NEW YORK – Federal regulators on Tuesday charged Texas financier R. Allen Stanford and three of his firms with a “massive” fraud that centered around high-interest-rate certificates of deposit, and raided some of the companies’ offices.

In a complaint filed in federal court in Dallas, the Securities and Exchange Commission alleged Stanford orchestrated a fraudulent investment scheme centered on an $8 billion CD program that promised “improbable and unsubstantiated high interest rates.”

Stanford’s assets, along with those of the three companies, were frozen. Stanford’s firms include Antigua-based Stanford International Bank, broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.

The bank’s chief financial officer, James Davis, and Stanford Financial Group’s chief investment officer, Laura Pendergest-Holt, were also charged in the complaint.

U.S. District Court Judge Reed O’Connor has appointed a receiver to handle the frozen assets.

The charges come amid an investigation that has lasted more than three months and included the SEC, the Financial Industry Regulatory Authority, the U.S. brokerage industry’s self-policing body, and the Florida Office of Financial Regulation. Investigators visited the Florida offices of Stanford Group last month.

Stanford Group did not immediately return calls seeking comment.

Alfredo Perez, a spokesman for the U.S. Marshal’s Service in Houston, confirmed that agents raided Stanford’s office in Houston Tuesday morning, but he did not have any other immediate comment.

The SEC alleged Stanford and his businesses misrepresented the safety of the deposits, claiming the bank reinvested client funds in liquid financial instruments to help return profits on investments sharply higher than average rates of similar products.

“Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises, and fabricated historical return data to prey on investors,” Linda Chatman Thomsen, director of the SEC’s division of enforcement, said in a statement.

The SEC also accuses Stanford of running a second scheme tied to sales of a mutual fund product, which allegedly used false historical performance data to grow the program from less than $10 million in 2004 to more than $1 billion. The alleged fraud helped generate $25 million in fees for Stanford Group in 2007 and 2008, according to the SEC.

Stanford, 58, is one of the most prominent businessmen in the Caribbean, with investment advisers around the world helping him grow a personal fortune estimated at $2.2 billion by Forbes magazine.

His Stanford International Bank Ltd. said deposits surged from $624 million in 1999 to $8.4 billion in December. The bank is based in the twin-island Caribbean nation of Antigua and Barbuda, which has carved out a niche as a tax haven and offshore base for Internet gambling.

Stanford has deep roots in Texas, where he graduated from Baylor University, and still speaks with a slight twang. But he travels in different circles now — knighted in 2006 by the islands’ government, Stanford is known there as “Sir Allen.” And last year he shook up the staid world of professional cricket by bankrolling the purse in a $20 million winner-take-all match in Antigua between England and a West Indies select team.

The England and Wales Cricket Board said it has suspended negotiations for a new sponsorship deal amid the allegations.

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Originally posted 2009-02-17 13:50:33.

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SEATTLE (AP) — A few weeks after launching the first wide-scale layoffs in its history, Microsoft Corp. admits it screwed up a key part of the plan.

The company is asking some laid-off employees for a portion of their severance back, saying an administrative glitch caused the software maker to pay them too much.

Lou Gellos, a Microsoft spokesman, would not say how many of the 1,400 workers let go in January were overpaid, or by how much. Microsoft has said severance would be calculated by length of service and position in the company.

The Redmond, Wash.-based software maker is asking former employees for reimbursement, by check or money order, within two weeks, according to a redacted letter posted by the technology blog TechCrunch. Gellos confirmed the letter’s authenticity.

With the recession biting into sales of Microsoft’s core Office and Windows software, Microsoft said in January it would let up to 5,000 of its 94,000 employees go, the only mass layoff in its 34-year history.

Shares of Microsoft sank 54 cents, or 3 percent, to $17.46 in afternoon trading amid a broader sell-off Monday.

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Originally posted 2009-02-23 18:03:19.

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Olympic swimmer Michael Phelps has made marijuana a popular topic. He was photographed smoking from a bong, lost corporate sponsorships, and was suspended from the sport as a result. But celebrities aren’t the only ones thinking about dope.

Some legislators in California have pot on their minds, too. That’s because the government of the biggest economy in the United States is facing a massive budget deficit whose pain would be alleviated by decriminalizing marijuana.

California’s current deficit stands at a whopping $15 billion and is expected to reach $42 billion next year. And the state run by Gov. Arnold Schwarzenegger has virtually run out of cash. It recently delayed $3.5 billion of payments to taxpayers and counties.

While nearly all U.S. states currently face budget shortfalls, California’s deficit is more than one-third of its general fund. That’s largely due to its dependence on income taxes, which slide during a recession. And the state can’t easily borrow due to the government bond-market freeze. Moody’s even warned it may downgrade the state’s rating.

There’s no easy fix to the problem, as any solution likely requires cutting benefits and social services—tough political choices for Schwarzenegger. But the state does have an abundant natural resource it may be able to draw on for help.

Marijuana is California’s largest cash crop. It’s valued at $14 billion annually, or nearly twice the value of the state’s grape and vegetable crops combined, according to government statistics. Indeed, a recent report pegged marijuana as two-thirds of the economy of Mendocino County, a ganja hotbed north of San Francisco. That’s not surprising—it costs $400 to grow a pound of pot that can sell for $6,000 on the street.

But the state doesn’t receive any revenue from its cash cow. Instead, it spends billions of dollars enforcing laws pegged at shutting down the industry and inhibiting marijuana’s adherents. Of course, there’s a reason for that. Marijuana’s social costs may include addiction and rehabilitation treatment and lost productivity. Yet these are minute compared with the extensive social costs of alcohol or tobacco.

Of course, just legalizing pot wouldn’t automatically harvest revenues for the state. An organized system of regulating sales and collecting taxes would need implementing. And it’s possible that general drug use could rise, though the debate that pot is a gateway drug to harder substances is inconclusive.

There’s also the question of whether or not taxing marijuana would simply create a black market that would again skimp the state on taxes. The best corollaries here are cigarettes and alcohol. Rises in “sin taxes” on them have decreased consumption—a positive—but don’t seem to have destabilized the legal market. Decriminalization could lead to some job losses in law enforcement, though the countervailing argument would see these forces put to work stopping harder crime.

So what are the numbers? A national legalization effort would save nearly $13 billion annually in enforcement costs and bring in $7 billion in yearly tax revenues, according to a study by Harvard University economist Jeffrey Miron. Since California represents 13 percent of the U.S. economy, those numbers suggest the state could save $1.7 billion in enforcement costs and nab up to $1 billion in revenues. That doesn’t include any indirect revenues as, for example, rural farming communities grow or marijuana tourism, which has been lucrative for the Netherlands, takes off.

Put it all together, and California could potentially wipe some $3 billion off its budget deficit by letting its people puff and pay. That still leaves it with a gaping $39 billion hole to fill, so the state’s problems go far beyond what a new cash crop can fix. But anything to help soothe the state’s chronic fiscal pain—even if unpalatable to some—is worth considering.

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Originally posted 2009-02-15 19:00:09.

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