Securities and Exchange Commission v. Standford International Bank, Ltd. et al

Filing 1

SECOND AMENDED ORDER APPOINTING RECEIVER. Signed by David C. Godbey, United States District Judge, July 19, 2010. (Attachments: # 1 Summary, # 2 Preliminary Injunction and Other Equitable Relief as to R. Allen Stanford, # 3 Agreed Preliminary Injunction as to Stanford International Bank, LTD, Stanford Group Company and Stanford Capital Management, LLC and Agreed Order Granting Other Equitable Relief, # 4 Preliminary Injunction and Other Equitable Relief as to James M. Davis, # 5 Agreed Preliminary Injunction as to Laura Pendergest-Holt and Agreed Order Granting Other Equitable Relief)(lw)

Securities and Exchange Commission v. Standford International Bank, Ltd. et al

Doc. 1 Att. 2

case 3:0s-cv-002e8-N sRtslthfl.

oorr Fir"o

COURT U . E ,DTSTRICT OF NORTIIERN DISTRICT TEXAS

IN THE I]NITED STATESIIISTruCT T'ORTEE NORTIIERN DISTRICT OF
DALLAS DTVISION

$ $ plainriff, $ $ $ $ STANFORI}INTERNATIONAL BAFIK LTD-, $ STANTORI} GROUPCOMPAI$Y, $ STA}IIFORD CAPITAL MANAGEMENT, LLC, $ R A.LLEN STAIIITORD, JAMES M. DAVIS, end $ LAURA PENDERGEST-IIOLT $ $ Defrndants. $ end $ $ ST.ANFORD FINAT{CIAL cROIlP, rnd $ THE STA"F{TORIT FINANCIAL GROUPBLDG INC,, $
I

SECIIRITIE$ ANr) FXCHAI{GE COMMISSION,

No.: 3:09+v-0?98-N Cass

ReliefDefendants,

$

PRELIMINARY INJUNCTION A}ID OTEER EQTITTABLE RELIEF AS TO R AIIEN STANII}BD Thir maHetcurnebefolo mo, lhe undc;rsiped United StnteeDietrtct Judge,thia l2th ilay of Mrrcll 2O09'on the applioationof PlaintitrSecurities and Exctrangr Commissio'n issuancc for of a preliminary injmction agflinstDefrndant R. All*r Stemford and an ordar for othcrrequitablr reliof aBainsthim. This cowt has prcrriouely iseued a temporuy rcrEaining ordcr (TRo'1, oder froezing aesets, ordcr rcquiring an accounting,ordor rcquiring preservationof docurnurls, orda authorizing expeditod discov*y, and order appointing rcocivtr. The court artended the TRO on Mslch 2, ?009. Bassd on the materials beforc the Court, the Court makes tho following findings of fact and oonclurionsoflaw

Certifieda true copy of o n file in my otflseon

Dockets.Justia.com

159 Case3:09-cv-0029&N Document

F i l ed03/12/2009 Page2 of 12

l.

Defendut Stanfordrecsivedactud notice of the prmoedingr hercin, snd wag

validly eervedwith a summonsand mmplaint. In addition, Sbnford wer velidly ee'rvod had and actualnotice of thc TRO in this oeseand the March 2 extensionofthc TRO. Plaintiffnoticed Stanford's depositionto teko plas6 ofl Fobruery25, 2009. 2. 3, Stoufordfflilod to appearfo,rthis deposition, Stanfordwas noticcd for his dcporition r rccond time on n{ardr +, 2001. tn liou

of appeoriry for hie depositionteotimorry,Stanfordgovi&d the Commissionwith r doclaration in which invoked his privilege again* self inctimination rmdcr thc Fiflh Amcndmffit to the Unrted StatesCoflstitution. 4. Thorc flrEno factral issuesin diryute with rogardto DefendantStanford. Doepite

having receivedservicesnd notide of the Focecdingtr stanford hasnot appcarcdor othenvid ootrtosted enky of a preliminary injwction. Likowiso, stanford hasnot filcd or servedany the p4ers in opporition to thc flry of the proliminary injunction, or cbeJlanged esret ftec;e or the

other ernergoncy relief grantedin ftc TRO. 5. Defenda[t Stffiford bflr faild to provide financial or amount information as

orderedby thc Coun, 6, Defeordaflt Stanfordhas failed to ftpaFiate aseets obtaircd firo,rn activities thc

allegedby the Commisrion. 7. Starfo,rdIntrflationsl Ba*, Ltd. ("SIB'I pu+orr$ to be a privatc intanatio,nal

bank domicilcd in st. rohn's, Antigu4 wert Indieo, sIB olaimsto srffie 50,000clients in overr 100counhiec,with assets rrrdet managanentofrpproximatoly $B billion. sIB sclls putative

SEC v- Std;nfodrd ld''dg'nati{/'g]l Edtd| Ltd.. et al. hclimimty Injunction ad Ordtr Gruting OUrf Rclitf - R. Allcn Stsnford

159 Case3:09+v40298*N D o c u m e n t

F i l ed03/1?/?009 Page3 of 12

certificatesof depositfrthe CD') to U.S. investorstlrurgh SGC,it8 a.ffilistEdinvostf,ont advie'r. 8. is Staofordftoup Compeny,a Houton.based cnnporation, negirtrcdwith thc

Commissionas a brokerrdeslfi snd iuvcstnent advimrr. It has29 offiocs looatodtimughout the Uflited Stete6, $GC's principal businc* corris8 ofsaler ofSlB*issued securities,ma*eted ar oortifioafceof dt4otit. SGC is a wholly owned subsidiuy ofStrnford Group Holdings, Inc., which in tum ie owncd by Defendsst Stsnfsd. 9. StanfordCryitrl MamgFmefi, s registeredinvestmilt adviser,took ovtr the

managemenof lhe SAS pncgrrm (formrly Mutuel Fuf,d Pa.brcm)from SGC in erly 2007. t SCM marketetho SAS progran tlrough SGC. I0. Dcfend.qnt Stsnfor4 a citiztn of the U.S, and Antigua Wcst Indis, is thc

chairmm oftho board and mle slureholdsr of SIB end the sole director of SGC'e partnt comPsny. 11. Starfo'rdqgagod in fraudulart couduc! inoluding mis4prupriating inveotor

firndu,and malci4gmatcdal rniueprcscntatioru e'r.l omiseioue concrnin& amougother thingr, SIB's certilicate of depoeitpogram, the nntureand liqrridity of SIB's assotg, cxi*tence of thc rslatcd party traDsactiof,s, pwportad loeffi fsm sts b stadord, puryortgd cqital infirsions inro SIB, andthc $AS progrem. 12. Defe,ndant Stanford's assets, including procecdsobteinedffnough fralduletrt

activitier, arc in inuninent jeopardy of dissipationor loee. Abcontan aset fireerc,Defsndant stanford can rcrnovefiud* beyurd lhe courr'B jurisdictio'n with little hopc that they caabe rccowred al a lrtr date,rend*ing any final judgmerntof disgorgernent commisrion migtrt the obtain mcuningless.

SECv. Sbnfod In@Hdtb^al Bdrt, Ltu|., er aI. Prctiminary Injunction snd Order Cfrnting OtEr Relicf- & AlleB Stubrd

159 Cese 3:0F-cv40298-N Document

F i l ed03/1?2009

Page4 of 12

13.

rclating to the It ie necesary to gusrd tho rtcords of Defardurt Stanfo'rd

dealingsfi'om dcstsuctionor deftndants or uty oftheir securitiet, fiuncial, or busiuoso altcration. 14. DeferrdmtSmfomd,dirtctly andirdirecdy, haemadousoof thomeansffid

cmurerce" lhe meils, or tlre facitties of e f,Etiorl8lsecuitics N(dbarye instrur fltalitiosof inte,nrtaie ofbugincqg and desmrledbelow andin the in mrmectiqr with thc ace, Practices, coruse$ Commission'tplcadings. 15. hercinlhat included Thc Coflmission's actiof,srigs ofout of cffduct dnscdbed

includingtrc ffi rold by SIE activitiosh lhc Udted Shtcs involving the saleof otrtain Eecuritis, 'SAS-" andotherdefiendmtfanda propridy mrrtral fund wrq programkrown as 16. In telling ftc (D, ttredefendmtsin thie actiorl including Ddcf,dmt Sttrford, madc

rqresentatioru conoerningarrong othcr things,(i) tho bank'e eafetyand eecurity;and (ii) wetE cornistcnt, double-digit retu$s on the bank's investmmt portfolio. ThcsEr'presentstions flBterially faleemd misleading: Instead,significant portious of lhe bank's putfolio were misappro'priated Stanfordusodby him to acquireprivatc cquity andftal csteto, In fact, at by year-end2008, the largost segmenbof the bank's portfolio werc: (i) undocrmcntod"Ioun" to Stanford; (ii) private equitg and (iii) ovcrr-valued estate. real 17. SIB's financifll ststements, whidr wqo spp,roved Defffidsflt Stanfod, by

incorne, inoluding ite iwoehnent income, are also fiotional, In calculatingSIB's itrvoshrtent Defeildant Staflfordp'rovidedto SIB's intemal r.countaub a predetorminod retufi or iflvcstmqrt for the bank's portfolio. Using thie prc-deternined lurnber, $IB't acoountnnts revertc-ogineercd the bank's financial Btetemrnts roflect investncnt incone that SIB did not to actually eam,

fiEC v. Staqdrd Inlcrrutrilrml Banh LH., A al. Pretiminnry l4irmction ad Ordcr ftanting Othcr Belief - R- Aller SEDfotrd

Case 3:09-cv40298-N Document159

F i l ed03/122009

Page 5 of 12

18.

hr ib Deoombcr2008 Montbly Repott, which Sunford appmve{ SIB told

investorsthat tho bank had receivcd a oqital itrfiEiotr of $541 million on Noveurbcr28, 2008. lvas ftaterially falsc andmfuleading. Thie representation 19. The mutual furd wrap programrcfcrencedabovowaemsrtctctl basedon

matcrially falsemisleding historical pcrforn{nce data. 20. The investnents ofrerod and eoldby the Deffidmt trE "securitiee' under Section

Act 3(a)(10)of the Exchange [l$ U'S'C. $ Act [5 U.S.C.$ 77b], Section 2 ( l ) of the Secrrities ?8c1,Sectiot 2(36) of the Inwrurent CompanyAct [15 U.S.C. $ 80a-2(36)],ud Smtion 2 0 2 ( 1 8 )oftho Advisort Ast [15 U.S.C.$ 80Fql8)J 21, Smtion Thie Court hasjurisdiction over thie aclion, and vtnuo ie prtpcr' underr

22(a) of ttre SecuritiesAct [15 U.S.C. $ 77v(a)], Section27 of the ExchangoAct [ 5 U.S.C. $ 78ael,Section43 of the InveshnrrntCompenyAct [15 U.S.C. $ 80a43], and Sedion 214 of the A d v i a e n Act [l5 U.S.C.$ 80b-.14]. ?.2, on This C.owthaepsrtonaljwisdiction ovcrr Hrmdant Stmford based ttreadivitiee

set forth aboveandthosedctailedin matErials if, con$idercd lhis mafiEr. 21. cor$ituting the Certainof the tarraactiurq ectq practioe, andcoureo df businoss

allepd violationsof law occunedwithin theNorthemDitrict of Texaa. U, Dofendfft Stafifordftssbgen detrtied eowiceofpnrccss ud roceivedectuel with of thc IRQ urd the dats

noticeof the @mc1r of this actionagainsthinr, fie TRO, tfrc uuuico

andtime oftho prclininary injunction heuing in this ma$tr. $ervim of ptuccrswas validly offeoted. All ploadiqgsandothrpryrs necssdry thc c'rty of thiejrdgnent wor popedy ftr ssved ffi Defudant Stffftrd.

SECv- Etanlord Inenatiot'g.l Bo k, Ltd., et ql. Ihlituiuary Injrnction ard Ordtr Grarting Other Rolidf - R. A tfl Stmfold

Case 3:0$cv40?98-N

Documenl159

F i l e d03/1?2009 Page6 of 12

25.

has Deftdurt Srmrfond violatedttue Cortt's orderrequiringhim to pdrovido

infonnationrcgardinglus assete thercqukmflIt thd hc ftpatriflte any{ssotslocatedabruad. Snd DefendautStenfod hasaleodefrulted on the Commiesioa'trtotion for a Freliminerymjrurction contimringtre assctfrcescendftr an odff grantingothu rclicfby failing to cofltett the argunartt and allegafionrraisedby the Corunisoion, 26. that The Cmnmissionhasdtrnonstreted it ie nmeetry to mntirnretlre injunotivo

relief, a$et ft+cze,andotherreliefdruing the pardencyofthis rction to tndurcthfit therede assots Defetdfrt ttrat to eatirfi, at leastin pert ay ful judgmeart the Conrrrinrionmight obteinagainet Stmford. 27The Commission dcmonsffied the propershowingof a currsrt violation of the has

will laws arrda risk tharthteo vioLntions tccLr. Acoodingly, a prcIiminry fedeI-dsecruitics warrated it thit cascagainat Matdtflb, injunotion and assa froozear,e Stanford. Bascdon thc foregoingFindingt of Faotaud Corclusionsof [-ax'; I. IT IS HEREBY ORDBRED that Defrndant Stanfordard bu egtirts, rervstrts,enrployees, att'omeys,and all other personein activo concert or prticipation with him lrrho rccsive actual notice of this Freliminay Injrmctiou by pcrsonal sorvioeot otherwiseare restrsinedsnd enjoined from violating Section 1{a) of the SecuritiesAct [15 U.S,C. $ 77q(a)], diroctly or indirtctty, it tho offerr or sale of any sccurity by thc use of any meart or insttmcnts of tanryortatiot or communicationin if,tr.rstateccffimcrre or by thc uso of the mailg, bla (l) cmploying ary devicq *.hemg or artifioeto defi{ud; or itrcludiry Defmdrnt

SECv. Stnt,''l,td Int*rf,drlnnal Ba g Ltd., at dl. Prtlin fllry lnjtrnction ud Ordct Granting Othrr Rclicf- R. Allen Stn&rd

159 Gase3:09-w-00298-N Document

F i l ed03/1?2009

Pag7 of 12

(2)

or obhinirrgrnonoy PrsFHtyby mes$ of my rmtue stilffircnt of matsial fict or in to flDyomi86iofl ctfltr r|letrielfact necesEary ffiLr to maketlrc statfirEt(s) rmdcr in msde, theliik of tln circrunstances whichtheyworcmrde,notmiglesding;

(3)

or preEtioe' coulEcofbueiffiss whioh crpordss would or engBgirym efly Earrsaetion, oper-ate a fraud or deceitrpon tbc purchaom' as II.

IT IS HBREBY ORDERED that Dsfefldbt Stmford and hie agentr,srvant&employeos' atl,om6),8md all othcrrpersonsin Ectiv conperrt participation wtth him who receive actual , ot ard notioe of thie Prsliminary Ifljmctiof, by personalstrvice or othcr$'ieoflre resuleined er{oincd fiom violating or aiding and abettingviolatio'nsof Socum 10(b)oftho Exclwgc Act or Rule l0b5 [l5 U.S.C. $ 78j(tr) and l? C.F.R. $ 240.10b-5],dirtc'tly or indirtotly, in cmnectiomwith the purclreseor sale of any socurity, by makirE ufie of etry lllsan8 or it8ftruntality of intetstdc commorcgor of lho mails, crrof ury fscility of any tritional sccuritierecchmge (l) to uss or crnploy any mruipulativc ot deoeptive devicc or conFivanoo in conftavrrntionof tho nrles and rogul,etiott prumulgatedby the Cotmissiotq

(2) (3)

t'oennployany dwice, echerne, ertifico to dofraud; or to make any mtsue BF.tfrflentof a maredal frct or omit t0 stalc a matenal fact necEosdyin otder to makc thc stetcrf,rf,tsmado, in the light of tho circurhstflrces underwhictr they weromaflq not misloading;or

(4)

to erigage etry acLpracticc,or courte ofbuEiness in which o,prflEs utouldoperate tr asa fralrl or deceitr4on atryp[sofl.

lld., et aI. SECv. Stn{onl Internatiorul Bonlc, Prelimiury.Injuction rrd Order Gnnting Otlrer Rnlief - R. Allcn Sunfod

159 Case3:09-cv-00298-N Document

F i l ed03l 1z l 2009 PageI of 12

il. IT I$t HEREBY ORDERED thal Defendant$tmford and his egotrts,servants,employees, attmnep, and all otlrcr prrms in scqvc concdft u particip*ion with him who receivc actual

ers notioo of thfu Frclirninary Iqjunction by prsonal *rrrice or otherrwisc redtminodmd enjoined from aiding and abetting vio}atiorrt of Scotions206(l) sfld 206(2) of tlro Advi*rrs Ad [15 U'S.C$$ S0b-6{1),(2)J, dfuectlyot indirectly, by use of tlre meils or a$y rneatrsor bstrummtslity of intcrstatccorflrnercc,by: (l) employing any devic6, echemq or arufice to rleftaud any clirt or prospctive dIieNU or (2) cngagrrg ir sry tanssctiotr, praoticg or coute of bwinete which opuatco at a frurd or deceit upon any clirtrt or proepectivoclient.

ry.
s{f,vanE,ftrplo},Ees, IT IS HEREBY ORDERED that Dofardent Stanfordmd his aEeflt5, stomeye, tnd ell oths prsousin rctivo mnccrt ot participation wi$ him who teccive aotual notioe of this Proliminary In1'tmction poraonelacrvice or othrrrvise sre hcrcby rcdtaincd and by emjoinedfrorr, dircctly or indirrctly, making eny pal,rnentor orpcnditureof fiuds belongingto o in the poeseesior, cusbdy, or contol of Dcfeodant Stanfod or effmting auy mle, giff, htpothecatio4 or otha disposition of arry assetbelonging to or in the pomeorioq custody, or cotrtol of DsfendEntStaflfo'rd,pcrding a ihorvinC to this Court thet Dsfcndrflt Stmfod hts sulficient fmds or atsoE to satisry an chims uising out of the violatione rllegod in tho Connrision's Complaintor thc posti4gof a botrdor swety sufficisnt to EEsrIro Fflyrnd of any Buc.h olaim.

gECv Ewfo lntenulnaal Bwtk,L.frI,et tl. PttliminaryInjmctiott 8f,dffier Grering Otbrrt Relief* B. Allcn $tmfo'rd

t Case 3:09-cv-00298-N D o c u m e n159

F i l ed03/122009

PageI of 12

v_
mvings btrtll' IT IS HEREBY ORDERED that all bankt, mvings nnd loan aggocietiotrs, ttust oompanicq sscrritios b'rgkff-dealere,commoditios dealr6,inv6ftfit conpenies, othf, finaflcial or depoeitoryiffititutions, and invoetnsnt compefliesthat hold one ot morc aooounBrn the na.urc,on bchalf or for thc bsoofit of Defendut Starford who rcceive sctual noticc of this Prcliminary Injunction by personal scrrriceor othcrwisc ut htroby rosbeind nd cnjoinod' in liquidating rogard to mry euch account, fi,om engagingin any fiusaotion in socurities (erxcept trarrsactioruneceessry cofirply tvith a court ordr) or any di#ureornert of fim.ls or securitisg to pandingfirrthcr order ofthid Coufl. VI. limited tf IS HSR.EBYORDERED tbst all other individuals, corporationr, partre,rehipe, liability courpanie, and other artificiel cntities who rrcoive sctusl nonce of this Preliminary Injunctipn by pewonal sfrvioe or otlre'rnise are hereby retheined rod enjoircd fiom disbursing any firnds, eoouritics,or othor p'ro'pedyobtaincd from DofcardantStanford without adqurte consideration. VII. lT IS HEREBY ORDERED $ar DdnrdErf Stanfondfu hueby tcquircd to mrke an inlerim accor.urting, unde'r oath wifth tm days of the issuanocof thie order: (l) detailing a[ moniec and othtrr btncfitt which he receivg{, directly or indire+tly, as e result of the activitios alleged in the Conplaint (iucludrng the date on which ths monioe or other be,nofitwas rtcived and thc namc, addrcss,and telephonsnumber of the porsonpaying tho monry or pmviding the bonefit); (2) listing all cuttnt aEEetB whrrrsver they may be locatrd and by who'movcrthoy are boing held (including thE Dflfire and addroesof the holdor and thc amount or valuo of tfte

SECr. Star{o Intf,-hatid.nalBanle, LkI, a aL Itelisirbry Injunstion nd Otda Guntiq8 Oths Rclief - R. Alltn Stuford

159 Case3:09-cv-0029&N Document

10 03/1?2009 Page ol 12 Filed

holdingB); and {3) ligting atl tocoBlrtswith my financial ot brokerageinrtitution maintainedin thc name o{ on bchalf of or for the bEnefit 04 Defaxld[t st8Eftrd (if,chding the namo urd et addremof the accountholder aud thc acoountnumbc'r)and thc amoudt held in eaclt acmunt eny point dwing tho pcriod fum Ianuary 1, 2000 ttnough the d4teof fre sccotmtitrg'

vm.
IT IS HEREBY ORDERm that DofErdant Stanfod and his agrnt+ se,rvanu,employeet' dttodeyE, and all othrr pasons in activc co[ctrt or participdion wrth the,ur,including any barrk, securitidbrokordealcr, tr any fi1rfficisl or depositaryinetitution, who rmoivee actual notioo of this Prcliniflry lqillllction by ptrsonal mrrrice or othcnlriEeo,rehereby restrainodmd eqioined

from ilcstroying; Iunoving mutilrting alteting, cmcealing or firposilg ot in my urxImef,'my booke rnd fcordr or*ned by, or prtaining to, the fintociel tran$dtio$6 rnd s$8tr of Deftndant or any fltities undcr his cffikol. IX. IT IS HEREBY ORDERED tbst tlre commission ie suthorizcd to servepmcesson, and give rrotice of thoseprocccdingsand the relief grantcd hcrein to, Defef,d@t by U.S. Mail' e'neil' faosimilc, o'r any other moansauthorizal by the FcderalRulce of Civil Proccdurc.

x.
IT IS HBREBY ORDERBD rtrar expediteddrsooverymay take place consistmt with tho following: O) any party mey nodce and conduct drrpotitiotu uporr oral exsmination and may rcquost atrd obtain ptoiluotiofl of doanmatt or other things for inrp*tion ud

copying ftoru partiee prior to tha expirdion of tlirty dryr a,fter eervice of a stunmons&d the PlaintiffCornflission's Complaint upon Mcndant;

sBc y. S/#d4fodldrq diawl Batk, LaL, d sl. h PrcUfitttry lqiutrtioft and Ordtr Gnnting Otbtt Rtlitf - R. AIlGtr Shtrffid

10