The search for investment tycoon Allen Stanford, who is under investigation for billions of dollars in fraud, is finally over.
The FBI agents located Stanford in Fredericksburg, Va, where they served him with a civil complaint from the Securities and Exchange Commission. Stanford also gave up his passport and promised not to flee.
CBN News spoke with will air an interview with Bill Dallas, an investment banker who spent two years in prison for investment fraud. Click play for his comments.
Too Good to Be True?
The SEC is investigating the Texas billionaire for investment fraud. Investigators believe he head up an $8 billion investment scheme, that promised investors an unrealistic rate of return.
Authorities say they are still looking for billions of unaccounted investor dollars. They have not charged Stanford with any crime, but they did shut down three of his companies this week. SEC officials allege that he lied about the strategy for his investments.
Big Red Flag
Two years ago, the Stanford International Bank investment portfolio earned more than 10 percent, more than twice what the S&P 500 earned. The bank assured depositors that a team of experts was analyzing the investment risk daily. They were told the institution was going out of its way to make sure the money was safe.
"Especially in these difficult times, our success speaks for itself," the 58-year-old Texas billionaire wrote in a mid-2008 newsletter. "I have an unbridled optimism and enthusiasm for our future.
But regulators say the Stanford portfolio was basically a "black box." A lot of the funds were tied up in real estate and private equity companies that are not traded on public stock markets.
None of the bank's CDs were registered with the SEC, regulators said. And rather than a team of analysts, authorities say Stanford and his longtime friend, James M. Davis, were the only ones overseeing the money.
Steve Wells, a forensic accountant and Western Kentucky University professor, said the bank sugarcoated its numbers by relying on management estimates and ignoring future credit losses.
"That's a red flag to me," Wells said. "Big time."
The company also made it hard to tell exactly what their investments were. Any accountant who looked at those reports would have told investors to be cautious, Wells said.
Catered to Big-Money Clients
Stanford bank employees were also told to arrange visits only for clients with $5 million or more to invest. But some doubted what clients were being promised.
A one-time top broker at the bank says asking too many questions eventually got him fired.
Early this year, regulators noticed an alarming increase in wire transfers as Stanford International Bank tried to move money out of its investment accounts. Clients were prohibited from cashing out, regulators said.
Source: The Associated Press