A former top lieutenant to imprisoned financier R. Allen Stanford pleaded guilty Thursday in Houston to obstructing the Securities and Exchange Commission inquiry that led to the downfall of his global empire. Laura Pendergest-Holt, 38, spoke in a soft, tremulous voice as she answered a federal judge’s pointed questions about her role in the multibillion-dollar fraud. She was chief investment officer of Stanford Financial Group, an international financial services company based in Houston. “I knew I was delaying the SEC,” she told U.S. District Judge David Hittner, providing the only real drama in the half-hour court hearing. hlt stanf In return for her guilty plea, and her agreement to forgo any appeal, the government said it would drop the remaining 20 criminal charges against Pendergest-Holt. Prosecutor Jason Varnado recommended a three-year prison sentence. The obstruction charge carries a maximum sentence of five years in prison and a $250,000 fine. Hittner accepted the guilty plea and announced a Sept. 13 sentencing hearing. In the meantime, federal probation officials will prepare a pre-sentence report for the judge. Pendergest-Holt, attired in a black pantsuit, white jacket and flats, was allowed to remain free on bond. She left the courtroom in the company of her husband and attorney.
Pendergest-Holt had been set to go to trial in September with two other indicted ex-executives — Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller. Lopez and Kuhrt are still set for trial. A former Antiguan financial regulator was also indicted and awaits extradition to the U.S.
By Laurel Brubaker Calkins and Andrew Harris
Laura Pendergest Holt, the former chief investment officer for R. Allen Stanford, has agreed to plead guilty and serve three years in prison for her role in a $7 billion fraud, three people familiar with the matter said.
Pendergest Holt, 38, will plead guilty to a single obstruction charge, said one of the people, all of whom asked not to be identified because the plea agreement isn’t public.
She faces a September trial on charges related to those that resulted in Stanford being sentenced on June 14 to 110 years in prison. Prosecutors had requested a maximum sentence of 230 years against Stanford, based on investors’ losses on bogus certificates of deposit sold by Antigua-based Stanford International Bank Ltd.
Pendergest Holt has denied wrongdoing. Dan Cogdell, her lead attorney, didn’t return phone and e-mail messages yesterday seeking comment on a plea agreement. Pendergest Holt is scheduled for re-arraignment on July 21 in federal court in Houston, according to court records.
Pendergest Holt had told Stanford Financial Group Co. investors and the firm’s financial advisers that she oversaw a stable of international money managers who were responsible for the bulk of the bank’s assets, according to court papers. She may have had authority over as little as 20 percent of the bank’s assets, according to testimony during Stanford’s trial.
Prosecutors charged her in June 2009 with conspiring to mislead investors in conjunction with Stanford and Chief Financial Officer James M. Davis, her boss and former lover. During Stanford’s trial, Davis told jurors he had a three-year affair with Pendergest Holt that ended in 2003, and that Stanford approved of the romance between his two top deputies.
Alisa Finelli, a Justice Department spokeswoman, declined to comment on the reported plea agreement.
Stanford, 62, was convicted in March by a federal court jury in Houston of leading a massive fraud in which later investors’ funds were used to pay above-market returns to earlier investors. He was accused of secretly borrowing more than $2 billion in depositors’ funds to finance a lavish lifestyle and several money-losing businesses.
Stanford is appealing his March 6 conviction and his sentence.
Joan Stack, former global human resources manager at Stanford Financial Group, testified during Stanford’s trial that Davis and Pendergest Holt routinely hired unqualified relatives and fellow church members to staff most positions in the Memphis, Tennessee, research division that oversaw the bank’s multibillion-dollar investment portfolio.
“They were family members who had no experience in doing what we’d hired them to do,” Stack said.
Holt invested about $2 million of the bank’s portfolio in a hedge fund run by her husband, a former personal trainer, according to testimony.
The case is U.S. v. Stanford, 4:09-cr-0342, U.S. District Court, Southern District of Texas (Houston).
Dear SIB Depositor:
We noted with great interest the 110 year sentence given to Robert Allen Stanford yesterday. While this sentence does not begin to make up for the pain and suffering that you have experienced, we are confident that justice has been served at least in that regard. We remain committed, as the Joint Liquidators of the Stanford International Bank, to run the Estate as efficiently and effectively as possible. We are working hard to marshal and liquidate assets and pursue claims on your behalf. Our goal is to make a prompt and fair interim distribution to you as soon as possible and hopefully by as early as September 30 of this year if we can convince the US Department of Justice to drop their freeze on the funds in Europe and Canada.
As always, please direct your questions to us at: email@example.com.
Marcus Wide and Hugh Dickson, SIB Joint Liquidators
By Walter Pavlo,
Dressed in green prison fatigues, R. Allen Stanford entered a federal courthouse in Houston today to hear U.S. District Judge David Hitner pronounce his prison sentence. The decision: 110 years.
Prosecutors had asked that the one-time billionaire financier get 230 years in prison. (note: Bernard Madoff is serving 150 years). The prosecutor told Judge Hitner, “230 years will not get anyone their money back but on sleepless nights they will know that he got the maximum.” I think 110 years will give them just as much comfort.
During the proceeding, Stanford’s attorney, Ali Fazel, objected to the use of the term “Ponzi scheme,” but Hittner said the evidence at trial justified the use of the term. It’s not like Stanford could be any more insulted. The prosecutors also compared him to Bernie Madoff. That too caused Fazel to speak up on behalf of Stanford by saying of Madoff, “he didn’t invest time in anything.” Not sure what he was going for with that comment but I took it that Stanford worked harder at his fraud than did Madoff.
Speaking on his own behalf, Stanford recounted his last three years, including his beating in September 2009. The best that he could say as a compliment for those who prosecuted him was, “I wouldn’t wish this on them.” While he acknowledge that he felt sorry for depositors, employees and his own family for the failure of Stanford Financial, he managed to slip in, “I’m not a thief,” and, “I never defrauded anyone.” Victims in the courtroom, all dressed in black, begged to differ.
The prison sentence represents a long fall from the once knighted Antiguan, who has been in prison since his arrest in June 2009. Declared indigent by the court, all of Stanford’s assets were frozen and he was represented by a public defender. In March, Stanford was found guilty of running a $7 billion Ponzi scheme. However, his road to the courthouse was not without controversy. First, there was that strange interview on CNBC in which Stanford proclaimed his innocence. Then Stanford sued Lloyd’s of London, the underwriter of Stanford Financial Group’s Directors and Officers insurance, to pay for his legal fees. In the end, Lloyd’s won and Stanford got the legal help of public defenders Ali Fazel and Robert Scardino.
Stanford learned that prison can be a difficult place to live. Long before being tried in court, Stanford was severely beaten by another inmate. He was hospitalized and later transferred to a federal prison medical facility in Butner, NC, as result of an addiction to anti-depressants, which he developed after the beating. The trauma, his lawyers claimed, left their client unable to remember anything. After a year’s delay in heading to trial, government psychologists determined he was faking it and set a court date.
In January, just 12 days before Stanford’s trial was to begin, Fazel and Scardino wanted out of the case on the grounds that budget restrictions were hurting their ability to defend him. Prior to that, a number of supporting groups and expert witnesses for the defense said that they too wanted to quit because they were not being paid by the government. Eventually, some money was released and Stanford was off to trial.
With all of this drama, there still has been no distribution of the funds that have been seized by the government to victims who had invested their savings with Stanford in the hopes of incredible returns on safe (certificates of deposit) investments. The trial and the prison sentence will bring some closure, but the restitution to investors will come up a little short. With regard to the losses for U.S. taxpayers? We will be paying for Stanford’s prison stay and his future legal fees. Stanford is planning to appeal and the court will be giving him a new public defender.
Stanford’s most memorable statement was, “If I live the rest of my life in prison …. I will always be at peace with the way I conducted myself in business.” He can think about that one for a while.
My thanks to Twitterers Ronnie Crocker and CNBC’s Scott Cohn, who gave us all updates during the sentencing.