Hittner ordered that Stanford be sent to a hospital in the U.S. Bureau of Prisons where he can be treated for his drug addiction as well as receive additional psychiatric and neurological testing and ultimately undergo another competency exam. Hittner suggested a facility in North Carolina.
Stanford's attorney had wanted the financier to go through his detox at a private medical facility in Houston and then be allowed to continue his recovery at a local apartment Stanford's family would pay for.
But prosecutors, who had suggested the financier might be faking mental illness as a way to get out of jail pending his trial, had said Stanford should be treated within the federal prison system.
Stanford has been jailed without bond since his June 2009 indictment, deemed a flight risk by Hittner, who has denied several requests by the financier to be freed.
"It is not lost on the Court that Stanford's motion to be released to a local mental facility for treatment may be yet another attempt by Stanford to be released on bond," Hittner said. "The Court's finding that Stanford is incompetent, however, does not alter the Court's finding that Stanford is a flight risk and that no combination of conditions of pretrial release can reasonably assure his appearance at trial."
A gag order issued by the judge bars lawyers from publicly discussing the case.
Stanford's trial had been set to begin this week.
Hittner has said he will set a new trial date after he receives more information about Stanford's mental health.
It is unclear how long Stanford will be in treatment. The psychiatrists had testified the detox process could take two months or longer.
Stanford has had other health issues, including problems with his heart rate, since being jailed.
Stanford and three ex-executives of his now-defunct Houston-based Stanford Financial Group are accused of orchestrating a colossal pyramid scheme by advising clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns. Stanford's businesses had headquarters in Houston.
Stanford's attorneys say he ran a legitimate business and didn't misuse bank funds to pay for a lavish lifestyle, as prosecutors allege.
Stanford and the executives have pleaded not guilty to various charges, including money laundering and wire and mail fraud.
They are also fighting a Securities and Exchange Commission lawsuit filed in Dallas that makes similar allegations.