MEMPHIS, Tenn. - U.S. Marshals have raided offices for the Stanford Group in both Memphis and Houston Tuesday morning, removing boxes of documents as part of an investigation into questionable investment returns.
Stanford Financial Group, Inc., the multi-million dollar Houston-based investment firm headed by Sir R. Allen Stanford, is being investigated by the Securities and Exchange Commission.
Previous reports state six of the firm's offices had information downloaded from computers and files looked through by investigators of the Financial Industry Regulatory Authority last month. The target appeared to be the firm's sales of certificates of deposit in an affiliated off-shore bank and the above-average returns those investments paid.
Memphis investment analyst Martavius Jones says Stanford, who boasts of over $8 billion in assets and 30,000 clients worldwide, could be the victim of a new "get tough" policy in Washington brought on by a now infamous financial fiasco.
Stanford Financial Group has already planted some deep roots in the Memphis community since taking over title sponsorship of the Stanford St. Jude Championship Golf Tournament in 2007 and immediately distinguishing themselves as a notable charity partner for the renowned children's research hospital.
The following is the official statement from the U.S. Securities and Exchange Commission:
The United States Securities and Exchange Commission announced that on February 16, 2009, the Honorable Judge Reed OConnor, a federal judge in the Northern District of Texas, in response to the Commission's application for emergency preliminary relief, entered a temporary restraining order against Robert Allen Stanford and three of his companies, the Antiguan-based Stanford International Bank (SIB), Houston based broker-dealer and investment adviser, Stanford Group Company (SGC) and investment adviser, Stanford Capital Management.
The courts order also extends to SIB chief financial officer James Davis, and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group. The temporary restraining order restrains the defendants from violating certain antifraud provisions of the federal securities laws, as well as provisions of the Investment Company and Investment Adviser Acts. Also, Judge OConnor froze all assets of the defendants until further notice, ordered that assets outside the U.S. be returned to the courts jurisdiction, appointed a receiver to marshal the defendants assets and granted other relief.
The SEC's complaint, filed in federal court in Dallas, alleges that the defendants have committed an $8 billion fraud and violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act of 1940, and Section 7(d) of the Investment Company Act of 1940.
The complaint 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, supposedly earned through its unique investment strategy, which has purportedly allowed the bank to achieve double-digit returns on its investments over the past 15 years.
According to the 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. Recently, as the market absorbed the news of Bernard Madoffs 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 Commission continues to seek, among other things, a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and civil money penalties.
The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter.