US billionaire accused of $12 billion fraud

Just a few months after the $US50 billion Bernie Madoff scandal rocked America’s financial services sector, Texan billionaire Allen Stanford has been accused of conducting “a massive ongoing fraud” over the sale of $US8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua.

Federal agents directed by the US Securities and Exchange Commission raided Stanford Financial Group’s Houston offices this morning.

Forbes magazine recently ranked Stanford as the 205^th richest American, with a fortune of $US2.2 billion ($3.5 billion). Stanford Financial claims to have $US51 billion under management.

The SEC has accused Stanford and two other executives of fraud in that he sold the certificates of deposit “by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks”.

US commentators say the accusations levelled against Stanford and his companies are part of the SEC’s crackdown on too-good-to-be-true offers from financial services companies. According to the SEC, Stanford International Bank quoted a rate of 5.375% on a $100,000 three-year certificate of deposit (CD) compared with rates of less than 3.2% at American banks. The bank recently has even offered rates of more than 10% on five-year CDs, the filing stated.

The SEC is also seeking to freeze assets of the company and has appointed a receiver to Stanford Financial Group “to take possession and control of defendants’ assets for the protection of defendants’ victims”.

In an ironic twist, the SEC has also claimed that Stanford’s investment companies were exposed to the Madoff scandal, despite the company’s assurances that it had not lost any money.

Cricket-mad Stanford leapt to prominence last year after he staged a Twenty20 cricket competition in the Caribbean and spent $US20 million (about $US1 million a player) on a game between England and a West Indian all-star team.

But overnight the England and West Indies cricket boards suspended sponsorship negotiations with Stanford following the fraud charges.

“The England and Wales Cricket Board (ECB) and the West Indies Cricket Board (WICB) have suspended negotiations with Sir Allen Stanford and his financial corporation concerning a new sponsorship deal,” the ECB said in a statement.

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