Wed Feb 18, 2009 6:50pm EST
By Ana Isabel Martinez
CARACAS, Feb 18 (Reuters) - Well-off Mexican pensioners joined middle-class Venezuelans in a frantic quest on Wednesday to track down their savings as the fraud scandal enveloping U.S. broker Stanford Group Co spread to Latin America.
Crowds flocked to Stanford offices in Caracas and Mexico City and telephone lines buzzed as harried Stanford staff fielded calls round-the-clock about frozen accounts. Regulatory authorities moved on the bank's assets in Ecuador and Panama and its Colombian brokerage unit halted stock trading. [ID:nN18432144]
"I heard the news and came straight down," said Caracas resident Josefina Moreno, who said her son had about $10,000 invested. "We've had money here for 2 years, and I want it back."
The U.S. Securities and Exchange Commission (SEC) has accused billionaire Allen Stanford, a high profile cricket promoter, and two Stanford executives of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched around the world from Texas and Antigua. Venezuelan investors alone could have more than $2 billion invested in the scheme. [ID:nN17381625]
One Venezuelan official familiar with some Stanford Group operations said that Venezuelan investors were mainly middle-class or rich individuals with deposits ranging from $10,000 to tens of millions of dollars.
The SEC civil complaint, filed on Tuesday in federal court in Dallas, Texas, named Stanford International Bank (SIB), based in Antigua with 30,000 clients in 131 countries and $8.5 billion in assets, and the group's Houston-based broker-dealer and investment adviser units. In all, the company claims to oversee $50 billion in assets.
Venezuelan investments account for an estimated third of money in SIB, authorities said. [ID:nN18444225]
Stanford Bank Venezuela sought to calm clients on Tuesday by saying its assets were not linked to SIB, and requested a national banking authority representative to sit on its board. [ID:nN18423175]
SHATTERED SHELTERS
In a region all too familiar with financial turmoil, market meltdowns and frozen bank accounts, the Stanford scandal has panicked investors who were already worried about the effects of the global financial crisis on their jobs and savings.
Many wealthy Venezuelans look to overseas accounts as a way of dealing with tough currency controls, soaring inflation and their concerns that socialist President Hugo Chavez is driving the oil rich nation toward Cuba-style communism.
At Stanford's Mexico City office, middle-aged women carrying Louis Vuitton and Carolina Herrera designer purses fiddled with flashy necklaces as they waited alongside Jewish men in skull caps, switching between Spanish and Yiddish as they spoke on their cellphones.
Stanford staff handed out statements that said Stanford accounts had been frozen and provided wire transfer instructions for clients who wanted to liquidate accounts. Some of those waiting in line wept into their cellphones.
Some said they did not know if their money was in Mexico or Houston or Antigua.
"All my capital is in this bank, and I don't know what I am going to do. They won't attend to us. They are locked inside. They don't want to talk to us," said Karyna Kleinckwort, a widow in her mid-thirties.
BAD NEWS AFTER MIDNIGHT, CONFUSION REIGNS
Stanford Fondos has been licensed to operate in Mexico since 2005. The country's bank regulator said that as of Nov. 2008, Stanford had sold investment stocks worth roughly $45 million to some 3,400 clients in Mexico.
"Yesterday, our advisor called us at 1 a.m. and told us he could not believe it," said Maria Esther Azuela, a housewife in her mid-sixties. "This is a big blow."
In Quito, Ecuador, confusion ruled. After the government announced that it was investigating the operations of two local units of Stanford, Anita Cazar rushed to claim her cash. [ID:nN18454119]
"I don't know what is happening," said Cazar, 50, who joined other investors looking for answers. "I saw it in the newspaper, but I want to get my money out just in case."
The Quito stock exchange suspended Stanford's local brokerage house on Wednesday from operating on that exchange for 30 days. [ID:nN18422837]
Santiago Noboa, head regulator for markets in Quito, said the Stanford units managed a fund and investor portfolios totaling about $15 million, but authorities were yet unaware of other instruments the firm might have sold locally.
In Colombia, a local unit of Stanford halted activities on the Colombian stock exchange. Operations there would be limited to fulfilling commitments and returning funds, officials said. [ID:nN18421308]
Peruvian securities regulator Conasev sent an inspection team to Stanford's broker-dealer office in Lima. Conasev said the unit has net assets in Peru of 6.8 million soles ($2.1 million). [ID:nN18426995]
In Panama, bank regulators seized Stanford's local affiliate, Stanford Bank. Nobody lined up outside the branch in Panama City, but a four-page note pinned to the door told of the banking superintendent's decision to take over the bank because of a threat of a run on its assets. [ID:nN17401186]
"Because of the aforementioned," it read, "the interests of the depositors are at risk and it is necessary to carry out an immediate administration control of Stanford Bank, Panama." (Reporting by Caracas, Mexico City, Quito, Panama, Bogota bureaus; Writing by Patrick Markey; Editing by Toni Reinhold)
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Depositors turned away from Stanford banks
By BEN FOX, Associated Press Writer Ben Fox, Associated Press Writer – Wed Feb 18, 5:43 pm ET
ST. JOHN'S, Antigua – Panicky depositors were turned away from Stanford International Bank and some of its Latin American affiliates Wednesday, unable to withdraw their money after U.S. regulators accused Texas financier R. Allen Stanford of perpetrating an $8 billion fraud against his companies' investors.
Some customers arrived in Antigua by private jet and were driven up the lushly landscaped driveway of the bank's headquarters, only to be told that all assets have been frozen pending an investigation by Antiguan banking regulators.
"I don't know what to think. I have my life savings here," said Reinaldo Pinto Ramos, 48, a Venezuelan software firm owner who flew in by chartered plane from Caracas Wednesday with five other investors to check on their accounts. "We're waiting to see some light."
Banking regulators and politicians around the region are scrambling to contain the damage after the U.S. Securities and Exchange Commission filed civil fraud charges against the billionaire on Tuesday. Regional Director Rose Romero of the SEC's Fort Worth office called it a "fraud of shocking magnitude that has spread its tentacles throughout the world."
Specifically, U.S. regulators accused Stanford, two other executives and three of their companies of luring investors with promises of "improbable and unsubstantiated" high returns on certificates of deposit and other investments. They asked a federal judge to freeze all three companies' U.S. assets and to seek the repatriation of any of their assets overseas.
That would include the $7.2 billion managed by the Antigua-based Stanford International Bank, which has affiliates in Mexico, Panama, Colombia, Ecuador, Peru and Venezuela. Also frozen were assets of Houston-based Stanford Group Company and Stanford Capital Management.
"The fallout threatens catastrophic and immediate consequences" for the twin-island nation of Antigua and Barbuda, said Prime Minister Baldwin Spencer. It also could rattle the economies of smaller nations throughout the region.
Stanford, 58, has a personal fortune of $2.2 billion, according to Forbes magazine. He owns a home in St. Croix, in the U.S. Virgin Islands, and operates his businesses from Houston and Antigua, where his companies and charity have had such a prominent role that the islands' government knighted him in 2006.
SEC spokesman John Nester said the agency does not know where Stanford is. James Sullivan, the U.S. marshal for the Virgin Islands, said agents are monitoring his "extensive holdings" in St. Croix, including a boat he sometimes he docks there, but could not say whether he is currently in the territory. He does not currently face any charges requiring his presence in court.
"As of right now, all we are doing is an ongoing investigation to monitor his holdings, for lack of better term, and we are not actively pursuing him," Sullivan told The Associated Press.
Stanford also has been a major political player in the U.S., where some congressmen quickly announced they would donate his campaign contributions to charity.
The Stanford Financial Group, through its political action committee and employees, has contributed $2.4 million to political candidates, parties and committees in the U.S. since 1989, with nearly two-thirds going to Democrats, according to the Center for Responsive Politics, a group that tracks campaign spending.
Most of that cash flowed during the 2002 election cycle, when Congress was debating a financial services antifraud bill that would have linked the databases of state and federal banking, securities and insurance regulators. The bill ultimately died in the Senate, where the biggest recipients have been Sen. Bill Nelson, D-Fla. ($45,900); Sen. John McCain, R-Ariz. ($28,150); Sen. Chris Dodd, D-Conn. ($27,500); and Sen. John Cornyn, R-Texas ($19,700). Rep. Pete Sessions, R-Texas also received $41,375.
Stanford and his wife Susan also donated $931,100 of their own money, with 78 percent going to Democrats, including $4,600 to President Barack Obama's presidential campaign last May 31. Records show $2,300 of that was returned on the same day.
Governments across the region took a variety of actions Wednesday to protect local investors who'd deposited money with Stanford-linked institutions.
Colombia suspended the activities of Stanford International Bank's local brokerage Wednesday to protect "clients and investors." Panama occupied Stanford bank branches following a run on deposits, which its banking agency described as an isolated "consequence of decisions adopted by foreign authorities."
Assets at the bank's four Panama branches, which reportedly held $200 million in deposits at year's end, are held largely in liquid, fixed-income investments that can more easily be converted into cash to cover deposits if necessary, the bank said.
In Venezuela, banking regulator Edgar Hernandez said the government was considering a bank request for help after a $26.5 million run on deposits removed about 12 percent of the holdings at Stanford Bank SA in Caracas.
"We suggested an open intervention" by the government, including the possibility of the government or a state-run bank depositing funds to prop up the bank, Hugo Faria, one of the bank's directors, told The Associated Press.
In Mexico, where the Stanford Fondos unit manages about $50 million for some 3,400 clients, a note posted on a shuttered office door in the capital's wealthy Polanco neighborhood announced that all accounts "are temporarily frozen."
"We don't have any other information at this time, you will be contacted in the future with more details," the note said.
Karina Klinckwort, 38, had rushed to the office Wednesday: "Everything I have is with them, everything that my husband, may he rest in peace, invested is with them."
In Antigua, hundreds of depositors lined up outside the Stanford-controlled Bank of Antigua, many clutching portable radios to listen to financial news.
"People have to come to get their money," said electrician Rasta Kente.
Regional regulators warned that panicking will only make things worse.
"If individuals persist in rushing to the bank in a panic they will precipitate the very situation that we are all trying to avoid," said K. Dwight Venner, governor of the Eastern Caribbean Central Bank.
Virgin Islands Gov. John deJongh said he worries the probe will worsen the U.S. territory's flagging economy, potentially costing jobs and investment in local projects. Stanford had pledged to build an office complex next to St. Croix's airport.
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