It's most frustrating being on a plane at JFK and reading the complaint against Laura Pendergest-Holt, knowing that you won't be able to blog it for another eight hours or so. It's a curious thing: basically she's been arrested on obstruction of justice charges because she wasn't completely forthright when she testified in early February, at the time that the Stanford story was breaking all over the press. But she was clearly set up as the patsy: because Allen Stanford himself, along with his CFO James Davis, refused to testify at all, they can't be arrested on similar charges.
On the other hand, there was some really big stuff that Pendergest-Holt knew and didn't say to investigators, not least that $1.6 billion of Stanford International Bank's "assets" consisted of a loan to Allen Stanford himself. And that the $541 million "capital contribution" that Sir Allen made to the bank in December was made up largely of real-estate holdings which the bank already owned, having bought them for $88 million earlier in the year.
Meanwhile, the FT has dug up an NASD arbitration proceeding from 2003 in which a former Stanford employee, Leyla Basagoitia, accused Stanford of running a Ponzi scheme. The NASD -- which later became Finra -- wasn't buying it:
Ms Basagoitia's allegations were denied by Stanford Group Company and dismissed by the dispute resolution panel. She was ordered to pay Stanford $107,782 in damages, in repayment of a loan advanced to her while an employee of the company.
Michael Falick, the lawyer who acted for Ms Basagoitia, said his client contacted the SEC about the alleged fraud in tandem with her NASD complaint. Mr Falick said: "It was really troubling, because the NASD was meant to be a regulatory body."
Note that this was an NASD proceeding, not an SEC proceeding (although Basagoitia did inform the SEC as well as the NASD of her suspicions). So Blodget's off base here:
Mary Schapiro wasn't running the SEC when it muffed this latest scam, so she can blame it on her predecessor.
Not true! The vice-chairman of the NASD at the time that Basagoitia made her allegations was one Mary Schapiro. And true to the NASD's nature, the arbitration panel reflexively sided with the company rather than the employee.
And elsewhere on the Stanford-victims front, I just got an email from a Stanford employee:
Employees in all U.S. offices were told by the Receiver that "Payroll would be met and benefits were still in effect" as part of their initial communication to employees (in person) as they closed offices. Funds for payroll are reportedly in Stanford's Treasury department, employees were called in to process payroll, but the Receiver has not approved the transfer of funds to meet this payroll obligation. Funds should have been transferred into employee bank accounts at midnight tonight, and paper checks mailed tomorrow.
Stanford employees were told they were not terminated last week, that in fact "it was business as usual" per the Receiver's email to global Stanford employees. "Consider it a paid vacation," a Stanford employee was told in Memphis, Tennessee. This means employees were not able to begin the process to file for unemployment or make other arrangements with creditors that their income had been suspended.
In fact, many employees were called in to assist the Receiver in many departments. All employees have been working under the assumption that the Receiver would honor the commitment made to meet payroll. Were these employees called back under false pretenses? Funds are in-house to pay employees per Receiver's promise - Receiver now apologizes for the hardship. Why is Receiver now denying to release the monies? Arethe lawyers and other "outside experts" hired by the Receiver being paid with funds promised to meet payroll?
While criminal charges against Allen Stanford or Jim Davis have not been filed, most employees feel that a crime has been committed against them by the Receiver.
Said employees almost certainly include former Fed governor Lyle Gramley. Has anybody got around to asking him anything about his employer yet?
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