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June 19, 2009 6:32 PM

Allen Stanford Indicted

Posted by Zach Lowe

In news that can't be considered surprising, the U.S. Department of Justice today unsealed a massive criminal indictment charging the billionaire financier R. Allen Stanford and five other people with orchestrating a $7 billion Ponzi scheme through Stanford's banking empire in Antigua and in the U.S. 

The Securities and Exchange Commission filed a civil case against Stanford and several Stanford International Bank executives in February, so today's indictment had long been expected. The new indictment, available below, centers on the now-familiar scheme involving the bank's certificates of deposit, which offered investors huge, double-digit rates of return. The indictment charges Stanford and three other company officials--including Laura Pendergest-Holt, the bank's chief investment officer--with falsely pumping up the value of the bank's investments in presentations and meetings with investors. In reality, the indictment says, about 80 percent of the bank's investments were in illiquid assets, including more than $1 billion in loans to Stanford, according to stories from the New York Times, USA Today, and others.

Let's break down the lawyers. For Stanford, well-known Texas criminal defense attorney Dick DeGuerin has been on the case for months. Also, Patton Boggs partner Christina Sarchio has now been retained for both the SEC case and the new criminal case, according to court records. Pendergest-Holt, who before today has been the only person facing criminal charges in the case, has retained a team consisting of Jeffrey Tillotson of Lynn Tillotson Pinker & Cox, Brent Baker of Parsons Behle & Latimer, and Houston-based criminal defense attorney Dan Cogdell.

The complaint names three other Stanford employees and one Antiguan official, Leroy King. King allegedly accepted bribes from Stanford in exchange for tipping him off to U.S. investigations and conducted sham audits showing positive results for Stanford's bank. Lawyers for those defendants could not be immediately reached. 

Let's not forget Thomas Sjoblom, the Proskauer Rose partner who represented Pendergest-Holt when she first testified before the SEC in February. As we've written before, the SEC soon after charged her with lying to investigators, raising questions about whether Sjoblom should have been representing her and Stanford's bank at the same time. (The experts were unanimous in saying that Pendergest-Holt should have had her own lawyer; SEC records show Sjoblom emphasized several times during testimony that he was not her personal attorney.)

Today's indictment is likely to increase the focus on Sjoblom, whom Pendergest-Holt has since sued for malpractice. (Sjoblom has never returned our calls for comment, and his lawyer, James Cole of Bryan Cave, did not return a message left for him today.)

The indictment does not name Sjoblom, but it mentions only one attorney for the bank, "a lawyer for SIBL." Sources involved in the case have confirmed the lawyer is Sjoblom, and the description of the lawyer's activities matches descriptions of Sjoblom's that are already in the public record of litigation related to the Stanford case.

According to the indictment, Sjoblom met with SEC attorneys at a restaurant in Houston on Jan. 22 and discussed the case, assuring them that Stanford's bank was "not a criminal enterprise" and that "the assets are all there." A day later, he successfully persuaded SEC attorneys to subpoena Pendergest-Holt and the bank's president for testimony instead of Stanford and his number two man, James Davis, the indictment says. Sjoblom claimed that Stanford and Davis were removed from the bank's day-to-day activities, and that Pendergest-Holt knew the "nuts and bolts" of the business better.

On Jan. 24, a day later, Sjoblom wrote an e-mail to a bank employee discussing his success in staving off any deposition of Stanford and Davis. In that email, he wrote that Pendergest-Holt would have to prepare hard for her deposition, and in particular that she would have to "get up to speed" on one type of asset the bank held. He sent an e-mail to Pendergest-Holt and others three days later re-emphasizing that point. Pendergest-Holt would have "to rise to the occasion," Sjoblom wrote, because "our livelihood depends on it."

Pendergest-Holt allegedly lied to the SEC during that testimony in early February. The next day, Sjoblom withdrew from the case and officially disaffirmed anything he had told the SEC about the company during the investigation. The move won praise from experts who initially said Sjoblom had acted appropriately. 

In any case, Tillotson says Pendergest-Holt is "anxious to get going" in defending herself now that the full indictments are finally out. Sarchio has not responded to requests for comment.

Stanford, who surrendered today in Virginia, was ordered held in custody over the weekend until a hearing can be held on his detention next week, the New York Times says. As always, stay tuned. Davis has been charged through what is known as a "criminal information" against him. Davis is cooperating with investigators and is expected to plead guilty. 

Download Stanfordindictment

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Correction, Davis has been charged, but not indicted. The U.S. Attorney returned an information in lieu of obtaining a grand jury indictment, which signals Davis is pleading guilty. Both are instruments for bringing formal charges and both can lead to conviction. The difference is that you cannot have a trial by information.

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