FBI finds Stanford in Virginia, serves complaint

WASHINGTON/ST.JOHN’S, (Reuters) – U.S. law  enforcement officials found Texas billionaire Allen Stanford in  the Fredericksburg, Virginia, area yesterday, and served him  with a complaint accusing him of an $8 billion fraud.

FBI spokesman Richard Kolko said the FBI acted at the  request of the U.S. Securities and Exchange Commission (SEC),  and that Stanford had not been arrested. The FBI gave few other  details.

Allen Stanford
Allen Stanford

The whereabouts of the jet-setting 58-year-old tycoon who  has luxury U.S. and Caribbean homes, had been the subject of  intense speculation since he failed to respond to civil charges  filed in Texas on Tuesday.

Stanford, two colleagues and three Stanford companies are  accused of a “massive fraud” by the U.S. Securities and  Exchange Commission.

U.S. federal agents raided Stanford Group offices in Miami,  Houston and other U.S. cities earlier this week.

A law enforcement official said Stanford was making  arrangements to turn in his passport.

The fallout from the SEC charges against the flamboyant,  mustachioed financier and sports entrepreneur has rippled far  beyond U.S. borders, prompting investigations from Houston to  Antigua and Caracas.

Five Latin American countries have now acted against  Stanford businesses, while Britain’s Serious Fraud Office (SFO)  is monitoring a possible U.K. link after media reports that  Stanford’s books were audited in Britain.

The SEC accused Stanford in a civil complaint on Tuesday of  fraudulently selling $8 billion in certificates of deposit with  impossibly high interest rates from his Antiguan affiliate,  Stanford International Bank Ltd (SIB).

The scandal, emerging hard on the heels of the alleged $50  billion fraud by Wall Street veteran Bernard Madoff, has again  spooked international investors and sharply increased public  distrust of investment plans.

In Caracas, the government of socialist President Hugo  Chavez took control of Stanford Bank Venezuela, one of the  country’s smallest commercial banks, to stem massive online  withdrawals following the SEC fraud charges.

“The authorities were forced to take the decision to  intervene, and there will be an immediate sale (of the bank),”  Finance Minister Ali Rodriguez told reporters.

Another Andean nation, Ecuador, announced it was seizing  two local Stanford units — a brokerage house and a fiduciary  firm. “We will intervene to protect the interests of  investors,” Santiago Noboa, the state regulator of the stock  exchange in Quito, told Reuters.

Mexico’s banking regulator said it was investigating the  local Stanford bank affiliate for possible violation of banking  laws.

Peru’s securities regulator suspended the operations of a  local Stanford unit.

ABC News reported Wednesday that federal authorities had  been probing whether Stanford was involved in laundering  Mexican drug money, but the U.S. Drug Enforcement  Administration (DEA) said it had no current inquiry underway.

An initial review also revealed no past investigations, but  officials were still checking, a DEA spokesman said.

Another federal law enforcement official said U.S. agencies  previously had investigated suspected money laundering at  Stanford’s offshore banks but did not find evidence warranting  criminal charges.

As investigations into Stanford’s businesses widened,  evidence emerged that his Stanford Group Co had been  disciplined by the Financial Industry Regulatory Authority  (FINRA). the U.S. broker-dealer watchdog.

In November 2007, FINRA fined Stanford Group $10,000 for  misleading sales literature that failed to prominently disclose  risks, such as that the CDs were not issued by a U.S. bank and  were not insured by the Federal Deposit Insurance Corp.

The company was also fined $20,000 in April 2007 for not  promptly forwarding customer checks from the firm’s retail  brokerage operations and conducting a securities business  without maintaining minimum capital levels.

In March 2008 the firm was fined $30,000 for research  reports that violated a number of broker-dealer rules.

Mark Tidwell and Charles Rawl, former Stanford brokers in  Houston, quit in 2007 over concerns that Stanford was lying to  clients about returns.

Rawl told Reuters in an interview in Houston that when he  confronted his managers about possible discrepancies in the  performance of funds he was marketing to clients, he was told  of ongoing discussions at the “highest level of management”  about “whether or not we were going to let this sleeping dog  lie.”

At a staff presentation in March 2007, management tried to  conceal such discrepancies, Rawl said. “They tried to pull the  wool over our eyes in a meeting.”

Antigua and Barbuda Finance and Economy Minister Errol Cort  said late Wednesday the twin-island Caribbean state was  scrambling to shore up its banking system against the  potentially devastating impact of the U.S. fraud charges  against its biggest private investor and employer.

In St. John’s, a small Antiguan firm that Stanford  identified as the auditors of his offshore bank said yesterday it had no information about ties to the tycoon.

The head of C.A.S. Hewlett & Co in the Antiguan capital  said the firm’s former chief executive, Charlesworth Hewlett,  was the only person with possible knowledge of a relationship  to Stanford. Hewlett died on Jan. 1 at the age of 73.

“We are not privy to any information about any relationship  with Stanford,” the firm’s head, who would identify herself  only as Celia, told Reuters by telephone.

Britain’s Evening Standard newspaper had reported that  Hewlett’s daughter Celia had taken on the responsibilities of  the accounting firm from London after her father died.

Stanford’s personal fortune was estimated at $2.2 billion  last year by Forbes Magazine. He holds dual U.S.-Antiguan  citizenship, has donated millions of dollars to U.S.  politicians, and has secured endorsements from sports stars,  including golfer Vijay Singh and soccer player Michael Owen.

In Antigua, Stanford owns the largest newspaper and is the  first American to receive a knighthood from its government.

Antigua has faced U.S. scrutiny in the past for alleged  money laundering activities and operations by suspected Russian  “shell” banks.

Jonathan Winer, a Washington lawyer and former State  Department official in the Clinton administration, said that  following a U.S. warning to Antigua in the late 1990s,  consultants and lawyers working for Stanford took control of  records of Antigua’s bank regulatory agency “to carry out a  cleanup” of the suspect banks.

The local bank regulator objected, as did the U.S.  government, Winer said. “The conflict of interest that we felt  existed with using Mr. Stanford and his people to clean up the  banking system was unique … it was bizarre and  inappropriate.”

“One of the results of all this was that Antigua was put on  a watch list.”

In response, Antigua implemented banking reforms requested  by the United States, and the sanctions were lifted in 2001.

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