 | |
| Company type | Private |
|---|---|
| Industry | Global financial services |
| Genre | Global financial services |
| Founder | Robert Allen Stanford |
| Defunct | February 17, 2009 (2009-02-17) |
| Fate | Placed in receivership on allegations that this company was aPonzi scheme |
| Headquarters | Houston,Texas, United States |
Key people | Robert Allen Stanford (chairman and CEO) Laura Pendergest-Holt (chief investment officer) James Davis (CFO) |
| Services | Wealth management |
| Owner | Robert Allen Stanford |
| Divisions | Stanford Capital Management Stanford Group Company Stanford International Bank Ltd. |
TheStanford Financial Group was a privately held international group offinancial services companies controlled byAllen Stanford, until it was seized by American authorities in early 2009. Headquartered at 5050 Westheimer inUptown Houston,Texas, it had 50 offices in several countries, mainly in the Americas, included theStanford International Bank, and was said to have managed US$8.5 billion of assets for more than 30,000 clients in 136 countries on six continents.[1][2] On February 17, 2009,U.S. Federal agents placed the company intoreceivership due to charges of fraud.[3][4] Ten days later, theU.S. Securities and Exchange Commission amended its complaint to accuse Stanford of turning the company into a "massivePonzi scheme".[5]
Allen Stanford traced his company to the insurance company founded in 1932 inMexia, Texas, by his grandfather, Lodis B. Stanford.[6][7] However, there was no direct connection between the insurance company and Allen Stanford's banking business, which he started on theBritish Overseas Territory ofMontserrat in theWest Indies in the 1980s.[8] Allen Stanford's move into banking utilised funds he had made in real estate in Houston in the early 1980s.[7]
In 2008, Stanford Financial Group announced it would open a new global management complex inSt. Croix, U.S. Virgin Islands, to include the base for the corporate support functions such as business technology, compliance, finance, human resources, investment strategy and legal, as well as the chairman's office. Completion was planned for July 2009 but did not occur due to the company's dissolution.[9]
The company was bound by a web of personal and family ties. Stanford'schief financial officer and second-in-command,James M. Davis, was his roommate atBaylor University. Thechief investment officer,Laura Pendergest-Holt, grew up attending a church inBaldwyn, Mississippi, where Davis was aSunday school teacher. Many top officials were related to each other. This led former employees to claim the company was fraught with nepotism; former executive Charles Satterfield toldBloomberg News that whenever someone asked questions, a common response was "I'm not going to question my brother-in-law."[10]
Stanford Financial Group comprised several affiliated companies:
In 2007, Stanford Financial Group assumed title sponsorship of theStanford St. Jude Championship, a topPGA Tour event to benefitSt. Jude Children's Research Hospital ofMemphis, Tennessee. On March 20, 2009, after the Group's fraud was revealed, the PGA announced that they would be dropping their affiliation with the company and that for 2009 the event would be called the St. Jude's Classic.[19]
Stanford Financial Group was the lead financier for the 2007 filmThe Ultimate Gift,.[20][21] According to the Association for Healthcare Philanthropy, the story ofThe Ultimate Gift promotedphilanthropy in not-for-profithealth care institutions.[20]
The group established a significant presence ingolf,polo,tennis,cricket andsailing, sports which were popular among Stanford's wealthy clients. Stanford Financial Group was the title sponsor for such sporting events as the Stanford U.S. Open Polo Championship, the Stanford USPA Silver Cup, the Stanford Antigua Sailing Week, the PGA Tour Stanford St. Jude Championship, and the Stanford International Pro-Am. Stanford also sponsored professional golfersVijay Singh,Camilo Villegas andDavid Toms as well asMorgan Pressel on the LPGA Tour. In tennis, the company was a sponsor of theSony Ericsson Open. Stanford also sponsored theChampions Series Tennis Tournaments featuringJim Courier,John McEnroe andPete Sampras.
TheStanford Financial Tour Championship, previously known as theLPGA Playoffs at The ADT and theADT Championship, was the season-endinggolf tournament on the US-basedLPGA Tour. Beginning with the 2009 event, it was to be sponsored by Stanford Financial Group.[22]
As one of the founding partners, Stanford Financial Group was also involved inTiger Woods's annual golf tournament, theAT&T National.[23]
During the week of February 13, 2009, Stanford issued a letter to clients saying: "Regulatory officers have visited our offices and have stated that these are routine examinations".[7] On February 17, 2009, U.S. federal agents entered the company's Houston and Memphis offices.[24] Law enforcement officials placed signs on the office doors stating that the company was temporarily closed: "The company is still in operation but under the management of areceiver".[3]
TheSecurities Exchange Commission's (SEC) charged Allen Stanford, Pendergest-Holt and Davis with fraud[1][25][26] in connection with Stanford Financial Group's US$8 billioncertificate of deposit (CD) investment scheme that offered "improbable and unsubstantiated high interest rates".[27] This led the Federal government to freeze the assets of Allen Stanford, Stanford International Bank, Stanford Group Co., and Stanford Capital Management.[1] In addition, Stanford International Bank placed a 60-day moratorium on early redemptions of its CDs.[28]
On February 18 and 19, 2009,Ecuador andPeru suspended the operations of local Stanford units, and, inVenezuela andPanama, the governments seized local units of Stanford Bank.[29]Mexico's financial regulators announced on February 19 that it was investigating the local affiliate of Stanford bank for possible violation of banking laws.[29]
On February 27, 2009, Stanford official Laura Pendergest-Holt was arrested by Federal agents in connection with the alleged fraud.[30] On that day the SEC said that Stanford and his accomplices operated a "massive Ponzi scheme", misappropriated billions of dollars of investors' money and falsified the Stanford International Bank's records to hide their fraud. "Stanford International Bank's financial statements, including its investment income, are fictional," the SEC said.[5][31]
United States District Judge David Godbey froze all of the Stanford personal and corporate assets. Godbey gave them to Ralph Janvey, aDallas receiver; Janvey will retain control until the SEC suit is resolved.[32] A British receiver took the Antigua-based Stanford International Bank.[33]
On July 1, 2009,James M. Davis, the CFO of the company, agreed to change course from his not guilty plea and plead guilty to three charges related to the Ponzi scheme fraud, once details can be worked out.
On November 13, 2009, the US District Court ordered brokerage accounts to be transferred toDominick & Dominick LLC. The transfer became effective on January 20, 2010.[34]
In 2011, an auction of Stanford's goods was held in Houston.[35]
Mark J. Kuhrt (born 1973), the former global controller of Stanford Financial Group, was found guilty by afederal jury inHouston on November 19, 2012, of aiding Allen Stanford in afraud scheme involvingStanford International Bank (SIB).[36][37] He was charged in 2009.[38][39][40]
Evidence at Kuhrt's trial showed that he knew about and monitored Stanford's misappropriation of SIB's assets, concealed the misappropriation from the public and nearly every other Stanford employee, and worked behind the scenes to keep it from being discovered. Additionally, he assisted Stanford in deceiving SIB clients during the2008 financial crisis by claiming that Stanford had invested hundreds of millions of dollars in SIB when in fact he had not. Kuhrt assisted in the creation of a fraudulent real estate deal that involved inflating the value of land parcels that were bought for $63.5 million to a fictitious $3.2 billion.[41][42][43]
US Prosecutor Jeffrey Goldberg said Stanford could not have carried out the fraud without help. He said Kuhrt - in his post as global controller of Stanford Financial Group - actively covered up his boss’s fraud.[44] "Gil Lopez and Mark Kuhrt were faced with the same choice over and over again, to either help Allen Stanford lie to his customers and misuse their money or say ‘I don’t want to be part of it". The men chose to "keep it secret and actively work to keep others from finding out about it." added Goldberg during the trial.[45]
Former Stanford accountant Henry Amadio told jurors that he expressed his concerns to his former boss, Mark Kuhrt, regarding the increasing amount of investor funds being utilized to fund Stanford's other ventures. According to Amadio, Kuhrt "was concerned too."[46]
Kuhrt's trial lasted for five weeks. The jury deliberated for about three days before finding Kuhrt guilty on ten of the eleven counts in the indictment. He was found guilty on nine counts ofwire fraud and one count ofconspiracy to commitwire fraud. On one count of wire fraud, Kuhrt was found not guilty. He was promptly remanded into custody following thetrial.[36][47]
On February 14, 2013 Kuhrt was sentenced to 20 years inprison.[48][49][50] In addition to the prison terms, U.S. District Judge David Hittner, who presided over the trial, sentenced Kuhrt to serve three years ofsupervised release and ordered Kuhrt to pay a $25,000 fine. Judge Hittner also found that Kuhrt obstructed justice by committingperjury at trial.[41][51][52]
Theconviction was upheld by the appeals court on June 5, 2015.[53][54]
Kuhrt (Inmate Register Number: 99140-179) has been released on December 20, 2024.[55]
Stanford was headquartered in theGalleria Tower II inUptown Houston,Texas, U.S.[56][57] Previously the company was headquartered in 5050Westheimer Road,[58] a three-story, 71,000 square feet (6,600 m2) building across fromThe Galleria. Jennifer Dawson of theHouston Business Journal described the facility as "high-end office digs."[59] By 2007 Stanford's headquarters moved to Galleria Tower II.[60]
On May 18, 2010, the receiver entered into astalking horse contract for the sale of 5050 Westheimer Road.[61][62] During that month Black Forest Ventures LLC was the designated bidder to defeat at the auction, with a minimum bid being $12.5 million.[59] The auction was scheduled to be held on Thursday June 24, 2010 at the offices ofBaker Botts, L.L.P. inOne Shell Plaza inDowntown Houston.[62] The auction was canceled due to a lack of bids, and Black Forest's stipulated that it would acquire the building for $12.2 million.[59] Black Forest bought the 5050 Westheimer building in July 2010.[63]
On March 19, 2012, the 5th U.S. Circuit Court of Appeals overturned a federal judge's ruling from the previous year that threw out three class action lawsuits that are trying to use state laws to recover investor losses resulting from Stanford's scheme. The ruling allows lawsuits by investors who lost millions in the Stanford Ponzi scheme to go forward against several third parties.[64]
In February 2023,TD Bank of Canada agreed to pay the receiver $1.2 billion to settle claims related to Stanford. Four other banks agreed to pay a total of $400 million; the five banks provided services to Stanford Financial during the two decades that it operated.[65]
