R. Allen Stanford, the former board of directors chairman of Stanford International Bank (SIB), was sentenced today in Houston to a total of 110 years in prison for orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion from SIB to finance his personal businesses….
According to court documents and evidence presented at trial, the vehicle for Stanford’s fraud was SIB, an offshore bank owned by Stanford and based in Antigua and Barbuda that sold certificates of deposit (CDs) to depositors. Stanford began operating the bank in 1985 in Montserrat, the British West Indies, under the name Guardian International Bank. He moved the bank to Antigua in 1990 and changed its name to Stanford International Bank in 1994. SIB issued CDs that typically paid a premium over interest rates on CDs issued by U.S. banks. By 2008, the bank owed its CD depositors more than $8 billion.
According to SIB’s annual reports and marketing brochures, the bank purportedly invested CD proceeds in highly conservative, marketable securities that were also highly liquid, meaning the bank could sell its assets and repay depositors very quickly. The bank also represented that all of its assets were globally diversified and overseen by money managers at top-tier financial institutions, with an additional level of oversight by SIB analysts based in Memphis, Tenn.
As shown at trial, this purported investment strategy and management of the bank’s assets was followed for only about 10-15 percent of the bank’s assets. Stanford diverted billions in depositor funds into various companies that he owned personally, in the form of undisclosed “loans.” Stanford was thus able to continue the operations of his personal businesses, which ran at a net loss each year totaling hundreds of millions of dollars, at the expense of depositors. These businesses were concentrated primarily in the Caribbean and included restaurants, a cricket tournament and various real estate projects. Evidence at trial established Stanford also used the misappropriated CD money to finance a lavish lifestyle, which included a 112-foot yacht and support vessels, six private planes and gambling trips to Las Vegas.
According to evidence presented at trial, Stanford continued the scheme by using sales from new CDs to pay existing depositors who redeemed their CDs. In 2008, when the financial crisis caused a slump in new CD sales and record redemptions, Stanford lied about personally investing $741 million in additional funds into the bank to strengthen its capital base. To support that false announcement, Stanford’s internal accountants inflated on paper the value of a piece of real estate SIB had purchased for $63.5 million earlier in 2008 by 5,000 percent to $3.1 billion, despite the fact there were no independent appraisals or improvements to the property.
Department of Justice press release link: click here