Kantas.
In recent days, Shepherd said he had fielded a flood of
telephone calls from concerned investors and advised them to
move their money as quickly as possible.
That advice may have come too late. Financial advisers in
Stanford's offices in Louisiana, Florida and Texas told
investors the money was locked up for a little while.
"One of my clients wanted to pull out $700,000 that he had
invested in Stanford CDs and was told there was a 60-day
moratorium on withdrawing the money," lawyer James Dunlap of
Atlanta said. Even a client whose $250,000 CD matured on Feb. 9
could not get the money out, Dunlap said.
Stanford spokesman Brian Bertsch directed all questions to
Some investors now say there had been problems in getting
money out, supporting suspicions of rival investment advisers
that Stanford's claims were too good to be true.
"There had been delays of three or four days in getting the
money out in the past," Dunlap said, noting that Stanford had
claimed technical difficulties at that time, and later made
Other investors are ready to go to court to try and get
their money back.
"We are trying to figure out what can be done in terms of a
lawsuit but right now we are still getting the facts," said
Houston attorney William Shepherd, who is representing some
Dunlap said he was getting ready to file a lawsuit as early
as Tuesday, possibly accusing Stanford of breach of contract.
(With additional reporting by Martha Graybow in New York and
Anna Driver in Houston; editing by Jeffrey Benkoe and Ted