Billionaire R. Allen Stanford charged in Ponzi scheme

WASHINGTON — Texas businessman R. Allen Stanford, who boasted on television last September that "it's fun to be a billionaire," appeared in leg irons Friday in U.S. District Court in Richmond, Va., after federal prosecutors unveiled criminal charges against him.

Stanford's wealth and success were largely a mirage, said prosecutors, who said he was the mastermind of a $7 billion financial fraud that devastated investors in the United States and Latin America.

Stanford, 59, surrendered to FBI agents late Thursday at his girlfriend's house in Fredericksburg, Va. A judge refused his release and ordered marshals to transfer him to Houston for further proceedings.

Several months ago, the Securities and Exchange Commission (SEC) said Stanford's operation was a Ponzi scheme, second in size only to the Bernard Madoff fraud that broke in December. The federal indictment showed how Stanford reportedly enriched himself while fooling investigators long suspicious of his business.

Houston-based Stanford Financial Group promised customers safe savings accounts at Stanford International Bank in Antigua, where they could earn attractive returns. Instead, the indictment alleges, Stanford took advantage of those funds, even awarding himself $1.6 billion in personal loans.

He is accused of paying $100,000 in bribes to one of Antigua's top financial regulators, Leroy King.

King is accused of trying to wave the SEC off its investigation, writing in one memo that an examination of Stanford's bank "concluded just five months ago confirmed (its) compliance with all areas of depositor safety and solvency, as well as other applicable laws and regulations."

Dick DeGuerin, Stanford's lawyer, said his client would fight the allegations and put the blame for the breakdown at his company on the SEC.

The SEC alleges that up to 30,000 investors were defrauded, including several thousand in the United States. Prosecutors said it was unlikely those investors will be fully paid back.

Stanford was a celebrity throughout much of Latin America with a knack for the grandiose. He was knighted by Antigua in 2006, gaining the title "Sir," and sponsored international cricket tournaments and local charities. He sparred with Stanford University over his claim that he shared ancestry with the school's founder.

Those tendencies extended to his fraud, the government alleged. The indictment charges that King, the Antigua regulator, gave confidential information about an SEC inquiry to Stanford, which enabled him to deceive the SEC about the bank's finances.

The criminal indictment charges that Stanford and associates told investors that his bank's assets grew from $1.2 billion in 2001 to $8.5 billion by the end of last year.

In outlining its case, the Department of Justice filed criminal charges against King and several of Stanford's employees, including Laura Pendergest-Holt, the chief investment officer; Gilberto Lopez, the chief accounting officer; and Mark Kuhrt, the global controller.

They are charged with one count of conspiracy to commit mail, wire and securities fraud; seven counts of wire fraud; 10 counts of mail fraud; and one count of conspiracy to commit money laundering. Stanford, Pendergest-Holt and King also face charges of conspiring to obstruct an SEC proceeding.

James Davis, the company's chief financial officer, faces separate criminal charges, including conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation. Another employee, Bruce Perraud, was charged with destruction of records related to a federal investigation.