R. Allen Stanford’s jury, a day after finding the Texas financier guilty of leading a $7 billion international fraud, will continue hearing evidence on federal prosecutors’ request that he forfeit $300 million in assets.
The jury of eight men and four women yesterday convicted Stanford on 13 of 14 charges including four wire fraud counts and five mail fraud counts carrying maximum penalties of 20 years in prison. No sentencing date has been set.
The panel acquitted him of the claim he used interstate wire communications to buy $9,000 in Super Bowl tickets for the chief of the Antiguan regulatory authority responsible for monitoring his Stanford International Bank Ltd.
“We are disappointed in the outcome,” co-lead defense counsel Ali Fazel said after the verdict. “We expect to appeal.”
The founder of Houston-based Stanford Financial Group denied federal government allegations he’d lied to investors about the nature and oversight of the certificates of deposit issued by the bank and sold in U.S. by his securities firm, Stanford Group Co.
Once ranked 205 on Forbes magazine’s 2008 list of the richest Americans, with a net worth of $2.2 billion, Stanford has been jailed as a flight risk since being indicted in June 2009.
Forfeiture Trial
The forfeiture trial, which continues today, began about 2 1/2 hours after the jury rendered its verdict. Prosecutors want the panel to decide how much money Stanford must give up now that they’ve said he is guilty.
The funds, now on deposit in the U.K., Switzerland, Canada and Antigua, belong to Stanford bank depositors, Justice Department lawyer Andrew Warren told the jury at the outset of the second proceeding yesterday.
“It includes the SocGen slush fund about which you’ve heard a lot about already,” Warren said, referring to money at a Swiss unit of Paris-based Societe Generale SA. “Every single dollar the U.S. is seeking is CD depositors’ money that stems from Mr. Stanford’s crimes and belongs to the victims of his fraud.”
Fazel responded that the government can’t prove that every dollar in every Stanford account spanning more than 20 years is subject to seizure as a product of fraud.
“That’s just not the case,” he told the jury. “I respect your verdict. It is what it is. The question is whether all the money — including money in his children’s accounts — is the result of ill-gotten gains, and we maintain it is not.”
Victims’ Recovery
“The forfeiture phase is as important as the conviction,” said former Stanford prosecutor Paul Pelletier, who is now in private practice with Boston-based Mintz Levin Cohn Ferris Glovsky & Popeo PC (1367L).
“Fifty percent of a prosecutor’s job is to obtain the conviction,” he said. “The other 50 percent is to recover for the victims, and forfeiture goes a long way towards that goal.”
The jury must find that specific Stanford assets were obtained with criminal proceeds in order to force him to give them up, he said. Funds recovered through this process will be returned to Stanford fraud victims.
“It’s an absolute given,” Pelletier said. “Not a dime of this money goes to the U.S. treasury.”
Lead prosecutor Gregg Costa declined to discuss the case after the verdict, citing a gag order imposed on counsel for both sides by U.S. District Judge David Hittner, who presided over the six-week trial.
The jury began deliberating on Feb. 29. Hittner ordered them to resume deliberations on March 5 after the panel sent him a note saying it was deadlocked.
Stanford’s Reaction
While a defense lawyer told jurors in an opening statement on Jan. 24 that they would hear from Stanford, he was never called to the witness stand.
Immediately before the jury gave its verdict, Stanford sat at the defense table with his eyes closed and his hands clasped at his chin. He occasionally turned and smiled faintly at his mother, Sammie, who sat in the front row with Stanford’s two adult daughters and a female family friend.
He audibly exhaled as Hittner read aloud the panel’s rulings and didn’t turn toward his weeping daughters and mother until the jury left the courtroom. His eyes welling with tears, Stanford then looked away.
Soon Stanford’s lawyers will begin marshaling their arguments for appeal, former federal prosecutor Douglas T. Burns, now a white collar criminal defense lawyer in New York, said in a phone interview.
‘Scour’ Record
“They’re going to scour through the trial record for any mistakes made” by Hittner, he said. The defense team may also challenge the judge’s December ruling denying a requested postponement.
Stanford sustained head injuries in a September 2009 jailhouse inmate assault and later developed an addiction to anti-anxiety medication resulting in a near nine-month term at a federal prison hospital in North Carolina.
His lawyers had argued he wasn’t fit for trial and that they had insufficient time to prepare their case.
“They could say the judge erred and made an abuse of discretion,” Burns said.
“This conviction is really a very important milestone along a very long, difficult path the victims have been on,” Kevin Sadler, lead lawyer for Stanford’s court-appointed receiver, Ralph Janvey, said in a phone interview after the verdict.
Receiver’s Lawsuits
The financier’s conviction may also bolster the receiver’s lawsuits alleging fraudulent transfers against former Stanford financial advisers and investors who “persist” in believing no fraud occurred at Stanford’s operations, he said.
“This conviction makes it impossible for that kind of fantasy to be sustained anymore,” Sadler said. “As silly as it sounds, people are still asserting that.”
Houston investor Cassie Wilkinson ran to court after receiving a call at the gym that the jury had reached a verdict. Wilkinson, who attended most of the trial, said she lost about $500,000 on Stanford CDs.
It is a relief that 12 jurors saw it the way we did, she said afterward. We were scammed. The bottom line is still we’ve lost. But it is justice, and there’s been no justice for the victims. We’ve been pretty much ignored, and now we aren’t being ignored.
Fraudulent CDs
The government presented testimony at trial from investors who bought the allegedly fraudulent CDs as well as from the executives who helped sell them.
The witnesses included government officials and former Stanford Group Co. Chief Financial Officer James M. Davis, who pleaded guilty to fraud-related charges in 2009 and testified for five days against Stanford. Davis, whose relationship with Stanford traces back to when they were Baylor University roommates, told the jury he knew the boss was committing fraud and didn’t stop it.
Prosecutors told the jury in their closing argument that Stanford wasted investor money on failing businesses, yachts and cricket tournaments. They said he secretly borrowed as much as $2 billion from his bank and sought to build an island resort for billionaires.
By 2008, the bank owed investors $7 billion that didn’t exist, prosecutor William Stellmach said.
Stanford had been digging that hole for years with his lavish lifestyles and loser companies, he said.
Banking Disclosures
Stanford’s defense lawyers argued that his banking disclosures complied with internationally accepted accounting standards. They also contended he had sufficient assets in an array of private enterprises to repay all investors. They said Stanford was consolidating these companies onto the bank’s balance sheets when the SEC sued him for fraud and seized his businesses in February 2009.
The defense presented former Stanford employees who said they saw no evidence of fraud at the company. Some offered testimony in support of the defense’s contention that Stanford was an absentee visionary who left the details of running his operation to Davis.
Stanford co-counsel Robert Scardino used part of his closing argument to criticize the prosecution and challenge Davis’s credibility.
“The key witness in their case has got to be one of the biggest liars you ever heard about or read about,” Scardino said of Davis. He told the jury that to believe the government’s case against Stanford, “you have to believe Davis.”
Declared Indigent
Stanford was declared indigent and given a taxpayer- financed defense because all of his assets were frozen by court order in February 2009 when he was sued by the U.S. Securities and Exchange Commission.
The U.S. judge in Dallas overseeing that case appointed a to marshal and liquidate Stanford’s holdings to repay investors. While Stanford waited in jail for his criminal trial to begin, the receiver sold his businesses, boats, six airplanes and stakes in a boutique hotel and golf course.
Stanford also lost the honorary knighthood given to him by the Antiguan government for his economic development efforts there. Antigua’s parliament stripped him of the title in November 2009.
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
To contact the reporters on this story: Andrew Harris in Houston at aharris16@bloomberg.net; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
