Sir Allen Stanford, the Texan billionaire, on Tuesday was ordered to stay behind bars as he awaited trial on charges of being involved in a $7bn Ponzi scheme and buying the co-operation of a senior Caribbean regulator.
Sir Allen has been in custody since he was indicted on June 18.
The trial is set for August 25, but lawyers expect it to be postponed into next year.
The 59-year-old has appeared to be holding up well in the face of 21 counts of conspiracy, fraud, bribery and obstruction of justice, smiling at the string of relatives who have turned out to provide support as he sat confidently in court.
Sir Allen pleaded not guilty to the charges last week and bail was set at $500,000.
He gathered from friends and relatives the $100,000 cash needed to free him, but prosecutors blocked the move with a request for US District Judge David Hittner to deny the bail ruling and keep him jailed until trial, arguing he could run off.
If convicted, Sir Allen faces up to 250 years in prison.
Judge Hittner sided with prosecutors Tuesday afternoon, citing Sir Allen’s ranking in Forbes magazine last year as the 205th wealthiest American with a net worth of over $2bn, that he has lived primarily outside the US for at least the last 15 years and his frequent global travels “belie his contention that he has strong ties to Houston.’’
He also cited $1.1bn in unaccountable Stanford group money, a secret Swiss bank account, Sir Allen’s failure initially to disclose an Antiguan passport and “the severity of the punishment he may be subjected to if convicted.’’
“We are very disappointed,’’ said Dick DeGuerin, Sir Allen’s lawyer. “We will appeal.’’
A criminal indictment unsealed in June alleged Sir Allen and his co-defendants sold $7bn worth of certificates of deposit through Stanford International, pledging high rates of return. They then allegedly misappropriated most of the funds, though about $1bn remains unaccounted for.
Sir Allen Stanford and Laura Pendergest-Holt, another top executive, like all those so far charged in the case, have denied all the allegations against them.
Prosecutors contend Sir Allen is a serious flight risk because of his international ties. Sir Allen holds citizenship for both the US and Antigua, where much of his business was based.
While Sir Allen originally said he did not know the whereabouts of his Antigua passport, it was turned in this week.
Now, Sir Allen has surrendered passports for both countries, and Mr DeGuerin said his client has no funds with which to flee because the authorities have seized all his assets.
The strong chances of winning the case provide an incentive for Sir Allen to stay in Houston, Mr DeGuerin told the court.
Prosecutors note, however, that the authorities have not been able to trace all the funds that had been under the control of the Stanford group and worry Sir Allen’s potential access to them and a large network of international wealthy high level friends could help him escape before facing the charges in court.
Federal prosecutors have been building a case against Sir Allen since at least February, when US regulators shut down his luxurious Houston offices, shocking investors.
Sir Allen is also facing civil charges. He asked a US judge to dismiss the civil fraud claims brought by the US Securities and Exchange Commission against him, saying they weren’t legally substantiated.
In a filing last week, attorneys for the Texan businessman said the regulator “totally fails to advise of the ‘where, when, who and how’ of the alleged fraud,” and argued that the complaint “simply lumps together the allegations against various combinations of defendants without providing specifics.”
Outside of the courts, the receiver appointed by the US to administer the affairs of the Stanford group has sought to bolster the estate’s fragile financial position by selling off assets. The receiver, Dallas lawyer Ralph Janvey, has called the group’s financial position “dire”, and said that the limited cash available will make it difficult to meet investors’ claims.
Earlier this month, he arranged the sale of furniture from the group’s nationwide offices, including some $2m worth extracted from a 90,000sq ft property in Miami. The Miami furnishings, which were bought by Fort Lauderdale-based AMC Liquidators, featured oriental rugs, marble-topped tables and a tapestry of Louis XIV.
“This inventory is the best quality office furnishings we’ve seen in our nearly 10 years in business,” AMC chief executive Michael Grimme said.
But the proceeds of that sale were not added to the group’s limited cash pile, since the money from the sale of the furniture went to the building owner in lieu of unpaid rent, according to Mr Grimme.
An disagreement between Mr Janvey and his Antigua-appointed counterparts – who are overseeing the liquidation of Stanford International Bank – has complicated attempts to recover assets for investors. Mr Janvey and Nigel Hamilton-Smith, a client partner at UK-based Vantis, have been engaged in a months-long dispute concerning jurisdiction over the worldwide assets of the Stanford empire, which spanned North America, Latin America and the Caribbean.
Both receivers agree, however, that at least $1bn is missing from the Stanford group and that any recovery of funds will take several years.
Mr Janvey has also been criticized by the SEC - who requested his appointment in February – for seeking to collect $20m in fees from the cash-strapped estate.
Meanwhile, the UK Serious Fraud Office announced that a court there had agreed to put an additional freeze on $100m worth of assets associated with Sir Allen and the Stanford Group. The assets, which include cash, shares and investments held by SIB in bank accounts at Credit Suisse and HSBC branches in the UK, were already the subject of a high court freeze on behalf of US civil authorities.
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