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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UNICOI – A Johnson City man thought he would pull a fast one on a drug dealer Tuesday by slipping him some funny money in return for OxyContin pills.

But the Unicoi County Sheriff’s Department had the last laugh because one of its officers was the dealer and sold fake pills to Kyle A. Kochelek, 21, 1548 Colony Park Drive. The buyer’s day got worse when he was arrested and the Johnson City Police Department’s Criminal Investigation Division helped Unicoi County authorities track down the device on which the counterfeit money reportedly was made.

“Information came that these guys had been spending counterfeit money,” Harris said of Kochelek and a man with him who was not charged. “He had been spending counterfeit money at locations, and also one person told us that he was spending counterfeit money on drug transactions.”

Unicoi County Investigator Frank Rogers said an undercover officer met with many people at a mobile home park in Unicoi and recorded a conversation about the trafficking of drugs, such as OxyContin and cocaine, with at least two other men.

The man arranged for Kochelek and another man to come to Unicoi to buy 76 OxyContin pills for $4,875.

When Kochelek and the man arrived, Kochelek gave the third party four bundles of money, which were fake, wrapped in legitimate $1 bills. The third party, who received placebo pills, which had no narcotic value, from the undercover officer, then passed them on to Kochelek. Rogers said the third party will be charged when he finds him.

“We were really interested in the money more than anything,” Harris said, noting Kochelek had used legitimate $1 bills, a $100 bill and a $20 bill used to make counterfeit cash. While the dollar bills were wrapped around the fake bills, Kochelek had a legitimate $100 bill and a real $20 bill on him.

With help from Johnson City officers, Unicoi County officers got the items used to make the fake money from the apartment of Kochelek’s girlfriend. Rogers said no charges have been placed against her yet.

“The money he spent with us was some of the worst money I’d ever seen,” Harris said. “In fact, some of its was just printed on one side. There were a few bills that were decent, but most of it was obviously bad money. This stuff was about the worst I’ve ever seen. Monopoly money would have looked better.”

Harris said this is the second arrest the sheriff’s department has made in the last couple of months involving the use of fake money in drug transactions.

After the deal, Kochelek and the other man got away but were stopped on Sciota Road by Deputy Adam Campbell, Rogers said. He said Kochelek had the pill bottle investigators had marked. Inside was one of the pills he had bought, but the rest had been tossed from the vehicle as they fled.

Rogers said Kochelek got away because the undercover officer was outnumbered four to one, but other officers were stationed nearby so they could pursue the suspects.

Kochelek was charged with criminal conspiracy with schedule II drugs, forgery and criminal simulation.

Rogers said the case is still under investigation and charges are pending on other suspects who were at the scene and involved in the conspiracy.

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Originally posted 2009-02-27 14:49:13.

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