Ponzi Scheme Indictments

Today in Washington, D.C., the FBI, Department of Justice, and our partner agencies announced at a press conference the unsealing of an indictment in the Southern District of Texas related to a multi-billion dollar Ponzi scheme that victimized thousands of people in the U.S. and abroad.

The indictment charges Robert Allen Stanford, the sole shareholder of the Houston-based Stanford Financial Group and other affiliated companies, with defrauding investors who purchased approximately $7 billion in certificates of deposit administered by Stanford International Bank, an offshore bank located on the island of Antigua.

Charges against Stanford, along with four other individuals, include conspiracy to commit mail fraud, mail fraud and securities fraud, wire fraud, obstructing an investigation by the Securities and Exchange Commission (SEC), and conspiracy to commit money laundering.

Said Lanny Breuer, Assistant Attorney General for the Department of Justice’s Criminal Division, “As today’s charges make clear, the Department will vigorously root out and expose financial crimes that wreak havoc on innocent investors.”

Also charged were:

• Laura Pendergest-Holt, chief investment officer of Stanford Financial Group and a member of Stanford International Bank’s investment committee, who had also been previously charged with obstruction of justice in a separate SEC proceeding;
  
• Gilberto Lopez, Stanford Financial Group’s chief accounting officer;
  
• Mark Kuhrt, global controller for Stanford Financial Group;
  
• Leroy King, administrator and chief executive officer of the Financial Services Regulatory Commission, the regulator for Antigua and Barbuda’s financial services industry. King allegedly accepted bribes to ensure that Stanford International Bank was not subject to close scrutiny by Antiguan or U.S. regulators.

Officials announcing the indictments included, from left, Lanny A. Breuer, assistant attorney general for the Criminal Division; Robert Khuzami, director of the U.S. Securities and Exchange Commission Division of Enforcement; Kevin Perkins, assistant director of the FBI Criminal Investigative Division; and Greg Campbell, deputy chief of the U.S. Postal Inspection Service. Not shown are Eileen Mayer, chief of the Internal Revenue Service-Criminal Investigative Division; and Tim Johnson, U.S. Attorney for the Southern District of Texas.
Additionally, a criminal information was unsealed today charging James M. Davis, Stanford Financial Group’s chief financial officer, for his role in the scheme, along with an indictment charging another former Stanford Financial Group employee with destroying company records.

The scam. According to the indictment, Stanford International Bank offered—through its network of financial advisors—CDs with higher (and ultimately bogus) rates of return than those available through CDs offered by U.S. banks. Stanford and his co-conspirators also misrepresented to clients the actual financial condition of Stanford International Bank, its investment strategy, and the extent of its regulatory oversight by Antiguan authorities.

Definition: What is a Ponzi scheme?

While collecting billions from his investors, who placed their trust and in some cases their life savings with him, Stanford and his co-defendants were allegedly misusing and misappropriating most of these assets, including diverting at least $1.6 billion into undisclosed personal loans to Stanford himself.

According to FBI Assistant Director Kevin Perkins, the FBI has seen an increase in Ponzi schemes. In the past 18 months, we’ve opened 100 new cases into these scams, many involving losses of more than $20 million. “Ponzi schemes and other securities fraud investigations are one of the top priorities of the FBI’s Criminal Investigative Division,” said Perkins. “We recognize the enormous impact these crimes have on the economy as a whole and on the trust of investors.”

Echoed U.S. Attorney Tim Johnson, Southern District of Texas, “The investing public needs to be assured that it is protected from those who would corruptly deprive them of their financial security.”

The case was worked jointly by the Department of Justice, FBI, Internal Revenue Service, U.S. Postal Inspection Service, and U.S. Securities and Exchange Commission.