Allen Stanford’s Bid to Delay January Trial for Investment Fraud Is Denied

R. Allen Stanford’s request for more time to prepare to face charges he led a $7 billion investment fraud scheme was denied by the judge who declared him mentally fit for trial. Jury selection will begin in Houston federal court on Jan. 23.

“This case needs to be tried,” U.S. District Judge David Hittner said in an eight-page ruling today. “This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims.”

Hittner ruled Dec. 22 that Stanford has sufficiently recovered from a head injury suffered in a jailhouse assault and an addiction to anxiety medications prescribed to him by prison doctors after the attack.

The judge delayed Stanford’s original trial date last January and ordered him into a prison rehabilitation program after finding Stanford’s medical conditions had made him incompetent to understand the proceedings or assist his defense team.

“Our ability to defend our client has been consistently limited by matters the court is well aware of,” Ali Fazel, Stanford’s lead lawyer, said in an e-mailed statement today about the ruling. “We are now reviewing our options.”

Flight Risk

Stanford, 61, has been detained as a flight risk since his June 2009 indictment on charges he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit at his Antiguan bank. The former financier has denied all wrongdoing.

Stanford’s attorneys had asked to delay the trial until late April to give them more time to review millions of pages of company documents with Stanford. They argued they’d had only a few days to review documents with Stanford while he was clear- headed. They said they needed to search beyond the limited set of papers the government has identified as critical to the case.

“The accused’s position is that this case is about the flow of money” through Antigua-based Stanford International Bank and more than 100 related Stanford companies scattered around the globe, Fazel said in a Dec. 27 court filing.

“Therefore, the defense in this case does not merely require knowledge of one company as the government contends, but rather, depends upon knowledge of the finances and operations” of all the companies, Fazel said in the filing.

Thousands of Investors

Prosecutors, who opposed a lengthy delay, said a four-to- six-week extension wasn’t unreasonable given the time Stanford’s lawyers had needed to devote to his recent competency hearing. They said further delay wasn’t fair to thousands of Stanford investors, whose recovery of funds from Stanford’s holdings is stalled until his criminal case is concluded.

ustice Department spokeswoman Laura Sweeney declined to comment on the ruling.

The government contends Stanford’s bank operated as a Ponzi scheme, in which early investors were paid above-market interest rates with funds taken from later investors.

Prosecutors claim Stanford siphoned off more than $1 billion to fund a lavish lifestyle of private jets, yachts, multiple mansions and a private Caribbean island.

Government Opposes Stanford Bid to Delay Trial

Scott Cohn (CNBC)
Federal prosecutors say a bid by accused Ponzi mastermind Allen Stanford to delay his criminal trial until late April ignores the interests of thousands of investors in the alleged $7 billion scam.

Attorneys for Stanford, who last week was ruled competent to stand trial following eight months in drug treatment, asked for the delay to give their client more time to prepare. He faces 14 counts in the scheme centered on allegedly bogus certificates of deposit. The trial is currently set for January 23.

“The public’s interest in a speedy trial is particularly acute in this case in which thousands of individuals who purchased CDs from Stanford have lost billions of dollars,” writes Assistant U.S. Attorney Gregg Costa in a court filing today. “This trial will decide not just whether Stanford is guilty of the criminal charges but also whether hundreds of millions of dollars of investor funds currently frozen in foreign countries will be forfeited and returned to the victims.”

Prosecutors say the alleged Stanford fraud is the second largest in U.S. history, surpassed only by Bernard Madoff’s Ponzi scheme.

U.S. District Judge David Hittner has promised a ruling this week on Stanford’s motion for a three-month continuance.

While Costa said the government does not oppose a shorter delay of four to six weeks, he says a longer delay ignores the interests of the public and the alleged victims.

Those investors–some 28,000 of them–have often found themselves lost in the shuffle of a case that has been marked by bizarre twists and unusual delays.

Stanford was indicted in June, 2009 and detained as a flight risk, but he was severely beaten by another inmate and then became addicted to prescription drugs while in custody. On Thursday, Hittner ruled Stanford has sufficiently recovered from his injuries and his addiction, and is fit for trial.

Meanwhile, the investors are locked in a dispute with the Securities Investor Protection Corporation (SIPC), which insures U.S. brokerage accounts, over whether their losses should be covered.

With the insurance coverage and Stanford’s trial still undecided, the investors have recovered just pennies on the dollar, nearly three years after the alleged scam was first exposed.

Allen Stanford Found Mentally Fit for Fraud Trial in January

By Laurel Brubaker Calkins

Dec. 23 (Bloomberg) — R. Allen Stanford, whose lawyers failed to convince a judge that he’s mentally unfit to stand trial, was ordered to face a jury next month on charges he swindled investors of more than $7 billion. The trial is to begin with jury selection on Jan. 23.

Stanford’s defense team argued unsuccessfully that his mental capacity was diminished by head injuries he suffered in a 2009 jailhouse assault and the effects of powerful anxiety medications prescribed in prison after the beating.

“I have found by a preponderance of the evidence that Stanford is competent to stand trial,” U.S. District Judge David Hittner in Houston said yesterday in finding Stanford able to assist in his defense.

Hittner’s ruling followed 2 1/2 days of debate over the extent of brain damage Stanford, 61, suffered from the assault and the extent to which he might be faking memory loss.

“He wants to con his way out of this case the same way he conned investors for more than 20 years,” Assistant U.S. Attorney Gregg Costa told Hittner yesterday. “Don’t let him do it.”

Robert E. Cochrane, the psychologist who was Stanford’s lead evaluator at the federal prison hospital in Butner, North Carolina, testified that the former financier failed every test designed to expose fakers.

Stanford’s claim of complete retrograde amnesia, the loss of the memory of what happened before the event responsible, is “remarkable” because it is so rare, Cochrane said.

First Amnesia Report

Stanford first reported having lost his memory after he arrived at Butner in February, more than a year after the assault, the government said.

“Every doctor on the stand agreed that Mr. Stanford is not suffering from the complete retrograde amnesia he repeatedly claimed he had,” Costa said. Once it is accepted that Stanford is exaggerating his memory loss, “it pulls the rug out from under all the other psychological problems he’s reporting,” the prosecutor said.

Ali Fazel, Stanford’s lead lawyer, argued that all the examining doctors agreed “He’s not right. There’s something wrong with him.”

Fazel said Stanford’s brain trauma and psychological impairments leave him incapable of assisting his lawyers or testifying in his own defense.

“Mr. Stanford isn’t running away from anything,” Fazel said. “He wants to fight.” Fazel said.

Desire to Help

Stanford was assaulted and over-medicated while in government custody and wanted the “opportunity to get better and help his counsel,” Fazel argued.

The defense put on testimony from three psychiatrists or neuropsychologists who all said the former billionaire is incompetent.

“He says it’s like there’s a blackboard with all his life written on it, but there are clouds that obscure it,” Victor Scarano, a forensic psychiatrist who examined Stanford for the defense, testified Dec. 21. “Every once in a while, a cloud opens up and he can connect with the memory, and then the clouds comes back.”

Scarano testified Stanford can’t recall some of his children, romantic encounters or business details. He retains “partial pieces” of memory, Scarano said.

Ralph Lilly, a neurologist for Stanford’s defense, testified Dec. 21 that the ex-financier’s brain damage and health problems, including depression, heart and liver disease, have put him “at risk for suicide.”

All-Night Observation

Based on news media reports of that testimony, Stanford was placed under psychiatric watch last night at the federal lockup in Houston. He arrived in court this morning complaining heatedly to his attorneys of having been kept awake and under observation in the jail’s “psyche hole” all night.

A prison official told Hittner an overnight mental evaluation was conducted out of “an abundance of caution,” given Stanford’s high profile and his own doctor’s testimony. She said Stanford will be re-evaluated tonight to determine if he can be returned to the general prison population.

Stanford has been held as a flight risk since his June 2009 indictment on charges of defrauding investors through a scheme built on allegedly bogus certificates of deposit at Antigua- based Stanford International Bank Ltd.

Hittner delayed Stanford’s trial, first set for last January, after three doctors testified that the financier was incapable of assisting in his defense because of his drug dependency and potential effects from the head injury.

Houston Jail

Stanford was sent back to a Houston lockup in November after Butner medical officials certified him competent to stand trial.

Prosecutors say Stanford skimmed more than $1 billion of investor funds to acquire a fleet of jets and yachts, multiple mansions and a private Caribbean island, as well as to give money to women with whom he had children. He has denied wrongdoing.

The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).

KLS complaint against the U.S. Government/SEC

Please find below the KLS complaint against the U.S. Government/SEC for its negligence in the Stanford case causing billions of dollars of losses to investors. KLS continues to amend and file claims with the U.S. Securities and Exchange Commission so that you can all be covered by this complaint and the class that it represents. All those of you who may have filed with another attorney must amend your claims in order to be covered by this complaint.

KACHROO LEGAL SERVICES, P.C.

Dr. Gaytri D. Kachroo
219 Concord Avenue
Cambridge, MA 02142
Telephone: (617) 864-0755
Facsimile (617) 864-1125
Press Release

Ft. Lauderdale, FLA – A class action lawsuit was filed against the United States yesterday, December 13, 2011, for the billions in losses suffered by investors in the Allen Stanford international Ponzi scheme.

The case, filed in the United States District Court for the Southern District of Florida seeks to hold the SEC responsible for its failure to stop Stanford and his registered investment advisor and broker/dealer company Stanford Group Company (“SGC”), who the SEC investigated several times between 1997 and 2004. The suit claims that the SEC was grossly negligent in its actions following each investigation in failing to take any action to stop Stanford, whom SEC official had determined was operating a Ponzi scheme. The class action against the SEC was filed the day after the SEC filed suit against the Securities Investor Protection Corporation (“SIPC”) for its refusal to reimburse investors for their losses.

“This case is unique because the SEC knew all along that this was a fraud and did nothing,” said lead attorney Dr. Gaytri Kachroo of Kachroo Legal Services, P.C. (KLS), who is representing investors in the class action. “If the SEC had simply refused to register SGC for any of its various securities laws violations or reported to SIPC that SBC was a Ponzi scheme and insolvent, the SEC could have stopped this scheme over a decade ago.”

In government investigations in 1997, 1998, 2002, and 2004, the SEC determined that Stanford was operating a Ponzi Scheme, but failed to take action to prevent his fraud. After increasing pressure from the Madoff collapse, the SEC finally acted in 2009, filing a case in federal court against Stanford and his companies, but only after investors had been defrauded of over $7 billion. The suit also alleges that the court-appointed SEC receiver has only been able to recover $100 million, net of expenses, out of the $7 billion investors lost because of the SEC’s negligence.

The case is Zelaya et al. v. United States of America, Case No. 11-CV-62644-RNS (S. D. Fla. 2011).

KLS complaint against the U.S. Government/SEC

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Allen Stanford Suicidal, Unfit for Trial: Doctor

By Laurel Brubaker Calkins – Dec 21, 2011

Indicted financier R. Allen Stanford, accused of leading a $7 billion investment fraud scheme, arrives for a hearing at the Bob Casey Federal Courthouse in Houston on Jan. 6, 2011.

R. Allen Stanford is suicidal and may never recover sufficiently from a jailhouse beating to stand trial next month on charges he ran a $7 billion Ponzi scheme, a doctor who examined him for the defense testified.

Defense lawyers and U.S. prosecutors argued for the second day in federal court in Houston over Stanford’s mental fitness. Stanford, 61, says he can’t remember family vacations, business dealings or romantic encounters with women because of the attack and because of anxiety drugs. The U.S. says he’s faking it.

Dr. Ralph Lilly, a neurologist, testified today that Stanford sustained “a major injury that required major surgery’’ in the 2009 inmate assault. Stanford is delusional and believes the government is out to destroy him, Lilly said. The doctor said he couldn’t predict when Stanford might be ready for trial.

“He’s at risk for suicide,” Lilly told U.S. District Judge David Hittner, citing an examination of Stanford this month. “His memory is like a crossword puzzle that’s fallen to the ground and doesn’t come together anymore.”

Lilly told the judge he didn’t know when or whether Stanford would be able to go on trial.

“I can’t say in the next month or ever,’’ he said.

Further Treatment
Depending on how Hittner rules, Stanford will undergo further treatment or face a trial Jan. 23 on charges of running a Ponzi scheme that cost investors more than $7 billion. If convicted, he could go to prison for the rest of his life.

Stanford has been imprisoned as a flight risk since his June 2009 indictment on charges of defrauding investors through a scheme built on allegedly bogus certificates of deposit at Antigua-based Stanford International Bank Ltd.

Stanford benefited from eight months of treatment in Butner, where he was successfully weaned from powerful anti- anxiety drugs prescribed after the assault, Lilly said. The lasting effects of the brain injury have left him depressed and occasionally hallucinatory, Lilly said.

“He’s delusional, paranoid and he feels the government has selected him to destroy him for whatever reason they may have,’’ Lilly testified. He said Stanford believes the U.S. wants to “make money off his businesses’’ and has tortured him.

Prison Psychologist
Robert E. Cochrane, a psychologist at the Federal Bureau of Prisons’ medical center in Butner, North Carolina, testified yesterday that Stanford failed every test designed to expose fakers. His claim of complete retrograde amnesia, loss of the memory of things that happened before the event that caused it, is “remarkable” because the condition is so rare, Cochrane said.

Lilly said today that Stanford is “absolutely’’ not faking his condition and isn’t even aware of the extent to which his mental faculties are impaired.

“His symptoms are characteristic of someone with a brain injury,’’ Lilly said. “His prognosis is limited.’’

The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).