The Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multibillion-dollar investment scheme centering on an $8 billion CD program.

Stanford's headquarters, located in Houston's Galleria shopping and office district west of the city's downtown, were raided by law enforcement officials today. 

Law enforcement officials are probing the company’s stated CD returns, in which the company offered rates between 10.3% and 15.1% every year from 1995 through last year -- five or six times what banks in the U.S. offer.

The company’s Web site claims it has $8.5 billion in assets and 30,000 clients in 131 countries. A biography on the site says Stanford is a citizen of the U.S. as well as Antigua. Stanford also claims he was knighted by the Antiguan government in 2006; in recent years, he has used the title “Sir.”

The FBI and the Financial Industry Regulatory Authority [FINRA] are also investigating.

According to the SEC’s complaint, Stanford's companies include Antiguan-based Stanford International Bank, Houston-based broker-dealer and investment adviser Stanford Group Company and investment adviser Stanford Capital Management.

The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group, in its enforcement action.

U.S. District Judge Reed O'Connor in Dallas has issued a temporary restraining order, frozen the defendants' assets, and appointed a receiver to marshal those assets.

"As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement. "We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."

Rose Romero, Regional Director of the SEC's Fort Worth Regional Office, added, "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."

The SEC's complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.

According to the SEC's complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in "liquid" financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators.

According to the SEC's complaint, SIB is operated by a close circle of Stanford's family and friends. SIB's investment committee, responsible for the management of the bank's multi-billion dollar portfolio of assets, is comprised of Stanford; Stanford's father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford's college roommate.

Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme, the SEC says.
The SEC's complaint also alleges an additional scheme relating to $1.2 billion in sales by SGC advisers of a proprietary mutual fund wrap program, called Stanford Allocation Strategy, by using materially false historical performance data. According to the complaint, the false data helped SGC grow the program from less than $10 million in 2004 to more than $1 billion, generating fees for the company (and ultimately Stanford) of approximately $25 million in 2007 and 2008, the SEC says.

The fraudulent performance was used to recruit registered investment advisers with significant books of business, who were then heavily incentivized to reallocate their clients' assets to SIB's CD program, the SEC says.

Stanford International Bank Ltd., the Antigua-based affiliate of billionaire R. Allen Stanford’s U.S. investment firm, has already placed a 60-day moratorium on early redemptions of its certificates of deposit, people familiar with the matter said.