SEC v. Stanford

SEC Complaint against Stanford


Yesterday, the SEC filed a complaint against R. Allen Stanford and three of his companies: Antiguan-based Stanford International Bank, Houston-based broker-dealer and investment adviser Stanford Group Company, and investment adviser Stanford Capital Management.

Tuesday morning, the Wall Street Journal reported on Stanford Depositors head to Antigua or Redemptions. Word had gotten out that the authorities were investigating the Stanford International Bank and depositors were nervous.

They should have been nervous when they first made the investments. According to item 31 in the SEC complaint, SIB was offering very high rates of return on CDs. On November 28, 2008 SIB was offering a 5.375% rate on a 3 year CD, while other US banks were offering rates under 3.2%. At the same time, SIB was saying the investments were safe and invested in very liquid assetts. [Investing 101. The greater the rate of return you should expect.]

Unfortunately it looks like the problem has been in place for years. The SEC complaint [item 4] , SIB had identical returns in 1995 and 1996.

Bruce Carton points out that one of Stanford’s own lawyers has emerged as a key figure in the matter: Attorney for Stanford’s “Disaffirmation” of Prior Statements Was Red Flag for SEC. Bruce cites a Bloomberg report that Thomas Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford’s company’s Antigua affiliate, told authorities that he “disaffirmed” everything he had told them to date.

Felix Salmon, of, first pointed the problems with Stanford International Bank on February 10: What's Going On at Stanford International Bank? Felix noted that Stanford had very consistent returns that seemed to not be impacted by any of the gyrations of the market over the last few years. Feliz also dug up a report by Alex Dalmady that highlighted the problems.

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Reference Info:Pleadings | Federal, 5th Circuit, Texas | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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