On the eve of his client's sentencing for one of the largest investment scams in history, an attorney for financier Allen Stanford says the fraud was not a Ponzi scheme as prosecutors claim, and that in arguing for a 230-year prison sentence the government is trying to divert attention from the fact that it missed the 2008 financial crisis.
"Although Ponzi scheme makes for a great sound bite and may help defer the fact that the Government has missed, on all cylinders, uncovering the shenanigans of the banks and other financial institutions in 2008 and 2009, it simply does not describe what Stanford was or what Stanford did," writes court-appointed defense attorney Ali Fazel in a 32-page court filing.
Fazel writes that in a Ponzi scheme, the perpetrator collects money from customers, but rather than investing it keeps some for himself and uses the rest to pay fictitious "returns" to prior customers.
"It was clearly shown at trial that Stanford actually made investments,"
Fazel writes. "He made investments in real estate, private equity; he invested and created foreign banks, foreign and domestic investment companies and airlines."
Stanford has claimed he had the funds to pay his depositors, and that his financial empire was solvent until the Securities and Exchange Commission shut it down in 2009.
Prosecutors argued successfully at trial that Stanford skimmed much of the investors' money to fund his lavish lifestyle. In March, a Houston jury convicted him on 13 counts in connection with the $7 billion fraud.
The government has recommended U.S. District Judge David Hittner sentence Stanford to the maximum 230 years in prison, among the longest white collar sentences in history. Prosecutors have also asked Hittner to order Stanford to forfeit $5.9 billion, which may be largely symbolic since most of the money is gone.
The 62-year-old Stanford, who plans to make a statement at Thursday's sentencing hearing, plans to appeal.
—By CNBC's Scott Cohn