Stanford charged In $9B Fraud

Texas financier R. Allen Stanford and three of his companies were charged Tuesday with a fraud centered on high-interest CDs. The SEC says Stanford orchestrated an investment scheme that promised "improbable" interest rates.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, host:

And I'm Michele Norris. And we're beginning the program today with yet another allegation of a massive financial scam. Today, federal agents raided the headquarters of Texas billionaire Robert Allen Stanford. The Securities and Exchange Commission has filed civil charges against Stanford and three of his companies, charging more than $9 billion in fraud against investors. A sign on the headquarters at the door now reads Under Management of a Receiver. Now, if you're saying to yourself this sounds a lot like Bernard Madoff, well, you're right.

And there is a connection here. To explain that and how the island of Antigua, big time cricket matches, and a gold-plated helicopter figure into the story, we're joined now by NPR's Wade Goodwyn. Hello, Wade.

WADE GOODWYN: Hello.

NORRIS: Let's start with those raids today in Houston. How did this all go down?

GOODWYN: Yeah, sometimes real life imitates television. Around 9:00 this morning the FBI and U.S. marshals roared up in Suburbans with tinted windows. They took control of the two Stanford buildings, which are across the street from one another. They secured the exits, herded the employees into glass offices on the ground floor, put agents on the rooftops of nearby buildings, and then secured the perimeter. I think that after the embarrassment of the Madoff scandal, the SEC is determined to demonstrate that it is still a regulatory agency with teeth that the public can trust.

NORRIS: Now, we mentioned Bernard Madoff. And when you read the SEC complaint against Robert Allen Stanford and his associates, there are clear similarities. Even some direct connections to Bernard Madoff.

GOODWYN: Yes. That's correct. Some of the hallmarks of Madoff's alleged scheme and this alleged fraud are the same. For example, the return on investments from Stanford CDs were according to the SEC improbably and consistently high. The bank says it could make those high returns because it was getting such a high return on its investments over the last 15 years. And even last year in 2008, when the S&P loss 39 percent and the stock market tanked, Stanford's diversified portfolio of investments only lost 1 percent, which is amazing. Another red flag for the SEC was when the bank claimed that its portfolio earned exactly the same amount - 15.71 percent in consecutive years.

Now, the odds of a worldwide portfolio of investments earning exactly 15.71 percent in back to back years is, shall we say, very high indeed.

NORRIS: And the SEC charges that Stanford said exactly what to his investors?

GOODWYN: That they've been lying. The bank is accused of training senior investment officers to provide false information. An appearance of safety was created. Investors were told that 20-plus team of analysts monitored the portfolio. And the SEC says it was really only Allen Stanford and his top lieutenant, James Davis, who really knew what was going on. When the Madoff scandal broke, investors were told that they'd no exposure to that scheme when in fact there were exposed.

And when investors tried to withdraw money from their accounts recently, they were allegedly told that they couldn't withdraw the money because the SEC had frozen those accounts, which wasn't true but which was an interesting and unusual explanation to give to investors. I suspect the SEC was moved to even quicker action when it discovered two weeks ago that the bank was trying to transfer $178 million from its accounts.

NORRIS: Wade, could you tell us a little more about Robert Allen Stanford?

GOODWYN: He's a fifth generation Texan who made his fortune in real estate in Houston in the '80s. He holds dual citizenship now. He's an Antiguan. He lives in the U.S. Virgin Islands. And he is big sports fan - golf, polo, sailing, tennis. He sponsored Vijay Singh and David Toms and Camilo Villegas. But his greatest love is cricket. Three months ago he paid out $20 million to the winners of a single cricket tournament at Antigua. And when he announced the competition in London, he landed on Lords Cricket Ground in a gold plated helicopter. So he has a taste for the flamboyant.

NORRIS: Thank you, Wade.

GOODWYN: My pleasure.

NORRIS: That was NPR's Wade Goodwyn.

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