SEC: We Are Shocked To Discover Stanford Was A Ponzi Scheme

After years of ignoring ex-employees who said that Stanford Financial was a massive Ponzi scheme, the SEC now concludes that Stanford was…a massive Ponzi scheme.

Stanford’s former “chief investment officer” Laura Pendergest-Holt appears to have sung like a canary. So when will they go pick up the latest billionaire fraudster and his college roommate/CFO?

Sarah Lynch, Wall Street Journal: The Securities and Exchange Commission filed an amended civil complaint late Friday alleging that Texas financier R. Allen Stanford and his company’s Chief Financial Officer James M. Davis operated a massive Ponzi scheme.

In carrying out this scheme, the SEC claims, Messrs. Stanford and Davis misappropriated billions 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…

[T]he SEC [says]… it now also has evidence that Messrs. Stanford and Davis misappropriated at least $1.6 billion of investor money through bogus personal loans to Stanford. An undetermined amount of investors’ money was also put into speculative and unprofitable private businesses. By the end of 2008, overvalued real estate, undocumented loans and private equity made up the bulk of the bank’s portfolio even though the company marketed it as a “well-diversified portfolio of highly marketable securities.”

To hide the fraud, the SEC said Messrs. Stanford and Davis fabricated the performance of the bank’s investment portfolio. Each month, the men decided on a predetermined investment return for Stanford International Bank’s portfolio and had the bank’s internal accountants reverse-engineer its financial statements to report investment income the bank never earned.

Ms. Pendergest-Holt, meanwhile, “facilitated the fraud scheme by misrepresenting to investors that she managed Stanford International Bank’s multibillion investment portfolio of assets and employed a sizable team of analysts to monitor the portfolio,” the SEC said.

The complaint claims that, in a meeting with senior employees, Messrs. Stanford and Davis admitted sometime in early February that they had misappropriated funds and falsified financial documents.

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