WEST PALM BEACH (CN) – A class-action claims that Pershing LLC, Stanford International Bank’s clearing agent, ignored glaring signs of fraud in Allen Stanford’s alleged $7 billion Ponzi scheme.
Lead plaintiff Lynne Turk says investors sent money to Stanford’s U.S. broker to buy Certificates of Deposit, and Pershing sent the money to the bank’s Antiguan headquarters. There, Stanford exploited the island’s lax regulations to perpetrate a “mass misappropriation” of funds, according to the complaint in Palm Beach County court.
In a complaint against Stanford in Dallas Federal Court in February, the SEC claims Pershing completed 1,635 wire transfers, totaling $517 million, from 2006 to 2008.
Pershing spokesman Michael Geller, however, said the company’s limited role as a transfer agent releases it from liability.
“Pershing did not custody the CDs, nor did we reflect such CDs on any brokerage account statement,” Geller said.
But the class action claims that Pershing was in a unique position to see that something was awry.
Stanford’s brokers advertised the securities on TV, radio, and in seminars. Pershing should have noticed that such solicitation required the CDs to be registered with the SEC as a public offering, the class says. Turk says Pershing was complacent or failed to act to preserve its income from transfer commissions.
“Thousands of wire transfers from a domestic account to an Antiguan bank for the purchase of a CD was unusual in and of itself,” according to the SEC complaint.
Class counsel Jim Beasley said he did not want to comment on the specifics of Turk’s investment.
Pershing voluntarily stopped wire transfers for the bank in December 2008, the SEC complaint states.