Statement at News Conference Announcing Additional Charges in Stanford Ponzi Scheme Case
Director, Division of Enforcement
U.S. Securities and Exchange Commission
U.S. Department of Justice
June 19, 2009
Good afternoon. My name is Robert Khuzami, and I am proud to represent the men and women of the SEC’s Division of Enforcement as its Director.
On February 17, the SEC charged Allen Stanford and two of his associates with operating a massive fraud.
We alleged then that Stanford committed this fraud through a very close circle of associates.
With today’s charges, the workings of that inner circle have now come into sharper focus, and the picture is a disturbing one.
We have alleged in today’s charges that three additional persons enabled Stanford to operate his scheme and avoid detection – two who helped him cook the books, and one who looked the other way.
In our amended complaint, we charge accountants Mark Kuhrt and Gilbert Lopez with committing and aiding and abetting securities fraud.
Kuhrt and Lopez fabricated the financial statements that enabled Stanford to lie to investors about the circumstances surrounding their investments.
Placed in a position of trust, these men manufactured the numbers to tell investors a fictional story about how their investments were solid, safe and secure.
And in a shocking twist to this story, Stanford’s scheme also corrupted a foreign regulator.
Today we charge Leroy King, the administrator and CEO of Antigua’s Financial Services Regulatory Commission (FSRC), with aiding and abetting securities fraud by accepting thousands of dollars in bribes on a regular basis to ignore the Stanford Ponzi scheme.
We allege that King saw to it that the audits and examinations of Stanford International Bank’s books and records were a sham.
He made sure that the FSRC did not examine the bank’s investment portfolio.
In a stunning breach of confidence for any regulator, King provided Stanford himself with access to the FSRC’s confidential regulatory files on him, including the SEC’s requests to the FSRC for information about Stanford’s operations.
Indeed, King went so far as to allow Stanford to essentially dictate the FSRC’s responses to the SEC’s information requests.
Thus, when King assured the SEC that Stanford was safe and solid, these were not the conclusions of an independent regulator following a thorough inspection. These were just more Stanford lies, dressed up in the letterhead of a supposedly impartial bank regulator who had in fact been bought and paid for with bribes and corruption.
Let me read from our complaint what King told the SEC that was paid for, with bribes, by Stanford: “We wish to assure the SEC that the FSRC’s most recent onsite examination conducted just five months ago confirmed [Stanford Investment Bank’s] compliance with all areas of depositor safety and solvency, as well as all other applicable laws and regulations.”
By doing so, Leroy King put personal greed ahead of the public trust.
He abused his position of authority and became the enemy of investors, instead of their protector.
Perhaps what is most disheartening about this case is that Stanford’s victims were not looking for one of those get-rich-quick schemes that we hear so much about and seem somewhat obvious to avoid.
Stanford’s investors were simply looking for a safe, low-risk place to put their money.
With Allen Stanford, they thought they had found such an investment.
What they actually found was a complicated array of phony financial statements, fabricated performance numbers, and sham audits that created only the illusion of safety and liquidity.
And it was an illusion created in part by these three men, all of whom rented out their expertise and positions of authority.
As we were investigating the case and trying to raise the curtain on this fraud, they were doing everything they could to keep that curtain down.
I want to conclude by thanking Lanny Breuer and my former colleagues at the Department of Justice who have worked tirelessly to build an impressive criminal case from the rubble of this massive fraud.
The DOJ prosecutors deserve special recognition not only for obtaining today’s indictments, but for their tireless efforts in locating and securing investor funds that are held in foreign countries.
I also want to thank the incredibly talented FBI agents, postal inspectors and IRS personnel for their top-notch teamwork with the DOJ and SEC.
Lastly, I also want to recognize the extremely hard work and talent of the SEC personnel who conducted this investigation.
They represent the finest of the traditions of all SEC enforcement personnel who work tirelessly every day to bring thieves and fraudsters to justice, and to protect investors.
Rose Romero, who heads our Fort Worth Regional Office
This has been an extraordinarily challenging investigation for everyone involved.
The investigators at all of our agencies have demonstrated the ability to collaborate and meet these intricate challenges head-on, and build the strong civil and criminal cases that we are announcing here today.