Allen Stanford Performs Another Trick

Chidem Kurdas

A lot of conmen are magicians, says John Tonsick, a forensic accountant and founder of Fraud Solutions. Yesterday in a Texas courtroom Robert Allen Stanford certainly tried to pull off another trick —his last chance before he was sentenced to 110 years for a $7-billion-plus fraud.

Mr. Stanford, who has maintained his innocence all along, argued that he ran not a scheme but a real investment business that functioned like a fine car, with “synergies” between its component parts.

Well, let’s look at this picture. One big component turned out to be a “loan” he took from the proceeds from the sale of products he called certificates of deposit. The “loan” of $1.6 billion to $2 billion – estimates vary – financed Stanford’s other businesses, almost all of them failures, and his absurd personal spending that ranged from two yachts to a fake castle. Before he was arrested in June 2009,  he said in an interview on CNBC that he did not take personal loans but rather invested that money through the venture capital arm of his company and other entities.

There’s the little problem that the CDs were advertised as backed by extremely low risk and liquid  portfolios of stocks and bonds; nobody said anything about venture capital to the customers. Then there is the fact that when subpoenaed to answer questions about the investments, Stanford instead sent off his employee, Laura Pendergest-Holt, a young woman who held the title of chief investment officer but in fact was more like a cheerleader for the sales people who pitched the supposed CDs. If Stanford personally invested those billions of dollars, why didn’t he explain it after being subpoenaed to do so?

Perchance he did not want to be the one lying under oath about the portfolio. Pendergest-Holt faces a criminal obstruction of justice charge in addition to fraud charges. Not that an additional charge would make a real difference for Stanford at this stage, but he had hopes of working his magic to make his legal troubles go away. Judging from his performance at the sentencing, he still does.

Fraudsters are very skilled and adapt to changes, says Mr. Tonsick, who was speaking at a conference organized by the New York State Society of CPAs.

Mr. Stanford said he will appeal. We will probably hear more about his fine investments, which somehow evaporated, leaving pennies to the dollar for the victims. He blames the government, Wall Street banks, his former buddy and colleague who testified against him—anybody but himself.

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