Allen Stanford found guilty of running $7-billion Ponzi scheme

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Allen Stanford was convicted on Tuesday of running a $7-billion (U.S.) Ponzi scheme, a verdict that caps a riches-to-rags trajectory for the former Texas financier and Caribbean playboy.

It was a vindication for the U.S. government, which closed down Mr. Stanford’s financial empire in February, 2009, but had failed for years to address signs that the business was built on air. The Stanford case was the biggest investment fraud since Bernie Madoff’s.

Allen Stanford leaves the Federal Courthouse in Houston where a jury found him guilty of running a $7-billion Ponzi scheme, March 6, 2012. Richard Carson/Reuters

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Mr. Stanford was found guilty on 13 counts of a 14-count criminal indictment, including fraud, conspiracy and obstructing an investigation by the U.S. Securities and Exchange Commission. He was found not guilty on one count of wire fraud. The charges carry a possible prison sentence of nearly 20 years.

As Mr. Stanford, 61, was led out of the courtroom after the verdict, he touched his fist to his heart and looked at the bench where his mother and two daughters sat. He has been jailed since his June, 2009, arrest.

“We’re disappointed in the outcome,” said Mr. Stanford’s defence attorney Ali Fazel. “We do expect an appeal.” He said he expects sentencing in several months.

The verdict came less than a day after a Houston federal jury said it could not reach a decision, and U.S. District Judge David Hittner instructed jurors to keep deliberating.

Still, the verdict may prove only a moral victory for Mr. Stanford’s victims, most of whom have received none of their money back.

“For all the investors, I think there is a sense of relief that they weren’t just fools” said Cassie Wilkinson, a Houston investor in Stanford funds who attended the six-week trial. “There was a jury of 12 people who found the same thing – that we were just conned.”

Mr. Stanford’s unravelling was one of the most closely watched fraud cases since Mr. Madoff’s. Mr. Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors have called a $64.8-billion Ponzi scheme. He is serving a 150-year prison sentence.

Mr. Stanford’s personal fortune was once valued at $2.2-billion.

At trial, prosecutors told how Mr. Stanford repeatedly raided the bank he owned in Antigua, Stanford International Bank, using it as his “personal ATM.”

He bought a castle in Florida for one of his girlfriends and his oldest daughter lived in a million-dollar condominium in Houston. He wore custom-made suits, lived in luxury homes and on a yacht in the Caribbean and bankrolled a $20-million prize for an international cricket tournament.

The government’s star witness, former Stanford aide James Davis, testified that he and Mr. Stanford faked documents and made up financial reports to calm investors and fool regulators. They funnelled millions of dollars from Stanford International Bank to a secret Swiss bank account that Mr. Stanford tapped for his personal use, Mr. Davis testified.

Mr. Davis, 63, has pleaded guilty to three criminal counts.

Mr. Stanford’s lawyers portrayed their client as a visionary who was not involved in his firm’s daily activities. They blamed Mr. Davis for any fraud and argued that Mr. Stanford’s businesses were viable until the government shut down Stanford Financial Group in Houston in February, 2009. Left with no money, Mr. Stanford was declared indigent by the court and his defence was paid for with public funds.

Wendell Odom, a criminal defence attorney in Houston who observed much of the trial, said Mr. Stanford’s attorneys did a good job of discrediting Mr. Davis by getting him to admit to being a liar. But they failed to develop an alternative theme for the jury. “There was just too much evidence,” he said.

While in jail awaiting trial, Mr. Stanford was beaten by another inmate, leaving him with a brain injury and broken bones in his face. He then became addicted to an anti-anxiety medication. His lawyers argued that those events caused him to lose his memory, making him incompetent to stand trial.

After eight months at a prison hospital in North Carolina, he was deemed competent to stand trial. Before his trial began on Jan. 23, Mr. Stanford’s lawyers said their client wanted to tell his story to the jury, raising the possibility that he would take the stand. Ultimately, he did not testify.

Mr. Stanford grew up in Mexia, Tex. He studied finance at Baylor University, where Mr. Davis, who later become chief financial officer of Stanford Financial Group, was his roommate.

In the 1980s, Mr. Stanford bought up real estate in Houston with his father, later selling it at a profit. In 1986, he opened an offshore bank on the Caribbean island of Montserrat and, after banking regulations there tightened, he moved his operation to Antigua.

The bank specialized in aggressively selling certificates of deposit to wealthy people, his former employees testified at the trial. They targeted clients in Latin America, especially Venezuela, and oil company workers with fat pensions who lived along the U.S. Gulf Coast.

In Antigua, he became a philanthropist and sponsor of cricket, the national sport, and was known as “Sir Allen” after being knighted there in 2006. By 2008, Mr. Stanford made No. 205 on Forbes magazine’s list of the wealthiest Americans.

But questions surfaced about how Stanford International Bank’s certificates of deposit could persistently pay above market rates. By February, 2009, investors were trying to withdraw their money and, on Feb. 17 of that year, the government descended on his headquarters in Houston and shut it down.

Antigua stripped him of his knighthood and seized his local assets.

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