Texas billionaire R. Allen Stanford, chairman of the troubled Stanford Financial Group, is set to appear in federal court Friday on fraud charges after surrendering to FBI agents in Virginia the day before, officials said.
At least five individuals, including Stanford, have been arrested following a sweeping federal indictment over an alleged $8 billion Ponzi scheme, CNBC had learned. Stanford and the others are expected to appear before federal magistrates in three states Friday.
The Justice Department has scheduled a news conference at noon ET in Washington, and the Director of Enforcement for the Securities and Exchange Commission, Robert Khuzami, is also expected to attend. Sources tell CNBC that in addition to the new criminal charges, the SEC is to lodge new civil charges.
Late word has the SEC alleging that the CEO of Antigua's financial regulatory body, LeRoy King, facilitated Stanford in the ponzi scheme.
Stanford, who built a small real estate business into a global banking empire and became one of America's richest men, is in federal custody in Virginia. He was arrested within hours of his indictment Thursday in what authorities have called a "massive" $8 billion Ponzi scheme.
An FBI spokesperson says Stanford was arrested Thursday evening in Stafford, VA, just outside Fredericksburg. Stanford's criminal defense attorney, Dick DeGuerin, says the 59-year-old financier surrendered to authorities. Stanford is expected to appear before a federal judge in Richmond on Friday at 1:30 p.m.
As CNBC first reported, Stanford's indictment was returned by a federal grand jury in Houston late Thursday afternoon.
Sources say Stanford was one of several people indicted, but because a federal magistrate placed the indictments under seal, it was not immediately clear who was indicted or what they were charged with, and the Justice Department refused to comment.
The indictment comes almost exactly four months after the Securities and Exchange Commission filed civil fraud charges against Stanford, two of his top executives and three of his companies.
The SEC claimed Stanford issued billions of dollars in bogus certificates of deposit from his offshore bank in Antigua, where Stanford held dual citizenship and was knighted by the island nation in 2006. Stanford has denied wrongdoing. In addition to Stanford, the SEC sued his Chief Financial Officer, James Davis, who is now cooperating with authorities.
Also accused is Stanford's Chief Investment Officer, Laura Pendergest-Holt. Pendergest-Holt has pleaded not guilty to criminal charges she conspired with Stanford and Davis to obstruct the SEC investigation. She is likely to face new charges in the indictment returned Thursday, according to sources close to the case.
- Secrets Of The Knight: Sir Allen Stanford & The Missing Billions
The theme of obstructing the SEC will be a major part of the new criminal case, according to sources. The SEC had received inquiries about Stanford as far back as 2001, and launched a formal investigation in 2005. But it was unable to bring formal charges until February 17, shutting down the company and locking all of its assets — and those of Stanford's investors — in a court-imposed receivership.
Investors, who are likely to recover just pennies on the dollar, have criticized the SEC and other regulators for not acting sooner. As CNBC first reported on June 5, prosecutors have been investigating a possible pattern of deceiving regulators. If true, it might explain the pace of the investigation.
While officials refused to discuss the contents of the sealed indictment, it is likely to expand on the SEC's allegations of a Ponzi scheme built around the certificates of deposit issued by Stanford International Bank in Antigua.
The CDs were marketed to individuals — many of them retirees in the U.S. — as safe investments. But the SEC alleges the proceeds from the CDs were used to pay improbably high returns to earlier investors, and to fund Allen Stanford's lavish lifestyle.
Stanford leased a fleet of private jets, and had homes in St. Croix, Houston and elsewhere. He gained fame as a lavish sponsor of professional sports, most notably cricket, which Stanford sought to popularize worldwide. Stanford bankrolled a $20 million cricket tournament based in Antigua, pitting his team of "All Stars" against a team from Great Britain. The winners could take their share of the prize money in cash, or invest it in Stanford certificates of deposit.
Stanford also cultivated an air of intrigue. Rumors abounded for years that the offshore banker worked as an informant for the U.S. government. Asked by CNBC in April about his role, Stanford responded, "You talking about the CIA?" He then refused to discuss the matter.
While Stanford did draw praise from U.S. authorities in 2001 for turning over millions of dollars in drug money that was being laundered through his offshore bank, it is unclear whether his relationship with U.S. authorities went any deeper than that. (Read more here)