WASHINGTON Feb 17 Allen Stanford's investment
companies were exposed to losses from the alleged Ponzi scheme
run by financier Bernard Madoff, and falsely reassured
investors otherwise, federal regulators charged on Tuesday.
The Securities and Exchange Commission outlined the Madoff
link in its charges against Stanford that also said the firm
sought to remove nearly $200 million from its accounts in
recent weeks. The firm also falsely told at least one customer
earlier this month that he could not withdraw a multimillion
dollar certificate of deposit because the SEC had frozen the
The agency charged Stanford, two aides, and three of his
companies with financial fraud in an $8 billion CD program. It
said his Stanford International Bank (SIB) and other units sold
CDs by promising higher returns than CDs offered by traditional
"Recently, as the market absorbed the news of Bernard
Madoff's massive Ponzi scheme, SIB has attempted to calm its
own investors by claiming the bank has no "direct or indirect"
exposure to Madoff's scheme," the SEC said.
"These assurances are false." The agency cited several
misrepresentations and said, "Perhaps most alarming is that SIB
has exposure to losses from the Madoff fraud scheme, despite
the bank's public assurances to the contrary."
It gave no more details, and a Stanford spokesman did not
return calls seeking comment.
Other SEC allegations included:
-- SIB reported identical returns of 15.71 pct in 1995 and
1996, which the SEC called "improbable" and suspicious.
-- Ninety percent of SIB's claimed investment portfolio is
in a "black box" shielded from any independent oversight, and
only Stanford and aide James Davis, also charged, knew details
of the bulk of the portfolio.
-- Stanford failed to cooperate with the SEC's probe and
continued to mislead investors by falsely saying the SEC had
frozen accounts to withdrawal or the company had ordered a
moratorium on CD redemptions.
-- A major, unidentified clearing firm stopped processing
wires to SIB for purchase of SIB-issued CDs after the clearing
firm was unable to obtain information about the company's
-- Stanford used also false information to promote a mutual
fund wrap program separate from the CDs. The program grew to
more than $1.2 billion from less than $10 million in 2004.
There was no sign of imminent federal criminal charges
Citing policy, U.S. Justice Department spokesman Ian
McCaleb, said "We cannot confirm or deny the existence of a
criminal investigation at this point."
(Editing by Jeffrey Benkoe)