- The Washington Times - Wednesday, February 18, 2009

NEW YORK | The federal government says R. Allen Stanford’s investment businesses were too good to be true and shut his companies down Tuesday.

Two months after Bernard Madoff was accused of running the largest investment fraud in history, Securities and Exchange Commission officials raided the offices of Mr. Stanford, a Texas billionaire, and froze the assets of three companies he controls, saying he perpetrated an $8 billion investment fraud.

Mr. Stanford, 58, was accused in civil charges of lying about the safety of investments he sold as “certificates of deposit” and promised unrealistically high rates of return. Regulators also said he faked historical data about other investments, which he then used to lure in more investors for the CD products.

The fraud’s operations purportedly reached as far as the tiny Caribbean island of Antigua, where Mr. Stanford was knighted in 2006 and helped sponsor high-stakes cricket matches. As news of the charges broke Tuesday afternoon, panicked residents of Antigua swarmed a second bank controlled by Mr. Stanford, hoping to take their money out, only to be turned away by guards. That bank was not part of the complaint released Tuesday.

Dozens of angry customers turned up at the main branch of the Bank of Antigua trying to get their money.

“Open the door and give us our money,” Liston Lewis, a 45-year-old construction worker said to one of the guards. “Even if it takes until 12 o’clock, give us our money.”

Mr. Stanford’s whereabouts were not known. Brian Bertsch, a spokesman for Mr. Stanford, referred all questions to the SEC. Stephen Webster, an SEC lawyer, said the agency is actively trying to find Mr. Stanford and didn’t know whether he had been served with court papers.

Mr. Stanford owns a home in St. Croix, U.S. Virgin Islands, and operates his businesses from Houston and Antigua.

The SEC, which has come under heavy criticism for missing early warning signs of Mr. Madoff’s purported fraud scheme, said Mr. Stanford used a tight circle of family and friends to operate a network through an Antigua-based company to push the investments on buyers, all the while promising “improbable and unsubstantiated high interest rates.”

In addition to Mr. Stanford, the civil lawsuit filed in federal court in Dallas names as defendants James Davis, the chief financial officer of Stanford International Bank, an Antigua-based company that was one of the three whose assets were frozen, as well as Laura Pendergest-Holt, the chief investment officer of Stanford Financial Group, a Houston-based financial advisory firm.

While not named in the SEC’s civil complaint, regulators said Mr. Stanford was aided in running the Antigua-based operation by his father, who lives in Mexia, Texas, and another Mexia resident with a background in cattle ranching and car sales. Mr. Davis, who was named in the lawsuit, was Mr. Stanford’s college roommate.

In Dallas, District Court Judge Reed O’Connor appointed a receiver to handle the frozen assets. A receiver was also appointed in the Madoff case to oversee the liquidation of that firm and to help investors recoup money. Mr. Madoff, who is under house arrest in his Manhattan apartment, is accused of orchestrating a giant $50 billion Ponzi scheme.

James Dunlap, an Atlanta-based securities lawyer, said Stanford customers he has been advising have been told they can’t get their money out of the firm, with some being told there is an indefinite hold on withdrawals.

• AP writers Monica Rhor, Ben Fox, Anika Kentish and Jeannine Aversa contributed to this report.

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