FBI locates Stanford in Virginia

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FBI locates Stanford in Virginia
Accused financier curried influence in Washington, watchdog group says
By Simon Kennedy & Alistair Barr, MarketWatch
Last update: 9:45 p.m. EST Feb. 19, 2009Comments:
SAN FRANCISCO (MarketWatch) -- Robert Allen Stanford, the Texas financier accused of an $8 billion fraud, has been tracked down in Virginia, the Securities and Exchange Commission said Thursday.
FBI agents located Stanford in the Fredericksburg, Va., area and served him with court orders and documents related to the SEC's civil suit against him, the regulator added in a statement.
The SEC's suit, filed Tuesday, claims Stanford and three of his companies defrauded investors in an $8 billion scheme involving certificates of deposit. The SEC has filed a request for emergency relief "for the benefit of defrauded investors" with U.S. District Judge Reed O'Connor, the SEC said in a statement, and O'Connor has responded by freezing Stanford's assets.
In addition, the SEC said it is seeking a judgment "permanently enjoining" Stanford from future violations of federal securities laws and ordering him "to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest."
Stanford's Antigua-based bank, Stanford International Bank, sold roughly $8 billion of certificates of deposit to investors through a network of financial advisers by promising "improbable and unsubstantiated" high interest rates, the regulator said in a statement. See full story.
Federal prosecutors are trying to find out whether Stanford ran a Ponzi scheme, where money from new customers is used to pay withdrawals by existing clients, The Wall Street Journal reported Thursday.
Stanford's whereabouts remained a mystery Wednesday and earlier on Thursday as depositors in Antigua and several Latin American countries rushed to try to withdraw their money from the Stanford-run banks.
Stanford, ranked by Forbes last year as the 205th-richest person in the U.S., is one of the biggest investors in the Caribbean. He's also ploughed millions of dollars into promoting and sponsoring cricket and other sports including golf.
Political donations
Stanford also spread more than $7 million in political donations across Washington in recent years on lobbying and campaign contributions.
A political action committee formed by Stanford and his wife donated almost $1 million; the rest was doled out via the Stanford Financial Group's political action committee, the watchdog group Center for Responsive Politics said in research released Thursday.
"Robert Allen Stanford now has two things in common with embattled investment manager Bernard Madoff: Both have been accused of defrauding their investors, and both have given significant funds to politicians," the group said.
Video: 205th Wealthiest American Charged with Fraud
Allen Stanford was charged by the SEC for an $8 billion fraud. WSJ's Kelsey Hubbard talks with Mike Allen about the alleged fraud that centers on a certificate of deposit program.According the report, big-name recipients of Stanford's donations included Democrats like President Barack Obama and Sens. Bill Nelson of Florida, Chris Dodd of Connecticut and Charles Schumer of New York. Republicans Sens. John McCain of Arizona, his party's 2008 presidential candidate, and John Cornyn of Texas also received donations.
Representatives Nelson, Dodd, Schumer, McCain and Cornyn were unable to immediately respond to requests for comment.
According to a report in the online edition of The Hill, Nelson, Dodd and McCain have joined other lawmakers in pledging to donate the Stanford donations to charity.
Obama ranked third among individual lawmakers receiving funds, the CRP report said, collecting $31,750 from the company's employees during his 2008 presidential bid, including $4,600 from Stanford himself.
"Stanford Financial Group has given $2.4 million to federal candidates, parties and committees since 2000, with 65% of that going to Democrats. Stanford and his wife, Susan, have given $931,100 out of their own pockets, with 78% going to Democrats," the report concluded.. See the list of Stanford's beneficiaries.
The center said that Stanford's lobbying arm, Stanford Group, spent about $2.2 million in Washington in 2008, a big spike from its previous high donation of just under $1 million in 2005.
"A special interest's lobbying activity may go up or down over time, depending on how much attention the federal government is giving their issues. Particularly active clients often retain multiple lobbying firms, each with a team of lobbyists, to press their case for them," according to the group. See full details on Stanford's spending on lobbying

According to earlier reports Thursday, Stanford has one other thing in common with the disgraced Madoff -- a predilection for small accounting firms.
Stanford used a tiny accounting firm with offices above a hair salon in North London to audit his financial empire, media reports said. The use of a virtually unknown auditor is reminiscent of Madoff, who used a three-man accounting firm while allegedly pulling off the world's biggest-ever fraud.
CAS Hewlett & Co. was the auditor for Stanford International Bank and was run by Charlesworth Hewlett until his death last month. Of three addresses registered in London, residents at two had no knowledge of Hewlett and the third was a one-room office previously used by the accountant, the Financial Times reported.
The firm's Antiguan office, meanwhile, is run out of just two rooms, with an old typewriter and an eight-year-old telephone directory on the reception desk, the FT said. Read more.
Stanford and three of his companies, including SIB, have been charged with fraud by the Securities and Exchange Commission. The regulator said SIB sold around $8 billion of certificates of deposit to investors by promising "improbable and unsubstantiated" high interest rates. See archived story.
Also similar to the alleged Madoff fraud, employees of Stanford were kept in the dark or were actively discouraged from asking questions about the group's investments.
Two former advisers at Stanford's Houston offices, Mark Tidwell and Charles Rawl, sued the group last year after they were allegedly forced to resign after raising concerns about how the business was run.
Stanford had been missing since the SEC announced its litigation earlier in the week. He reportedly failed to charter a private plane in Houston after the plane-leasing company refused his credit card.
His father, James Stanford, who was on the board but hasn't been charged, told the Houston Chronicle that he didn't know the details of how the investments were structured or where deposits had been invested.
"I cannot believe, I will not believe what is being alleged actually happened," James Stanford reportedly said, adding he didn't know where his son was.
Simon Kennedy is the City correspondent for MarketWatch in London.
Alistair Barr is a reporter for MarketWatch in San Francisco.