The SEC announced yesterday that it has charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program. News reports today indicate that the actions of a Stanford attorney who disaffirmed prior statements to the SEC about Stanford played a part in the SEC’s investigation.
According to Enforcement Director Linda Chatman Thomsen, the SEC alleged a “massive fraud based on false promises and fabricated historical return data to prey on investors.” The SEC’s complaint, filed in federal court in Dallas, alleges that acting through a network of financial advisers, Stanford International Bank sold approximately $8 billion of so-called “certificates of deposit” to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB’s unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.
According to the SEC’s complaint, the defendants misrepresented to CD purchasers that their deposits were safe, falsely claiming that the bank re-invests client funds primarily in “liquid” financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators.
Notably, one of Stanford’s own lawyers has emerged as a key figure in the matter. Bloomberg reports that last week, Thomas Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford’s company’s Antigua affiliate, told authorities that he “disaffirmed” everything he had told them to date. According to his bio on his law firm’s website, Sjoblom spent nearly 20 years at the SEC, and served as an Assistant Chief Litigation Counsel in the SEC’s Division of Enforcement from 1987 to 1999.
“The attorney’s withdrawal is a massive red flag” that “screams fraud,” said Peter Henning, who teaches criminal and securities law at Wayne State University in Detroit. “If the SEC hadn’t turned up the heat by that point, it did then.”