Allen Stanford Heads to Court Over Ponzi Scheme

Allen Stanford heads to court in Houston on Monday to face charges that he operated a $7 billion Ponzi scheme from Stanford International Bank Ltd, his offshore bank on the Caribbean island of Antigua.

Hot Feature: The Mystery of Wall Street Pay

The Texas financier has been in jail since June 2009 when a federal judged deemed him a flight risk. He is accused of misleading investors about certificates of deposit (CDs) issued by his offshore bank.

In one of the biggest white collar fraud cases since Bernard Madoff, Stanford’s brokerage firm allegedly distributed literature touting CDs as safe, with funds “generally invested in investment grade bonds, securities and foreign currency deposit,” while instead investing the proceeds in illiquid pet-project investments, including Caribbean real estate and a Cowboys and Indians magazine. Stanford is also alleged to have lent himself more than $2 billion.

Prosecutors will likely rely heavily on the testimony of the firm’sĀ former Chief Financial Officer James Davis, who has cooperated with the government since pleading guilty in August 2009. Davis was Stanford’s roommate when the two attended Baylor University in Waco, Texas. In past interviews, Stanford has blamed Davis, a tactic likely to be repeated by the defense at trial.

Stanford has pleaded ‘not guilty’ to 14 criminal counts of fraud, obstruction of a federal investigation, and conspiracy to launder money. Among the crimes of which he is being accused are involving himself in falsifying financial statements and making false statements about his firm’s financial condition.

Don’t Miss: Banks and States Make Progress Toward Mortgage-Based Offenses Settlement

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com