The trial of R. Allen Stanford, a money manager and chairman of the now defunct Stanford Financial Group, began on Monday, January 23, 2012. Stanford has been accused of running a $7.2 billion Ponzi scheme after being arrested in 2009 in Virginia. As with most fraudulent Ponzi schemes, Stanford Financial Group was investigated by the SEC, FBI, and the Financial Industry Regulatory Authority (FINRA), a major U.S. private-sector oversight body, to determine how Stanford International Bank was able to consistently make higher-than-market returns to its depositors. The complaint alleges that Stanford defrauded more than 20,000 investors through the sale of bogus certificates of deposit at Stanford International Bank, Ltd., a financial institution created by Stanford and based in Antigua.
Several aspects surrounding this case will make for an interesting trial. First, Stanford was the victim of a vicious prison beating in 2009 stemming from an altercation regarding use of the telephone. He now claims that he has lost all memory and that he cannot recall the details of his business and banking operations. Second, Stanford has filed a lawsuit accusing federal prosecutors, the FBI and the SEC of his complaint terms “abusive law enforcement,” and adamantly adhering to his claim of innocence. The suit seeks $7.2 billion in damages, which, coincidentally, is about the same amount that he is accused of stealing in the Ponzi scheme. Stanford has also filed suit against insurer Lloyd’s of London, claiming that Lloyd’s should be held liable for his legal fees as part of the Director’s and Officer’s policy held by Stanford Financial Group. However, after it was determined that Lloyd’s did not have to pay, Stanford is now attempting to have the U.S. taxpayer pick up his legal fees through his claim that he is indigent.
Finally, James Davis, the former CFO of Stanford Financial Group and Stanford’s college roommate at Baylor University, will testify as the government’s key witness. Davis has already pled guilty and hopes that his testimony will lead to a lighter prison sentence at his own sentencing. There is no doubt that these juicy details ensure that Stanford’s trial will be one to watch.