Federal regulators are charging R. Allen Stanford and three of his companies with a “massive” fraud that centered on high interest rate CDs. The Securities and Exchange Commission’s complaint, filed in federal court in Dallas, alleges that Stanford International Bank sold about $8 billion of so-called certificates of deposit to investors by promising “improbable and unsubstantiated high interest rates.” The rates allegedly allowed the bank to achieve double-digit returns on its investments for the past 15 years. According to the Wall Street Journal, instead of ultra safe investments, a substantial portion of the “portfolio was placed in real estate and private equity.” Read the Journal story here. (Registration required)
According to Bloomberg News, Stanford didn’t appear for testimony or provide any documents in response to SEC subpoenas in the past several weeks as investigators tried to account for the $8 billion in investor money. Read the Bloomberg report here.
U.S. District Judge Reed O’Connor entered a temporary restraining order and froze Stanford’s assets. The SEC’s outgoing enforcement chief Linda Chatman Thomsen says Stanford and his family and friends “perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors.”
The New York Times says law enforcement officers entered Stanford’s Houston offices around 10 a.m. today. Read the Time’s coverage here.
Stanford has an office in downtown Baton Rouge. FINRA, a non-governmental regulator of securities firms, visited the local office several weeks ago, one of six branches from which agency investigators downloaded information from computer hard drives and looked through files.