Allen Stanford

Federal Detention Center, Houston, where Stanford was held

Reports surfaced in early February 2009 that the SEC, the FBI, the Florida Office of Financial Regulation, and the Financial Industry Regulatory Authority, a major U.S. private-sector oversight body, were investigating Stanford Financial Group,[23] questioning the consistently higher-than-market returns which Stanford International Bank claimed to make for its depositors.[24] A former executive told SEC officials that Stanford presented hypothetical investment results as actual historical data in sales pitches to clients.[25] Stanford claimed his certificates of deposit were as safe as, or safer than, U.S. government-insured accounts.[26] A leaked cable message from the U.S. Embassy in the Bahamas reported as early as 2006 that companies under Stanford's control were "rumored to engage in bribery, money laundering, and political manipulation". The U.S. Ambassador to the Bahamas at the time was reported to have "managed to stay out of any one-on-one photos with Stanford" during a charity breakfast event.[27]

Federal agents raided the offices of Stanford Financial on February 17, 2009,[28] and treated it as "a kind of crime scene—cautioning people not to leave fingerprints".[29] The SEC charged Stanford with "massive ongoing fraud" centered on an eight-billion-dollar investment scheme.[2][30] Stanford's assets, along with those of his companies, were frozen and placed into receivership by a U.S. federal judge,[31] who ordered Stanford to surrender his passport.[32]

CNBC reported that Stanford tried to flee the country on the same day as the raids on his headquarters. He contacted a private jet owner and attempted to pay for a flight to Antigua with a credit card, but was refused because the company would accept only a wire transfer.[33]

On February 19, acting at the request of the SEC, FBI agents located Stanford at his girlfriend's house near Fredericksburg, Virginia, and served him with civil legal papers filed by the SEC.[34] The SEC often files civil charges before criminal charges are filed.[35] Stanford was arrested on June 18, 2009.[36] He surrendered his passport to federal prosecutors, and hired criminal defense lawyer Brendan Sullivan, who had represented Oliver North.[37]

Various governments took over Stanford's business operations. The Eastern Caribbean Central Bank announced that it had taken over the local operations of the Bank of Antigua, which was renamed the Eastern Caribbean Amalgamated Bank.[38] The Venezuelan government took over Stanford Bank Venezuela, the branch of Stanford's bank in that nation.[39][40]

On February 27, 2009, the SEC said that Stanford and his accomplices operated a "massive Ponzi scheme", misappropriating billions of dollars of investors' money and falsifying 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.[7][41] In an interview on April 20 at the law offices of Houston criminal attorney Dick DeGuerin, Stanford denied any wrongdoing. His companies had been well-run, he claimed, until the SEC "disembowelled" them.[29]

On June 18, 2009, Stanford was taken into custody by FBI agents.[42] On June 25, 2009, he appeared in a Houston court and pleaded not guilty to charges of fraud, conspiracy, and obstruction.[43] On August 27, 2009, Stanford was admitted into the Conroe, Texas, Regional Medical Center. He had complained of a racing heart while being transported from the private prison in Huntsville, Texas, to the Federal Courthouse in Houston to attend a hearing concerning his attorney, Dick DeGuerin, who had asked the court for permission to withdraw from Stanford's case.[44] Robert Luskin of Patton-Boggs, which had been representing Stanford in a simultaneous civil case, was to be lead counsel.[45]

On September 26, 2009, Stanford was hospitalized due to injuries sustained while being severely beaten by another inmate at the Cornell Companies-operated, Joe Corley Detention Facility in Conroe.[46][47] His injuries were described as non-life-threatening.[48]

In March 2010, SEC Inspector General H. David Kotz issued a report finding the SEC had failed to uncover the Ponzi scheme perpetrated by Stanford.[49] Because of concerns raised by former SEC Chief Investigator David P. Weber of improper conduct by Kotz, Inspector General David C. Williams of the U.S. Postal Service was brought in to conduct an independent review.[50] The Williams report found that Kotz "appeared to have a conflict of interest" because he had a personal relationship with an attorney representing Stanford's victims.[51][52]

Stanford's trial date was set for January 2011.[53] The district judge deemed that Stanford's anti-anxiety drug addiction impaired his judgment and therefore made him unfit to stand trial.[54] Stanford was incarcerated at the Federal Detention Center, Houston.[55] In February 2011 Stanford issued a counter-claim of $7.2 billion of damages against the FBI and the SEC.[56] In May, prosecutors dropped seven charges against Stanford, leaving 14 charges ongoing.[57]

By November 5, 2011, Stanford was being held at the Federal Medical Center at the Federal Correctional Complex, Butner in Butner, North Carolina.[58] His attorneys claimed that Stanford was unfit to stand trial due to amnesia resulting from his sustained injuries. On December 22, 2011, he was found competent to stand trial by U.S. District Judge David Hittner.[59]

The trial began on January 24, 2012, at the Houston Federal Courthouse, Judge Hittner presiding.[60][61] On March 6, after three hours of deliberation, the jury convicted him of masterminding a Ponzi scheme.[62] Prosecutors sought a sentence of 230 years in prison—the maximum permitted by law, and 80 years more than the 150-year sentence handed to Bernard Madoff—calling him "a ruthless predator" who "lived a life steeped in deceit." Stanford's lawyers pressed for a sentence of 31 to 44 months and a maximum of 10 years; the former sentence, with credit for time served, could have allowed him to walk out of prison without further jail time.[62][63] According to Peter Henning of The New York Times, judges have been more willing to impose sentences for financial fraudsters that effectively amount to life sentences in recent years. The extent to which such frauds wreck people's lives, Henning wrote, amounts to "economic homicide," and such outsized sentences are a way to express society's anger at such conduct.[64]

On June 14, 2012, Stanford was sentenced to 110 years in prison. Although it is less than half of the maximum sentence sought by prosecutors, it virtually ensures he will die in prison.[65][66][67] Hittner ordered Stanford to forfeit $5.9 billion, saying that Stanford had orchestrated "one of the most egregious frauds ever presented to a trial jury in federal court."[68] At sentencing, Stanford spoke for the first time in the proceedings, denying that he had ever swindled anyone. He blamed his company's failure on "Gestapo tactics" by government regulators.[62] He is incarcerated at Coleman II USP in Sumterville, Florida; his earliest possible release is March 13, 2103 – at which time he would be 152 years old.

On April 26, 2013, federal district judge David Godbey sided with the SEC in its civil suit against Stanford and ordered him to disgorge $6.7 billion ($5.9 billion in illegal profits and $861 million in interest) and pay a $5.9 billion fine. He was permanently banned from the securities industry. Godbey wrote that Stanford had carried out the fraud for over a decade "with a high degree of scienter," or knowledge that what he was doing was illegal.[69]

Stanford filed a 299-page brief in September 2014 with the 5th U.S. Circuit Court of Appeals in New Orleans on his conviction.[70] The appeal was rejected in October 2015.[12]

The United States Court of Appeals for the Fifth Circuit, affirming much of a United States Tax Court’s ruling, found that Stanford and his wife, Susan, under-reported their 1990 federal taxes by $423,531.36.[71] Public records suggest that Stanford may owe hundreds of millions of dollars in federal taxes. There are four federal tax liens from 2007 and 2008 against Stanford, totaling more than $212 million.[61][72]

The FBI and other agencies have been conducting an ongoing investigation of Stanford since 2008 for possible involvement in money laundering for Mexico's Gulf Cartel.[73] According to The New York Times, Stanford once held a Cook Islands trust called "Baby Mama", with his mistress and two children as beneficiaries. The trust protected proceeds deposited into Swiss and Isle of Man bank accounts from the sale of a $2.5 million Florida home.[74]

In 2001, Stanford said that his great-great-great grandfather was a relative of Leland Stanford, the founder of Stanford University.[75] He funded the restoration of Leland Stanford's mansion in Sacramento, California, in an effort "to help preserve an important piece of Stanford family history," and hired genealogists to prove he was a member of the Leland Stanford family.[20] A university spokesperson said "We are not aware of any genealogical relationship between Allen Stanford and Leland Stanford".[20] In 2008 the university filed a trademark infringement suit against Stanford, claiming the school's name was being used "in a way that creates public confusion" and is "injurious".[75]

Stanford created and funded the Stanford 20/20 cricket tournament in the West Indies, for which he built his own ground in Antigua. The first Stanford 20/20 Cricket Tournament was held in July and August 2006 where Guyana took 1st place defeating Trinidad and Tobago in the final. The second tournament took place in January and February 2008 with a global television audience of 300 million.[79] Trinidad and Tobago took first place and with it the US $280,000 Stanford Super Series prize after defeating Middlesex on October 27, 2008.[80]

In June 2008, Stanford and the England and Wales Cricket Board (ECB) signed a deal for five Twenty20 internationals between England and a West Indies all-star XI, with a total prize fund of £12.27 million (US$20 million) to be awarded to the team that won the Championship. It was the largest prize ever offered to a team for a single tournament.[81] This was in jeopardy after a row with Digicel, the sponsors of the West Indies cricket team, who were unhappy about sponsorship of the event. Eventually, the dispute was sorted out and the championship was won by Stanford Superstars, who defeated the England team by 10 wickets.[82]

On February 17, 2009, when news of the fraud investigation became public, the ECB and WICB withdrew from talks with Stanford on sponsorship.[83][84] On February 20, 2009, the ECB announced it had severed its ties with Stanford and cancelled all contracts with him.[85]

Stanford owned two newspaper businesses in Antigua and Barbuda[86] and Saint Kitts and Nevis,[87] both called The Sun. Following the scandal, both newspapers put workers on notice that their full operations would cease in April 2010.[88]

Stanford owned Maiden Island in Antigua and Barbuda.[89]