Friday, June 19, 2009

Stanford: Circle of Trust

As reported by just about everyone but very well by the Houston Chronicle (LINK), Allen Stanford was indicted by a Grand Jury in Houston. This came as a shock to only a very few “conspiracy theorists” out there who remain convinced that Allen was (and is) the victim of SEC overzealousness (or some other even further fetched concoction). A little reality check, please, people.

As for “what took them so long?”, I think it would be rather “how did they get this so quick?” It took about two years to get Ken Lay of Enron indicted. In any case, the indictment itself seems to lend some answers. Along with Robert Allen Stanford and CIO Laura Pendergest-Holt there were three others indicted: Houston-based accountant Gilberto Lopez; Houston-based global controller Mark Kuhrt; and Leroy King, a joint American-Antiguan citizen who was the head of the Financial Services Regulatory Commission down in Antigua.

Mr. King was the same one who in February declared that “everything was fine” in the morning, only to later say he would be “taking off the gloves”.
Apparently the US will try to extradite Mr. King from Antigua.

As for Mr. Lopez here's a cute comment from the Chronicle board"

I am oh so happy to see that they also picked up Gil "The World Revolves Around Me" Lopez. That man was as dirty as they come. Why don't they pick up his daughter Susan who also conveniently worked in the Accounting Dept. Oh, and his son Gil Lopez III who also had a high ranking position, for a contractor. We could all see if from the inside that it was a house of cards

Now this should be the answer of “what took so long”. CFO Davis, who apparently is being charged separately, and who has been cooperating with the authorities (i.e. singing like a canary) mostly likely had a good idea of “who knew what” and if he is trying to gain some favors with the authorities to see if they cut him some slack, well…you get the idea.

The authorities have to be frustrated with the Madoff case, where only Bernie sits in jail at this point. Davis’ insight may not help them recover more money (because there isn’t much more to recover), but he certainly has insights into who was in Stanford’s “Circle of Trust”.

These indictments are just the beginning. And here’s a tidbit I was sent, supposedly from a court document. If you have PACER access, maybe you can check is authenticity (at least if it was really filed as evidence). You know how it is with emails.

Additionally, the detailed recounts from Stanford executive meetings found in the SEC complaints are further evidence that not only Davis, but others have been “cooperating”. The authorities appear to be after the whole “circle” not just the main cogs.

Of course, all of this should give a certain relief to Stanford's thousands of victims, who may get at least some form of justice.
These developments, however, are likely to have little bearing on the ongoing receivership/liquidations processes, which are bogged down by in-fighting at the moment.

It's now up to the authorities to make these charges stick. Expect a very long and tedious (years) judicial process. The lawyers are licking their chops already.

UPDATE: Matt Goldstein at Reuters with another good take on the proceedings. Plus he uploaded the indictment. Good work!

UPDATE2: The SEC put its second amendment of its complaint up on its website. If you want the "juicy details" about how the books were cooked, this is a great read. LINK.

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