HOUSTON (CN) – The jury that convicted Allen Stanford of a multibillion-dollar investment fraud is deciding whether the government can seize $330 million in 29 foreign bank accounts that prosecutors say came from the scheme.
U.S. District Judge David Hittner convened the separate civil forfeiture hearing immediately after the jury found Stanford guilty in his criminal trial Tuesday.
Stanford was convicted of leading a $7 billion Ponzi scheme by selling certificates of deposit with phony interest rates issued by his Antigua-based Stanford International Bank.
U.S. Postal Inspector Clayton Gerber was the only witness prosecutors called for the forfeiture hearing.
Gerber told prosecutors he had been working on the Stanford case for 3 years, reviewing volumes of documents that trace the flow of cash to and from Stanford International Bank accounts.
In a dizzying exchange that made the million-dollar figures sound like pocket change, prosecutor Andrew Warren asked Gerber about his work “cash tracing” Stanford International Bank’s accounts in Canada, Switzerland, the Cook Islands and the Isle of Man.
The Cook Islands is a small group in the South Pacific, and the Isle of Man is a small island between Ireland the United Kingdom.
Gerber told prosecutors that all of the money in Stanford International Bank’s 29 foreign accounts was “directly traceable to Mr. Stanford’s fraud.”
Stanford’s defense attorney Ali Fazel took exception to Gerber’s testimony, while cross-examining him.
“Do you have a complete set of all credit, debits and bank statements for the accounts you have been talking about?” Fazel asked Gerber.
“I have a voluminous set of credit and debits related to the accounts,” Gerber replied. He acknowledged that he did not review each and every transaction in the accounts.
Fazel then went through the accounts with Gerber, asked questions so quickly that Judge Hittner had to ask him to slow down several times
“Have you looked at all transactions on that account? Do you know what the opening balance was?” Fazel asked.
“I don’t recall looking at all the transactions. I don’t recall the opening balance,” Gerber said.
Gerber said he had gone back 10 years on the accounts for his cash-tracing investigation.
“If you’re limiting yourself to 10 years, aren’t you making assumptions about how the money flowed?” Fazel asked. “Aren’t you making assumptions about money in the accounts to begin with?”
Gerber disagreed, saying it’s possible to trace the money to the Stanford International Bank’s certificate of deposit sales without having all the account records.
After Gerber left the stand, opposing counsel argued about a phrase in the verdict form Hittner was to read to the jury before its deliberations.
Fazel protested the phrase, “the United States will not keep any of the seized property,” claiming: “It’s not relevant what the U.S. government does with the funds.”
Hittner asked Fazel’s co-counsel Robert Scardino to explain, “bottom line,” why leaving the phrase in the verdict form mattered.
“Well, it helps the government’s case because if the jury thinks the government’s going to get the money they’re less likely to rule for the seizure,” Scardino said.
Prosecutor Gregg Costa appeared flustered by the off-the-record exchange, telling Hittner: “The government’s position is that any funds will be remitted to the victims. … It’s not clear what mechanism to use but the policy of the DOJ has always been to remit seized assets to victims.”
Hittner left the phrase in the verdict form he read to the jury before sending them out to deliberate.
He explained that the burden of proof had shifted from “beyond a reasonable doubt,” for Stanford’s criminal trial, to “a preponderance of evidence” for the civil forfeiture proceeding.
“You must decide whether the government has proven by a preponderance of evidence a connection between the property and the crime,” Hittner told the jury.
The Ponzi, the Trial
In February 2009 the SEC charged Stanford and three of his companies with orchestrating the multibillion-dollar Ponzi scheme, defrauding nearly 30,000 investors from 113 countries.
The SEC froze his companies’ assets and appointed a receiver to recover assets for investors.
The SEC claimed that Stanford’s Antigua-based bank Stanford International Bank perpetrated the fraud by selling certificates of deposit with unsubstantiated high interest rates. These rates allegedly were earned through 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, (Stanford’s college roommate), and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.
The government also accused Stanford of diverting $1.6 billion from the CDs into personal loans.
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 a sealed indictment.
Stanford’s long-anticipated trial was delayed after an inmate broke bones in his face and gave him a concussion in a fight over a telephone at a Houston federal jail, on Sept. 24, 2009. A judge later declared him incompetent to help his defense due to a brain injury he suffered in the fight.
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.
In February 2011 Stanford was sent to a federal prison hospital in Butner, N.C., where he was treated for drug dependency, and evaluated for any long-term injuries from the jailhouse fight.
He was sent back to Houston federal prison in November 2011, and on Dec. 22 Judge Hittner ruled him mentally competent to stand trial.
Stanford’s defense tried delay the trial, claiming he cannot remember some of the events in his life before the 2009 prison fight.
But a forensic psychologist who treated him at the prison hospital testified that he was competent, was thinking clearly after being taken off the drug and that his brain was not damaged by the fight, according to contemporary news reports.
Stanford’s trial started on Jan. 23 after he pleaded not guilty to the 14-count indictment.
The prosecution’s star witness, Stanford’s former CFO James Davis, testified that Stanford orchestrated the fraud.
Davis pleaded guilty in August 2009 to fraud and obstruction of justice in the Ponzi scheme.
Stanford’s defense attorneys accused Davis of lying to get a reduced sentence, and claimed that Stanford International Bank was legitimate and could have paid back investors if the government had not closed it down.
Stanford, who has repeatedly been described in lawsuits as a “former bankrupt gym owner from Mexia, Texas,” rose from that bankruptcy to being listed in Forbes magazine as one of the world’s richest men, with a personal fortune of $2.2 billion.
Mexia is a town of 6,600 southeast of Dallas where Stanford’s father still lives.
Stanford was knighted in Antigua, owned a local airline, a newspaper, two restaurants and a cricket stadium, where he campaigned to revive the sport in the Caribbean.