Monday, 28 July 2014
Last updated 4 hours ago
Mar 6 2012 | 2:12pm ET
Texas financier R. Allen Stanford was convicted on Tuesday on 13 of 14 counts of fraud in connection with a $7 billion Ponzi scheme.
Three years had elapsed between Stanford's being accused of the hedge fund fraud—which involved 30,000 investors in 113 countries—and Today's decision. The trial was delayed because Stanford was beaten severely in a prison fight in 2010 after which he became addicted to prescription anti-stress drugs. He was subject to a year of therapy before being declared fit for trial, over the defense’s objections that he had lost much of his memory and could not defend himself.
Stanford had pled not guilty to all 14 counts, which included conspiracy, mail fraud, wire fraud and obstruction of a Securities and Exchange Commission investigation. He was convicted of all but one wire fraud charge in the trial, which took place in Houston and lasted six weeks.
The eight-man, four-woman jury had appeared to be deadlocked on Monday, when they’d sent a note to Judge David Hittner saying they were unable to reach unanimous agreement on all 14 counts. Hittner instructed them to continue their deliberations.
Prosecutors claimed that Stanford had lied to investors for 20 years, convincing them to buy certificates of deposit from his bank based on the Caribbean island of Antigua then using the bank as his “own private ATM,” in the words of prosecutor William J. Stellmach. Stanford borrowed $2 billion to finance a high-flying lifestyle that included mansions, private jets, yachts, even a cricket team and stadium. Prosecutors also accused the Texas financier of bribing Antiguan officials to cover up his fraudulent dealings.
According to the New York Times, the key to the prosecutors’ case was the testimony of James M. Davis, Stanford’s former college roommate and later chief financial officer. Davis told the court Stanford’s business empire was a fraud—describing one incident in which Stanford dispatched him to London to fax a prospective client from a non-existent insurance company office, reassuring him about the safety of the investment he was contemplating.
“There really is no dispute that Allen Stanford lied,” Stellmach told the jurors in his closing argument, “lining his pockets with billions of dollars of other people’s money.” Another prosecutor, Gregg Costa, compared Mr. Stanford to convicted fraudster Bernard L. Madoff.
Stanford’s defense lawyers tried, unsuccessfully, to argue that Stanford had distanced himself from business matters, which were largely the concern of Davis. Davis, for his part, pled guilty to charges of fraud and conspiracy to obstruct an SEC investigation but told the court he’d been manipulated by Stanford who “instilled intimidation and fear.”
Stanford faces up to 20 years in prison.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…