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Stanford Gears up for a Legal Showdown


Alleged fraudster R. Allen Stanford is gunning for a fight.

Dick DeGuerin, the celebrated Houston criminal defense lawyer who is now representing Stanford, came out firing verbal bullets today at the Securities and Exchange Commission, which has civilly charged the 59-year-old Texas finacier with running a massive $8 billion Ponzi scheme.

“This is not a Ponzi scheme,” says DeGuerin, in an interview with BusinessWeek’s Unstructured Finance blog. “The SEC is using Stanford as a distraction from its failures in Madoff. This is not Madoff.”

What DeGuerin is referring to, of course, is the even bigger scandal surrounding New York money manager Bernard Madoff, the mastermind of the biggest Ponzi scheme ever. Madoff, earlier this month pleaded guilty in federal court, to charges he ran a $65 billion Ponzi scheme for decades. The SEC has been widely faulted for not detecting the fraud and ignoring tell-tale signs from a would be whistleblower.

“There are hard assets for evey dollar invested” with Stanford’s offshore bank in Antigua, says DeGuerin. “The losses in the Stanford case are right in line with the stock market.”

The SEC, in its civil complaint, has alleged that Stanford took at least $1.6 billion in personal loans from his offshore bank and deceived investors about the assets the bank was investing its money in. The SEC alleges the high-yields on the certificates of deposit sold by Stanford International Bank were deceptive and unsustainable.

“We’ll let the complaint speak for itself,” says SEC spokesman John Nester.

Earlier this week, Unstructured Finance first reported that Stanford was on the verge of hiring DeGuerin, who has represented everyone from cult leader David Koresh to former Republican House Majority Leader Tom DeLay. DeGuerin says he’s in the process of putting together a legal team to assist him. The first step, he says, is going into federal court to get a judge to unfreeze some of Stanford’s reported $2.2 billion in assets, so he can pay for his legal defense.

Right now, the only charges pending against Stanford are civil fraud charges. But federal prosecutors are also investigating and have already filed obstruction of justice charges against the former chief investment officer at Stanford’s once fast-growing Stanford Financial Group.

Meanwhile, Stanford’s top deputy, Jim Davis, the company’s former chief financial officer, is now cooperating with authorities, according to his lawyer David Finn. The SEC also filed civil fraud charges against Davis.

DeGuerin, however, brushed off the news that Davis is working with Stanford’s accusers. “If he tells the truth it doesn’t concern us.”

Unlike Madoff, who went down without much of a fight, Stanford is not going to make this easy for the authorities. Stay tuned. This thing is just heating up.


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