Ex-Stanford Execs’ Convictions Upheld By 5th Circ

Errors committed by a judge in the trial of two former Stanford Financial Group executives sentenced to 20 years in prison for their roles in Robert Allen Stanford’s $7 billion Ponzi scheme were ultimately harmless, the Fifth Circuit ruled Friday.

Former Stanford Financial Group execs Mark Kuhrt, left, and Gilbert Lopez were convicted for their roles in Robert Allen Stanford’s $7 billion Ponzi scheme. (Credit: AP) A three-judge appeals court panel in a published opinion affirmed the 2013 convictions of Gilbert T. Lopez Jr., the former chief accounting…

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Stanford’s Coconspirators Guilty of Fraud

By Teresa Ambord

 It wasn’t our fraud! That was a big part of the overall defense presented by two men accused of helping Texas financier R. Allen Stanford cover his tracks when he bilked trusting investors out of $7 billion. The jury took sixteen hours of deliberation over a three-day period to find the men guilty of conspiracy to hide a massive wire fraud scheme.

Stanford’s chief accounting officer, seventy-year-old Gilbert Lopez, and global controller, forty-year-old Mark Kuhrt, were each convicted of nine out of ten wire fraud counts and one count of conspiracy to commit fraud.  

The Ponzi scheme
 Stanford’s fraud involved the selling of bogus certificates of deposit at Stanford International Bank, Ltd. based in Antigua. According to prosecutors, Stanford advised investors that their funds were being put into conservative liquid assets and overseen by international money managers. In reality, evidence showed that Stanford and his finance chief, James M. Davis, controlled about 80 percent of the money. Stanford used the money to pay for yachts, private jets, and waterfront mansions. He also used some to finance his own risky business ventures, like cricket tournaments, a Caribbean airline, and resort developments.

Stanford himself was convicted last March and is now serving 110 years in a Florida federal prison. His attorneys are appealing his sentence. Davis is awaiting sentencing, after he pled guilty and testified against Stanford.  

Where do Lopez and Kuhrt fit into the scheme?
 Defense attorneys for Lopez and Kuhrt told jurors that their clients never intended to falsify records or break any laws. They relied on investment returns given them by Davis and Stanford. Those figures were used to create what turned out to be false financial statements, which unsuspecting investors relied on. In fact, the attorneys said, Lopez and Kuhrt tried to get Davis to publicly disclose that Stanford himself borrowed most of the funds that were supposed to be in investments, but they were overruled by Davis.

 “There’s no doubt whatsoever there was a massive fraud going on, but it was a Stanford and Davis fraud, not a Lopez and Kuhrt fraud,” said Kuhrt’s attorney, Richard Kuniansky.

However, prosecutor Jason Varnado told jurors, “They knew the bank was doing one thing and promising investors another, and they helped hide it. The only explanation for that is a criminal explanation.”

 Other employees were also involved in tracking the stolen funds, but Lopez and Kuhrt are the last to face criminal trial. Following their convictions, the government recommended allowing the men to remain free on bail until they appear before District Judge David Hittner (who presided over the trial) for sentencing on February 14. However, Hittner ordered both men taken into custody.

 “Based on the facts in this case, and this being an international scheme, I believe there are enough potential contacts out there that I decline to allow them to remain free,” Hittner said.

 Attorneys for both men will appeal.

Stanford Accountants Helped Hide Ponzi Scheme, U.S. Argues

By Laurel Brubaker Calkins on November 14, 2012

Two former accounting executives at Stanford Financial Group Co. should be convicted of helping Texas financier R. Allen Stanford conceal the theft of billions of dollars from investors at his offshore bank, U.S. prosecutors told a Houston jury.

The government asked jurors to reject claims by ex-Chief Accounting Officer Gilbert Lopez, 70, and former Global Controller Mark Kuhrt, 40, that they were duped by Stanford and his finance chief into creating false financial statements, which investors relied on to buy $7 billion of fraudulent certificates of deposit from Antigua-based Stanford International Bank Ltd.

“Gil Lopez and Mark Kuhrt were faced with the same choice over and over again, to either help Allen Stanford lie to his customers and misuse their money or say ‘I don’t want to be part of it,’” prosecutor Jeffrey Goldberg said during closing arguments today. The men chose to “keep it secret and actively work to keep others from finding out about it.”

Lopez and Kuhrt, who went on trial on Oct. 17, are the last two Stanford executives to be criminally tried for their roles in a Ponzi scheme built on bogus CDs. Early investors were paid above-market returns with funds taken from later investors, and the accountants helped cover up the Stanford bank’s insolvency for years before U.S. securities regulators seized the operation in early 2009 on suspicion of fraud, prosecutors said.

Appealing Verdict

Stanford, 62, was convicted in March of masterminding the fraud scheme and is serving a 110-year sentence at a federal prison in Florida. He is appealing the verdict and his sentence.

Federal prosecutors told jurors that Lopez and Kuhrt meticulously tracked about $2 billion that Stanford “sucked out” of the bank to fund risky private ventures including Caribbean airlines, resort developments and international cricket tournaments. The accountants didn’t disclose these loans or additional funds that Stanford took to underwrite a lavish personal lifestyle of private jets, yachts and waterfront mansions, the government said.

Stanford told CD buyers their money was invested in conservative liquid assets and overseen by international money managers. Evidence at his jury trial showed that Stanford and his top deputy, finance chief James M. Davis, secretly controlled more than 80 percent of the bank’s investments, much of which was loaned to Stanford or used to underwrite his other businesses.

‘Massive Fraud’

“There’s no doubt whatsoever there was a massive fraud going on, but it was a Stanford and Davis fraud, not a Lopez and Kuhrt fraud,” Richard Kuniansky, Kuhrt’s lawyer, told jurors today. Stanford and Davis “withheld everything that was obviously criminal from their so-called partner in crime,” he said.

Jack Zimmermann, Lopez’s lawyer, also made the argument that Lopez and Kuhrt weren’t in the loop.

“Was there one witness who came here and told you Gil Lopez had access to the real numbers?” Zimmermann asked.

Jurors heard Lopez, Kuhrt and Davis testify during the four-week trial. Davis pleaded guilty to his role in the scheme in 2009, testified against Stanford at his trial and is awaiting sentencing.

Goldberg showed the jury two Power Point slides of what he claimed were lies Lopez and Kuhrt told under oath. All of these lies, he said, were told to protect “the hot secret, the criminal secret” that “the source of Mr. Stanford’s money and lifestyle was the bank” and the $2 billion of investors’ money the financier took for personal use.

The accountants’ lawyers said their clients testified truthfully and urged jurors not to believe Davis, whom Kuniansky called “one of the most despicable human beings.”

‘Trusted Them’

“The government is trying to attach criminality to all these complicated accounting issues,” Kuniansky said. “Looking in hindsight, of course there are things he should’ve done differently. But at that point in time, he trusted them.”Zimmermann asked jurors to question why the government didn’t cross examine Lopez when he testified, “especially since they believed he was lying.”

“A lying defendant is a prosecutor’s dream, but they didn’t ask him one question,” Zimmermann said. “Why not try to trip him up?”

Lawyers for Lopez and Kuhrt told jurors the accountants relied on investment returns provided by Stanford and Davis and never intended to create false financial records or break any laws. The accountants also lobbied Davis to disclose Stanford’s borrowings to investors and were overruled, they said.

‘Accounting Principle’

“Gil Lopez didn’t believe it was illegal not to disclose”loans Stanford took from the bank, as he considered it an internal dispute over accounting principles, Zimmermann said.“A violation of an accounting principle or practice is not a violation of criminal law.”

The accountants’ lawyers said Stanford was consolidating the private ventures he funded with investors’ cash onto the bank’s balance sheet in late 2008 and early 2009. The accountants were prevented from completing the rollup by the government seizure of Stanford’s companies, their lawyers said.

If convicted of all charges, each of the men faces a possible sentence of more than 20 years in prison.

The case is U.S. v Lopez, 4:09-cr-0342, U.S. District Court, Southern District of Texas (Houston).

Stanford Accountants Face Final Criminal Trial Over Ponzi Scheme

By Laurel Brubaker Calkins and Andrew Harris on October 17, 2012

Two accountants accused of helping R. Allen Stanford swindle investors in a $7 billion Ponzi scheme are set to begin the last criminal trial stemming from the plot with opening statements in federal court in Houston.
Stanford Financial Group Co. Chief Accounting Officer Gilbert Lopez, 70, and Global Controller Mark Kuhrt, 40, face 10 counts of wire fraud and one count of conspiracy to commit wire fraud, which could send them to prison for more than 20 years if convicted by a jury. The men pleaded not guilty when they were indicted with the Texas financier in June 2009.
“Kuhrt and Lopez fabricated the financial statements that enabled Stanford to lie to investors about the circumstances surrounding their investments,” Robert Khuzami, enforcement director for the U.S. Securities and Exchange Commission, said in a statement the day the men were indicted.
Stanford, 62, was convicted in March of misappropriating more than $1.7 billion from investors who bought bogus certificates of deposit from Antigua-based Stanford International Bank Ltd. The former Texas billionaire is now serving a 110-year sentence in federal prison in Florida. He is appealing his verdict and sentence.
Stanford told investors their money was invested in conservative liquid assets. Evidence at his jury trial showed he was actually siphoning cash to fund risky private equity ventures, speculative real estate developments, cricket tournaments and a lavish personal lifestyle that included a fleet of private jets, yachts and multiple mansions.

Primary Evidence

The primary evidence against Lopez and Kuhrt are e-mails in which they discussed Stanford’s unreported loans and how to value certain assets to disguise that debt in the months before U.S. securities regulators seized Stanford’s businesses in February 2009.
Lopez, Kuhrt and James M. Davis, who was Stanford’s chief financial officer, discussed in these messages how to repeatedly flip a Caribbean resort property among Stanford entities so that its value could be inflated from $63.5 million to $3.2 billion in a matter of months, according to the indictment. The inflated value was intended to plug the hole in the books caused by Stanford’s personal loans and bad investments, prosecutors have said.
Lopez and Kuhrt also helped represent to investors that Stanford made a $741 million capital contribution to bolster the bank’s balance sheet in late 2008, when “Stanford did not make such capital contributions,” prosecutors have said.
Lawyers for Lopez and Kuhrt said during a 2011 court proceeding over legal-defense insurance coverage that the accountants were only following orders from Stanford and Davis and never intended to break any laws.

Draft Form

The accountants’ lawyers have said prosecutors are misconstruing documents that were in draft form at the time regulators seized the company. They claim that Stanford and his accountants were in the process of consolidating the private enterprises Stanford funded with investor loans onto the bank’s balance sheet, and that they were prevented from completing the rollup by the government shutdown.
Davis pleaded guilty to his role in the fraud scheme in 2009, testified against Stanford at trial and is awaiting sentencing. Laura Pendergest Holt, Stanford’s investment chief, pleaded guilty in June to obstructing a federal investigation into Stanford’s companies and was sentenced to three years in prison.
As of May 31, more than 20,000 Stanford CD investors had received nothing from about $220 million that court-appointed receiver Ralph Janvey has recovered from the sale of Stanford’s corporate and personal assets. About $108 million of that recovery has gone to cover the U.S. receivership’s expenses and windup costs on Stanford’s sprawling business empire.
An additional $335 million in Stanford assets have been identified in banks in the U.K., Switzerland and Canada. Janvey is fighting for control of those assets with a rival Antiguan-appointed receiver, who has spent about $20 million pursuing Stanford assets on behalf of defrauded investors.
The case is U.S. v Lopez, 4:09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

More Charges Coming Against Allen Stanford Executives

HOUSTON, Texas, Fri. Sept. 24, 2010: Several former executives of the company founded by 60-year-old R. Allen Stanford could soon be in hot water with the Securities and Exchange Commission.

The SEC has reportedly notified several that fraud charges will be filed against them, Rose Romero, director of the Securities and Exchange Commission`s Fort Worth office, said.

The disclosure came during her appearance this week before the Senate Banking committee. Romero, however, did not say who would be targeted by the charges, or when they would be officially filed.

Accountants Mark Kuhrt and Gilberto Lopez, and Leroy King, head of the financial services regulatory commission in Antigua – where Stanford`s bank was based and where he was also a naturalized citizen –may be the individuals who will face charges related to the fraud.

Romero`s comments came as angry senators grilled her and top officials of the SEC on Wednesday, citing the agency`s delays in taking action against accused swindler Stanford despite repeated red flags about his financial firm`s operations.
Committee chairman Chris Dodd, D-Conn., described the situation as one in which `you had an examination office yelling `fire, fire, fire` and an enforcement branch yelling `no fire.`

Sen. Kay Bailey Hutchison, R-Texas, called the revelations `stunning` and said that she hoped something is being done to make sure such a lapse doesn`t happen again.
An inspector general`s report concluded that Fort Worth SEC officials harbored suspicions that Stanford was acting illegally as early as 1997, two years after his company`s broker-dealer arm, Stanford Group Co., registered with the SEC but did nothing.

The new charges disclosed by Romero would add to those filed against the company`s head honcho, the Texas-born, Antigua-based Stanford, his chief investment officer Laura Pendergest-Holt and James Davis, the former chief financial officer of Houston-based Stanford Financial Group. Davis pleaded guilty last month to charges including fraud while Pendergest-Holt has pleaded not guilty to allegations of fraud and conspiracy to commit money-laundering.

Stanford, the former flamboyant billionaire and cricket mogul has pleaded not guilty to 21 counts of fraud, money laundering and obstruction. He faces up to 375 years in jail if convicted. A trial date has not yet been set for him.

The scheme involved the sale of Certificates of Deposit (CDs) offering unheard-of returns.

Judge Puts 2 Insurers on the Hook for Defense Costs for Stanford, 3 Execs

Senior U.S. District Judge David Hittner of Houston on Tuesday issued a preliminary injunction that orders two insurance companies to advance defense costs to Stanford Financial Group executives facing criminal charges and civil litigation. In a 42-page order, Hittner ruled that Certain Underwriters at Lloyd’s of London and Arch Specialty Insurance Cos. are prohibited from withholding “all ‘costs, charges and expenses'” already incurred by the defendants and that will be incurred in the future in United States v. Robert Allen Stanford, et al., a criminal case pending in Hittner’s court, and in Securities and Exchange Commission v. Stanford International Bank Ltd., et al., a civil case which is pending before U.S. District Judge David Godbey of the Northern District of Texas. Hittner gave the insurance companies 10 days to pay all invoices already submitted by defense attorneys for the criminal case in his court and the SEC civil suit in Godbey’s court.

Allen Stanford and three other Stanford Financial Group defendants — Laura Pendergest-Holt, Gilberto Lopez Jr. and Mark Kuhrt — filed the coverage suit after the underwriters in November 2009 issued denial letters that retroactively denied them coverage under directors and officers’ policies.

In the order, Hittner found the Stanford plaintiffs “met their burden of persuasion with respect to all four prerequisites of a preliminary injunction.”

Lee Shidlofsky, a partner in Visser Shidlofsky who represents the Stanford plaintiffs in the coverage suit, Laura Pendergest-Holt, et al, v. Certain Underwriters at Lloyd’s of London, et al., says “this is what we wanted.” He notes, however, that defense attorneys for the insurers told him they will appeal the order to the 5th U.S. Circuit Court of Appeals.

Neal Lane, a partner in Akin Gump Strauss Hauer & Feld in San Antonio who represents the insurance company defendants, did not immediately return a telephone message seeking comment.

Stanford, who is in custody, and the other three defendants, who are out on bond, have each pleaded not guilty to the criminal charges against them and have denied the allegations in the civil suit. The executives were indicted in June on fraud and obstruction charges in connection with an alleged conspiracy to defraud investors who bought about $7 billion in certificates of deposit sold through the Stanford International Bank Ltd. They pleaded not guilty to the charges in June, and Hittner set the trial for January 2011.