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.

Stanford Venezuela Recapitalized

The Venezuelan government announced that Banco Nacional de Credito (BNC) was the winner of the auction to control the assets and liabilities of Stanford Bank de Venezuela, a local commercial bank.

Although the press is characterizing this as a "sale" it was not really a sale, but rather a "recapitalization" and here is why:

In February, Stanford Bank de Venezuela, owned by Allen Stanford, was taken over by the Venezuelan government after the SEC filed a civil complaint that Mr. Stanford was running a ponzi scheme out of his Antigua bank.

Subsequently, the bank was declared insolvent and equity was written down to ZERO (declared lost). At that point it had NO capital and the owner was basically NOBODY.

An auction process to recapitalize the bank and assume the bank's liabilities (deposits) and assets was initiated and after two failed trials, BNC was declared the winner.

BNC will inject 240 million bolivars ($112 million at the official rate, $35 million at the rate everyone else has to use) to replish Stanford Bank de Venezuela's capital. This money will go into Stanford Bank de Venezuela, which will be then merged with BNC. BNC is basically paying to cover any further losses at what is now its own bank. The Venezuelan government gets NO money from this sale. Allen Stanford's "estate" gets NO money from this sale. The bank was basically given away to whoever put enough money in to recapitalize it.

For the depositors of Stanford International Bank in Antigua there is nothing to see here.

Stanford Bank de Venezuela reported a book value of Bs.88.3 million ($41 million official rate, $13 million otherwise) as of December 2008.

Stanford: Latin Parliament Weighs in

Venezuelan daily Ultimas Noticias is reporting that the Latinamerican Parliament (also known as Parlatino) came out last week in Paraguay in defense of the Latin American depositors affected by the Stanford International Bank fraud case.

In their declaration of the the public service committee it was stated that "action was required by the US and Antiguan governments to preserve the rights of the depositors without privileges based on nationality" and that Parlatino would be "siding with the depostors affected by the this international financial fraud and demanding that those responsible be brought to justice".

Basically, Parlatino is weighing in on the receiver war between the British Accountants (Vantis) and the Texas Lawyer (Janvey).

A representative by the name of Correa proposed taking the declaration to other instances of Parlatino, so apparently this first declaration was just from the committee.

The picture is of Jorge Pizarro Soto from Chile, who is currently the President of Parlatino. (I didn't know that).

Stanford: Vantis Does Dallas

Law360 (subscription) and the Financial Times are reporting that Vantis has filed a petition for a Chapter 15 bankrupcty for the US assets belonging to Stanford International Bank Ltd. (SIBL).

A good explanation of what Chapter 15 means is HERE. What I undertand is that Vantis is looking for SIBL's direct investments in the US. That is: eLandia, HSSO, Forefront and the Majestic Grille in Memphis among others. They can do so because SIBL has already initiated the liquidation process in Antigua.

They will NOT be looking for Stanford Group Company or the advisors' commissions. SGC as we have noted before was the personal property of Allen Stanford, NOT SIBL's.

The turf war continues...now on US soil.

Stanford Update

I hate to leave the blog without any new material for so long, so a quick update on the Stanford issue. First of all, you can get exceptional extended coverage of the case at Venepirámides (in Spanish) or the Stanford Watch at the Houston Chronicle. Someone also set up a twitter. (Don’t ask me to explain twitter…I still don’t get the blogging deal).

Summing up. In Antigua the courts authorized that SIB go into liquidation and Vantis the receiver becomes Vantis the liquidator. Here’s a good link from the BBC. You can hear Vantis on Radio HERE. Scroll to minute 32 which is where the Stanford part starts.

The liquidator also had bad news for SIB depositors, confirming that SIB was in fact very much akin to a ponzi scheme. Since SIB is in liquidation, depositors have become creditors. No distributions are expected any time soon and the bank could take as long as 5 years to “wind up”. This is unfortunate and probably reflects that liquid assets have been scarcer than I believed and perhaps the only Tier II assets are those in the CS account that was frozen by the SEC. (see Begun,,,,).

It is also unfortunate because it hinders and delays other legal action that depositors could take against third parties. How can you sue for losses, until you know how much those losses actually are? (You can...but this is a bother) A quick wind up of SIB would have been ideal.

In the meantime, the Houston receiver Ralph Janvey, had his motions to control assets in Antigua quashed, but he still managed to sue 66 US advisors for over $40 million in commissions from CD sales. Normally I would link the complaint, but it lists these advisors’ home addresses and that really wasn’t a good idea if you ask me.

Also the first interest “clawback” was achieved as an investor accepted to put aside some $15,000 he had received in SIB CD interest in the past, in exchange for getting his brokerage account unfrozen. LINK

Oustide the US, the Panamanian Authorities were accepting bids for the local Stanford Bank. LINK. The results of the bids weren’t to be disclosed immediately. LINK.
The Venezuelan bank will go to auction again, after the first bidding process didn’t yield a result acceptable to the government. This time the government will not get a “premium” for the bank, all the money will go to recapitalizing the bank itself (so the investor is just paying himself and absorbing losses). LINK.
And count Mexican soap opera actress Laura Zapata among Stanford’s victims. LINK LINK.
Yes, that is her picture at the top of the post.

As for as the criminal case, Allen Stanford now has a lawyer, but he doesn’t expect charges to be brought for a couple of weeks. Oh…and the mother or his girlfriend defends his innocence. Shocking! LINK.

More interesting, however, is that David Finn, who is CFO Jim Davis’ attorney has a blog. Not really much case discussion, though…except for one little headline:
“My baloney has a first name..it’s A-L-L-E-N". LINK
Davis and Stanford were roomates at Baylor University back in the '70s.

I think this is the END of a beautiful friendship, Louis...I mean Allen.

Update: BW reports on SIB's accounting "multiplicity".