Texas billionaire Allen Stanford and three of his companies were charged with “massive ongoing fraud” Tuesday as federal agents swooped in on his US headquarters. In a complaint filed in federal court in Dallas, the US Securities and Exchange Commission accused the cricket-loving Stanford, 58, and two other top executives at Stanford Financial Group of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched from Texas to Antigua and around the world. “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, regional director of the SEC's office in Fort Worth, Texas. The SEC was seeking to freeze the assets of the Stanford group and appoint a receiver “to take...control of defendants' assets for the protection of defendants' victims.” About 15 federal agents entered the lobby of Stanford's Houston office according to eyewitnesses. Stanford Financial remained open for business but was “under the management of a receiver,” according to a sign taped to the door of the firm's Houston office. Stanford's real estate holdings and celebrity associations have drawn comparisons with Wall Street investment manager Bernard Madoff, charged in an alleged $50 billion fraud. Stanford, who has denied any wrongdoing, has endorsement relationships with golfer Vijay Singh and England soccer star Michael Owen as well as involvement in polo. Last year Forbes Magazine estimated Stanford's personal fortune at $2.2 billion. The 25-page SEC complaint stated the Stanford International Bank (SIB) sold $8 billion in CDs “by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks.” Investors like Kelly Dehay, a realtor, showed up at Stanford's Houston office on Tuesday to inquire about their funds, only to be turned away at the door. Dehay said his Stanford broker sold him a CD held by the Antiqua-based SIB and promised returns above 8 percent. SIB has 30,000 clients in 131 countries with $8.5 billion in assets, all part of the $50 billion the company claims to oversee. – ReutersThe SEC also allege: • SIB reported identical returns of 15.71 percent in 1995 and 1996, which the SEC called “improbable” and suspcious. • Ninety percent of SIB's claimed investment portfolio was in a “black box” shielded from any independent oversight, and only Allen Stanford and aide James Davis knew details of the bulk of the portfolio. • Stanford failed to cooperate with the SEC probe and continued to mislead investors by falsely saying the SEC had frozen accounts 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 financial condition. • Stanford used false information to promote a mutual fund program separate from the CDs. The program grew to more than $1.2 billion from less than $10 million in 2004.
