Stanford CIO appears in court

February 27, 2009 11:30:23 AM PST
The chief investment officer of troubled Stanford Financial Group appeared in federal court Friday as new details emerged showing the head of the firm borrowed $1.6 billion from the troubled company's assets. [THE CHARGE: Read the U.S. Dept. of Justice release on the arrest]

Laura Pendergest-Holt, who looked pale and solemn in a black pantsuit, faces charges she obstructed the the Securities and Exchange Commission investigation of the Stanford scandal by lying about her knowledge of the firm's activities and by omitting key details.

Pendergest-Holt agreed to waive a probable cause hearing, allowing her case to be moved to Dallas, where the SEC charges were filed. But her attorney, Dan Cogdell, argued against a $1 million bond sought by Justice Department attorney Paul Pelletier.

Pendergest-Holt was arrested Thursday in Houston, where Stanford Financial Group is based. The firm's chief executive, Texas billionaire R. Allen Stanford, is accused of perpetrating an $8 billion investment swindle. FBI agents served Stanford with legal papers last week, and he was ordered to surrender his passport, but has not been charged with a crime.

Cogdell noted Friday that Pendergest-Holt had to get a salary advance of $10,000 to travel to Houston for the SEC interview because her assets have been frozen and she needed the money for expenses.

However, FBI Special Agent Vanessa Walter testified that Pendergest-Holt had earned a base salary of $350,000 in 2007 and $375,000 in 2008, with bonuses of about $700,000 each year. Walker also said Pendergest-Holt owned properties in Mississippi and North Carolina, and had access to a Credit Suisse account containing about $160 million. She signed over her access to the account Thursday.

The hearing was to continue Friday afternoon.

Court documents filed against Pedergest-Holt refer to "Executive A," who is Stanford, a person familiar with the case told The Associated Press on condition of anonymity because it is an ongoing investigation.

Documents filed in Pendergest-Holt's case indicate that Stanford grew irate at a meeting of executives earlier this month as the feds closed in.

The court papers say that people who attended the Feb. 5 meeting in Miami described Stanford pounding the table and saying, "The assets are there."

At another meeting, the documents say, it was revealed that Stanford had taken a $1.6 billion loan from the company's assets.

"She is looking forward to working with the government to get all the facts out and put this behind her," her attorney Brent Baker said Thursday night.

The government alleges in a federal complaint that Pendergest-Holt obstructed the investigation with some of her answers to SEC investigators' questions, including failing to reveal to the SEC how much she knew about investments in Stanford International Bank Ltd.

The FBI said in an affidavit that Pendergest-Holt repeatedly misrepresented how much she knew about the bank's Tier III portfolio, which represented about 81 percent of the bank's portfolio, and did not let the SEC investigators know about the $1.6 billion loan.

The complaint also alleges that Pendergest-Holt did not reveal that she was a member of the bank's investment committee.

"We appreciate the quick and decisive action of the Department of Justice and the FBI, and thank them for their fine work and cooperation in this matter," SEC Deputy Enforcement Director Scott Friestad said in an e-mail.

Stanford is accused in civil charges of lying about the safety of investments he sold as "certificates of deposit" and promised unrealistically high rates of return. Regulators also said he faked historical data about other investments which he then used to lure in more investors for the CD products.

Michael Zarich, the company's senior investment officer, has told authorities he didn't know where 90 percent of Stanford's portfolio was invested. Zarich has said he was trained by Pendergest-Holt to deflect questions about the investment strategy while pitching to wealthy clients in Antigua, where the bank was chartered.

When he tried to learn how the money was invested, Zarich has said Pendergest-Holt and Stanford's deputy James Davis turned him away. Zarich also has said Pendergest-Holt armed him with answers for potential investors worried about the size of Stanford's tiny, Antigua-based auditor.

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