Stanford receiver describes complex web

April 24, 2009 12:18:18 PM PDT
Companies controlled by Texas billionaire R. Allen Stanford appear to have had approximately 200 different accounting systems, apparently part of a plan designed to prevent any one employee from fully understanding the scope of the business, according to court filing. [SIGN UP: Get headlines and breaking news sent to you]

In a 58-page report, the court-appointed receiver Ralph Janvey described a "complex, sprawling web" of more than 100 companies, all of which were controlled directly or indirectly by Stanford. The Securities and Exchange Commission has accused him of running a Ponzi scheme.

The report, filed Thursday in U.S. District Court in Dallas, said the companies were set up in a manner "seemingly designed to obfuscate holdings and transfers of cash and assets."

The companies, based in Houston, were shut down and placed in receivership in February when the SEC filed a civil fraud suit in the Dallas court. The SEC alleges investors in certificates of deposits were paid with proceeds obtained from new investors.

Stanford has denied the allegations and said if there was fraud, he wasn't involved in it.

Dick DeGuerin, Stanford's Houston attorney, was traveling and not immediately available for comment Friday in the receiver's report, his office said.

In an interview in Friday's Houston Chronicle at Stanford's Houston headquarters, Janvey described the companies as "some of the most convoluted accounting and record-keeping I've seen."

Janvey's court filing further contends that there appears to have been manipulation of company financial records "in an attempt to hide the true financial condition of the businesses from regulators and other outsiders."

The filing cites several purported examples, including land on the Caribbean island Antigua that was acquired last April and September for $63.5 million and "written up" in value to $3.2 billion at the end of the year.

"The write-up would suggest that the value of the property increased fifty-fold in just a few months, during a period that was generally characterized by falling real estate values," the report states.

Records show no basis for the write-up in value as would be required by U.S. or international accounting principles, according to the document.

The filing said all of Stanford's businesses in the U.S. depended on sales of the CDs issued by Stanford International Bank in Antigua "and/or other allegedly fraudulent activities."

Neither Stanford nor his chief financial officer, James Davis, invested their own money in the CDs, according to the filing.

The document says close to $1 billion derived from the sale of the CDs cannot be accounted for by records reflecting what was invested in other assets or spent on company operations.

"For that reason, the receiver intends to continue searching for cash accounts and assets under Mr. Stanford's direct or indirect control," the filing states.

Analyzing the companies' assets, the report said there appears to be about $66.5 million in cash on hand, more than $300 million in non-U.S. banks and $30 million that could be realized from the sale of entities in Latin America. Real estate holdings, aircraft, coins and bullion also could be sources of cash, according to the document.

Since February, the Stanford companies have incurred about $15.8 million in operating expenses despite more than 1,000 U.S. workers being laid off, the report said.

When the receiver took over, he found millions of dollars in unpaid vendor bills. Even the account for janitorial services in the Houston offices was overdue, causing receiver attorneys to bring trash bags from home for a few days to help keep the offices clean, the Chronicle reported.

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