Stanford Official Indicted

Posted by: Matthew Goldstein on May 12

It’s not the big news that R. Allen Stanford’s investors have been waiting for the past three months. But Laura Pendergest-Holt, the former chief investment officer for Stanford’s now-defunct financial empire, was indicted today by a federal grand jury on two obstruction of justice charges.

The indictment, not yet public, is the first filed by federal prosecutors in the criminal investigation of Houston-based Stanford Financial Group. Federal authorities are investigating allegations that Stanford and his top associates ran an $8 billion Ponzi scheme by selling bank certificates of deposit that boasted artifically inflated rates of return.

Pendergest-Holt was previously charged in a criminal complaint with providing misleading and inaccurate information to the Securities and Exchange Commission during a series of interviews in January. Today was the deadline for prosecutors to either indict Pendergest-Holt on those criminal charges, or dismiss the case.

The Department of Justice, in a press release, said the two-count indictment charges that Pendergest-Holt “falsely represented” to the SEC that she did not know where the bulk of the CD assets were invested. In fact, prosecutors charge she knew as early as November that the value of those assets were far different from what investors had been told.

Pendergest-Holt’s lawyers were not immediately available for comment,

There had been some speculation that Stanford also might be indicted along with Pendergest-Holt. In fact, Stanford, in an impromptu television interview last month, said he expected to be indicted soon. But people familiar with the investigation say it may take another two weeks before prosecutors are ready to file criminal charges against Stanford—if at all.

For weeks now, Jim Davis, Stanford’s former college roommate and right-hand man, has been cooperating with prosecutors. Davis, the financial firm’s former CFO, is said to be close to reaching a plea agreement with federal authorities.

The SEC, on Feb. 17, filed civil fraud charges against Stanford, Davis and Pendergest-Holt. Stanford, a one-time billionaire, has had his assets frozen ever since the SEC court action.

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BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.

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