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Saturday, January 28, 2012

One Stanford Client Lost $20 Million, Ex-Executive Tells Jurors at Trial

By Andrew Harris - Jan 27, 2012

A former Stanford Group Co. executive told a jury that one client of R. Allen Stanford’s securities brokerage lost at least $20 million before the business was closed by U.S. regulators.

Jason Green, who led Stanford Group’s private-client group, offered the figure while being cross-examined by the defense on the fifth day of Stanford’s investor fraud trial in federal court in Houston.

Stanford’s lawyers have said that customers who bought the certificates of deposit issued by Antigua-based Stanford International Bank Ltd. and sold by the brokerage were able to withdraw every penny of their money until the Securities and Exchange Commission sued in February 2009.

Asked by defense attorney Ali Fazel if anybody had not gotten their money back before then, Green replied, “Yes, one person I know of specifically” was denied $20 million. Green later identified the client as Michael Moreno, who had residences in Lafayette, Louisiana, and in Houston.

Stanford, 61, who was indicted in June 2009, is accused of leading a $7 billion investment fraud cantered on CD sales. He is charged with 14 counts including mail fraud, wire fraud and obstruction of an SEC probe. He denies the charges.

Stanford, who suffered a jailhouse beating after his arrest, began rubbing his head during today’s proceeding. The judge offered to let him lie down and follow the trial from another room.

Joined in 1996
Green told the court yesterday that he joined the Stanford Group brokerage in 1996 and stayed until its end.

Moreno, he said, entrusted Stanford’s business with almost $50 million before withdrawing some of those funds to address a tax obligation. The $20 million withdrawal request was made shortly before Stanford stopped allowing clients to redeem CDs before their maturity date to stanch the outflow of capital as the global financial crisis deepened.

He also spoke of his efforts to persuade Stanford and the company’s chief financial officer, James M. Davis, to reassure customers after New York money manager Bernard Madoff’s December 2008 arrest for running the largest investment fraud in U.S. history.

‘Antiguan Madoff’
Green read an e-mail he sent to Stanford and Davis days before the SEC sued, in which he cited news articles that accused “Sir Allen of being the Antiguan Madoff” and said that he and other managers believed that if immediate steps weren’t taken to provide transparency, “we would not have a business to defend.”

On cross-examination today, Fazel asked Green about risk disclosures provided to prospective clients, offering them the opportunity to ask questions and receive answers about the firm’s “financial condition and affairs.”

Fazel asked if there was anything illegal about that.

“Only if people lie about their financial condition and affairs,” Green replied.

“Did you lie?” the lawyer asked.

“No, but I feel like I was lied to,” Green said. “I have a lot of clients, friends, relatives who haven’t gotten a penny back because there was no money.”

Later, Fazel questioned Green about Stanford Group’s ability to conduct financial research. The former executive told the court about a unit in Washington staffed with people he described as “political insiders,” including a retired brigadier general and a surgeon formerly with the U.S. Food and Drug Administration.

‘Politics Into Profit’
Their mission was to analyse legislation and “turn politics into profit,” Green said.

Asked by Fazel what became of that group after the Stanford firm closed, he replied, “I think they went to MF Global (MFGLQ).”

MF Global Holdings Ltd., parent company of the MF Global Inc. commodities brokerage, filed for bankruptcy protection in October. More than $1.2 billion may be missing from its customers’ accounts, trustee James Giddens has said.

The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case against Stanford is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).

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