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Saturday, December 9, 2023
Courthouse News Service
Saturday, December 9, 2023 | Back issues
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Jury Convicts Allen Stanford of Ponzi Scheme

HOUSTON (CN) - Allen Stanford faces more than 20 years in federal prison after a jury convicted him Tuesday for running a $7 billion Ponzi scheme.

Stanford was acquitted on just one wire fraud charge out of the 14 crimes with which he was charged. After five days of deliberations, the jury found him guilty of one count of conspiracy to commit mail fraud, four additional counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct an SEC investigation and one count of obstruction of an SEC proceeding.

As U.S. District Judge David Hittner read the verdict before a packed courtroom, Stanford showed no reaction other than a reddened face, but his daughter stifled a cry.

A day earlier, Hittner had ordered the deadlocked jury to keep deliberating charges that Stanford sold certificates of deposit issued by his Antigua-based Stanford International Bank with phony interest rates.

One of Stanford's court-appointed attorneys discussed his client's post-trial options.

"I think he could get as much as 120 years if the judge stacks the charges," attorney Robert Scardino said. "He has 14 days to file a motion for a new trial and sentencing will be in the next 2 months."

When asked about Stanford's mental status following the verdict, Scardino said, "It would be unusual if he was anything but depressed."

Forfeiture Proceedings Commence

After reading the verdict, Hittner convened a separate forfeiture hearing in which the same jurors will decide what will happen to $300 million, mostly cash assets, in Stanford's 29 personal and business accounts.

During the hearing, a federal prosecutor told jurors that "every single dollar the United States is seeking to seize is CD depositors' money, and belongs to the depositors."

Defense attorney Ali Fazel argued that some of the money belongs to Stanford.

"The totality of the accounts can't all be the proceeds of fraud," Fazel said.

The government's first witness, U.S. Postal Inspector Clayton Gerber, told the court he has spent the last three years reviewing "documents, lots of documents" to trace Stanford International Bank transactions.

Gerber's investigation shows that Stanford International Bank used eight bank accounts in Toronto Dominion Bank in Canada, and four accounts at HSBC in the United Kingdom to receive investors' payments for the CDs.

The forfeiture hearing will continue Wednesday morning.

The Government's Case

Stanford, 61, has been jailed since June 17, 2009, when he turned himself in to the FBI in Houston hours after a grand jury returned the sealed indictment.

The Securities and Exchange Commission charged Stanford and three of his companies in February 2009 with defrauding nearly 30,000 investors from 113 countries in a multibillion dollar Ponzi scheme.

Stanford's Antigua-based bank Stanford International Bank allegedly perpetrated the fraud by selling certificates of deposit with unsubstantiated high interest rates. He attributed the rates to SIB's unique investment strategy, which supposedly allowed the bank to achieve double-digit returns on its investments for 15 years.

The SEC also charged Stanford International Bank's chief financial officer James Davis, R. Allen Stanford's college roommate, and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.

In addition the government accused Stanford of diverting $1.6 billion from the CDs to personal loans.

Stanford's long-anticipated trial was delayed after another inmate broke bones in his face and gave him a concussion in a fight over a telephone at a Houston federal jail on September 24, 2009. A judge later said a brain injury that Stanford sustained in the fight made him incompetent to help his defense.

Stanford also claimed that government doctors had overmedicated him with high dosages of Klonopin, an anti-anxiety drug, for more than 13 months after the fight.

The court sent Stanford to a federal prison hospital in Butner, N.C., last year to treat him for drug dependency and evaluate for any long-term injuries from the jailhouse fight.

After Hittner deemed Stanford mentally competent to stand trial in December 2011, the defense tried to delay the trial further by claiming Stanford cannot remember some of the events in his life before the 2009 prison fight.

A forensic psychologist reportedly testified Stanford did not suffer any brain damage from the fight.

Stanford's trial started on Jan. 23 after he pleaded not guilty to the 14-count indictment.

Former Stanford chief financial officer James Davis acted as the government's star witness, testifying that Stanford orchestrated the fraud.

Davis pleaded guilty in August 2009 to charges of fraud and obstruction of justice related to the alleged Ponzi scheme.

Stanford's defense attorneys accused Davis of lying to get a reduced sentence, and also argued Stanford International Bank could have repaid investors if the government had not closed it down, according to news reports.

Civil fraud proceedings describe Stanford as a "former bankrupt gym owner from Mexia, Texas," who rose to the Forbes list of the world's richest people with a personal fortune valued at $2.2 billion.

Mexia is a town of 6,600 southeast of Dallas where Stanford's father still lives.

Stanford reportedly amassed his fortune by operating off-shore banks.

Stanford was knighted in Antigua, where he owned a local airline, a newspaper, two restaurants and a cricket stadium he hoped would revitalize the sport in the Caribbean, according to The New York Times.

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