If it is too good to be true... [SEC]

[Rev]

http://business.theglobeandmail.com/.../Business/home

SEC charges Texas financier with 'massive' fraud
SEC charges Texas financier R. Allen Stanford and 3 of his companies with fraud

* Stephen Bernard, AP Business Writer
* Tuesday February 17, 2009, 12:53 pm EST

NEW YORK (AP) -- Federal regulators on Tuesday charged Texas financier R. Allen Stanford and three of his companies with a "massive" fraud that centered around high-interest-rate certificate of deposits.

In a complaint filed in federal court in Dallas, the Securities and Exchange Commission alleged Stanford orchestrated a fraudulent investment scheme centered on an $8 billion CD program that promised "improbable and unsubstantiated high interest rates."

Stanford's assets, along with those of the three companies, were frozen. Stanford's companies include Antigua-based Stanford International Bank and broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.

The bank's chief financial officer, James Davis, and Stanford Financial Group's chief investment officer, Laura Pendergest-Holt, were also charged in the complaint.

Alfredo Perez, a spokesman for the U.S. Marshal's Service in Houston, confirmed that agents raided Stanford's office in Houston Tuesday morning, but he did not have any other immediate comment.

The SEC alleged Stanford and his businesses misrepresented the safety of the deposits, claiming the bank reinvested client funds in liquid financial instruments to help return profits on investments sharply higher than average rates than similar products.

The SEC is cooperating with the Financial Industry Regulatory Authority, the U.S. brokerage industry's self-policing body, as part of the ongoing investigation.

http://www.businessweek.com/magazine...n_id=rss_daily

Allen Stanford, 58, has emerged in recent years as a prominent figure on Wall Street, with a fortune estimated to top $2.2 billion, according to Forbes' annual list of the richest people in the U.S. Stanford Financial says it caters to roughly 50,000 wealthy investors, mostly in the U.S., the Caribbean, and Latin America. The firm declined to make Allen Stanford available for comment.
Jittery

In the wake of Bernard Madoff's alleged $50 billion Ponzi scheme, regulators and investors around the world are increasingly jittery about money-management firms that promise consistently higher-than-normal returns. Stanford Financial sells clients an array of investments, from stocks and bonds to mutual funds and rare coins. Even as the firm's client list has expanded, CDs have remained a central product. Stanford International Bank, an Antigua-based affiliate that issues the CDs, had just $1 billion of assets in 2001. Today, the bank says it has $8.5 billion.

Stanford's CDs, which require a minimum investment of $50,000, offer tantalizing interest rates. The current rate on a one-year CD is roughly 4.5%, according to the bank's Web site. The average at U.S. banks is about 2%, notes research firm Bankrate.com (RATE). A year ago, the offshore bank sold five-year CDs that yielded 7.03%; the industry average hovered around 3.9%.

[PNF]

wow, even at 5 years long CD, 7.03% is really good for supposedly risk-free CDs.

no wonder the head of SEC is on this list

http://www.time.com/time/specials/pa...877350,00.html