CARACAS Well-off Mexican pensioners joined middle-class Venezuelans in a frantic quest on Wednesday to track down their savings as the fraud scandal enveloping U.S. broker Stanford Group Co spread to Latin America.
Crowds flocked to Stanford offices in Caracas and Mexico City and telephone lines buzzed as harried Stanford staff fielded calls round-the-clock about frozen accounts. Regulatory authorities moved on the bank's assets in Ecuador and Panama and its Colombian brokerage unit halted stock trading.
"I heard the news and came straight down," said Caracas resident Josefina Moreno, who said her son had about $10,000 (7,020 pounds) invested. "We've had money here for 2 years, and I want it back."
The U.S. Securities and Exchange Commission (SEC) has accused billionaire Allen Stanford, a high profile cricket promoter, and two Stanford executives of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched around the world from Texas and Antigua. Venezuelan investors alone could have more than $2 billion invested in the scheme.
One Venezuelan official familiar with some Stanford Group operations said that Venezuelan investors were mainly middle-class or rich individuals with deposits ranging from $10,000 to tens of millions of dollars.
The SEC civil complaint, filed on Tuesday in federal court in Dallas, Texas, named Stanford International Bank (SIB), based in Antigua with 30,000 clients in 131 countries and $8.5 billion in assets, and the group's Houston-based broker-dealer and investment adviser units. In all, the company claims to oversee $50 billion in assets.
Venezuelan investments account for an estimated third of money in SIB, authorities said.
Stanford Bank Venezuela sought to calm clients on Tuesday by saying its assets were not linked to SIB, and requested a national banking authority representative to sit on its board.
In a region all too familiar with financial turmoil, market meltdowns and frozen bank accounts, the Stanford scandal has panicked investors who were already worried about the effects of the global financial crisis on their jobs and savings.
Many wealthy Venezuelans look to overseas accounts as a way of dealing with tough currency controls, soaring inflation and their concerns that socialist President Hugo Chavez is driving the oil rich nation towards Cuba-style communism.
At Stanford's Mexico City office, middle-aged women carrying Louis Vuitton and Carolina Herrera designer purses fiddled with flashy necklaces as they waited alongside Jewish men in skull caps, switching between Spanish and Yiddish as they spoke on their cellphones.
Stanford staff handed out statements that said Stanford accounts had been frozen and provided wire transfer instructions for clients who wanted to liquidate accounts. Some of those waiting in line wept into their cellphones.
Some said they did not know if their money was in Mexico or Houston or Antigua.
"All my capital is in this bank, and I don't know what I am going to do. They won't attend to us. They are locked inside. They don't want to talk to us," said Karyna Kleinckwort, a widow in her mid-thirties.
BAD NEWS AFTER MIDNIGHT, CONFUSION REIGNS
Stanford Fondos has been licensed to operate in Mexico since 2005. The country's bank regulator said that as of November 2008, Stanford had sold investment stocks worth roughly $45 million to some 3,400 clients in Mexico.
"Yesterday, our advisor called us at 1 a.m. and told us he could not believe it," said Maria Esther Azuela, a housewife in her mid-sixties. "This is a big blow."
In Quito, Ecuador, confusion ruled. After the government announced that it was investigating the operations of two local units of Stanford, Anita Cazar rushed to claim her cash.
"I don't know what is happening," said Cazar, 50, who joined other investors looking for answers. "I saw it in the newspaper, but I want to get my money out just in case."
The Quito stock exchange suspended Stanford's local brokerage house on Wednesday from operating on that exchange for 30 days.
Santiago Noboa, head regulator for markets in Quito, said the Stanford units managed a fund and investor portfolios totalling about $15 million, but authorities were yet unaware of other instruments the firm might have sold locally.
In Colombia, a local unit of Stanford halted activities on the Colombian stock exchange. Operations there would be limited to fulfilling commitments and returning funds, officials said.
Peruvian securities regulator Conasev sent an inspection team to Stanford's broker-dealer office in Lima. Conasev said the unit has net assets in Peru of 6.8 million soles ($2.1 million).
In Panama, bank regulators seized Stanford's local affiliate, Stanford Bank. Nobody lined up outside the branch in Panama City, but a four-page note pinned to the door told of the banking superintendent's decision to take over the bank because of a threat of a run on its assets.
"Because of the aforementioned," it read, "the interests of the depositors are at risk and it is necessary to carry out an immediate administration control of Stanford Bank, Panama."
(Reporting by Caracas, Mexico City, Quito, Panama, Bogota bureaus; Writing by Patrick Markey; Editing by Toni Reinhold)