by R. Allen Stanford and James M. Davis and executed through companies they

IN THE UNITED STATES DISTRICT COURT
 
FOR THE NORTHERN DISTRICT OF TEXAS
 
DALLAS DIVISION
 
SECURITIES AND EXCHANGE COMl\JlSSION, §
 
§
 
Plaintiff, 
§
 
§
 
v. 
§ 
COMPLAINT 
§ 
STANFORD INTERNATIONAL nANK, LTD., 
§ 
STANFORD GROUP COMPANY, 
§ 
STANFORD CAPITAL MANAGEMENT, LLC, 
§ 
R. ALLEN STANFORD, JAMES M. DAVIS, and 
§ 
LAURA PENDERGEST-HOLT 
§ 
§ 
Defendants. 
§ 
Plaintiff Securities and Exchange Commission alleges:
 
SUMMARY
 
1. The Coriunission seeks emergency relief to halt a massive, ongoing fraud 
orchestrated 
by R. Allen Stanford and James M. Davis and executed through companies they 
control, including Stanford International Bank, Ltd. ("Sill") and its affiliated Houston-based 
investm~nt advisers, Stanford Group Company ("SOC") and Stanford Capital Management 
("SCM"). LauraPendergest-Holt,thechiefinvestmentofficer 
ofa Stanfordaffiliate,was 
indispensable to this scheme 
by helping to preserve the appearance of safety fabricated by 
Stanford and by training others to mislead investors. For example, she trained training SIB's 
. senior investment officer to provide false information to investors. 
2. Through this fraudulent scheme, SIB, acting through a network 
of SOC financial 
advisors, has sold approximately $8 billion of self-styled "certificates ofdeposits" by promising 
high return rates that exceed those available through true certificates ofdeposits offered by 
traditional banks. 

3. sm claims that its unique investment strategy has allowed it to achieve double-
digit returns on its investments over the past 
15 years, allowing it offer high yields to CD 
purchasers. Indeed, 
sm claims that ~ts "diversified portfolio ofinvestments" lost only 1.3% in 
2008, a time during which the S&P 500 lost 39% and the Dow Jones STOXX Europe 500 Fund 
lost 
41 %. 
4. Perhaps even more strange, 
sm reports identical returns in 1995 and 1996 of 
exactly 15.71%. As Pendergest-Holt -sm investment committee member and the chief 
investment officer of Stanford Group Financial (a Stanford affiliate) -  admits, it is simply 
"improbable" that 
sm could have managed a "global diversified" portfolio ofinvestments in a 
way that returned identical results 
in consecutive years. A perfonnance reporting consultant 
hired 
by SGC, when asked about these "improbable" returns, responded simply that it is 
"impossible" to achieve identical results on a diversified investment portfolio in consecutive 
years. Yet, 
sm continues to promote its CDs using these improbable returns. 
5. These improbable results are made even more suspicious by the fact that, contrary 
to assurances provided to 
investors~ at most only two people -  Stanford and Davis -  know the 
details concerning the bulk 
ofSm's investment portfolio. And sm goes to great lengths to 
prevent any true independent examination 
ofthose portfolios. For example, its long-standing 
auditor is reportedlyretainedbased on a"relationship 
oftrust"between the head ofthe auditing 
finn and Stanford. 
6. Importantly, contrary to recent public statements 
by SIB, Stanford and Davis (and 
through them SGC) have wholly-failed to cooperate with the Commission's efforts to account 
for the $8 billion 
of investor funds purportedly held by SIB. In short, approximately 90% of 
2
SEC 
v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

SIB's claimed investment portfolio resides in a ''black box" shielded from any independent 
oversight. 
7. In fact, far 
fro~ "cooperating" with the Commission's enforcement investigation 
(which Stanford has reportedly tried to characterize as only involving routine examinations), 
SOC appears to have used press reports speculating about the Commission's investigation as 
way to further mislead investors, falsely telling at least one customer during the week of 
February 9, 2009, that his multi-million dollar sm CD could not be redeemed because ''the SEC 
had frozen the account for two months." At least one other customer who recently inquired 
about redeeming a multi-million dollar CD claims that 
he was informed that, contrary to 
representations made at the time 
ofpurchase that the CD could be redeemed early upon payment 
/ 
ofa penalty, R. Allen Stanford had ordered a two-month moratorium on CD redemptions. 
8. This secrecy and recent misrepresentations are made even more suspicious 
by 
extensive and fundamental misrepresentations sm and its advisors have made to CD purchasers 
in order to lull them into thinking their investment is safe. sm and its advisers have 
misrepresented to CD purchasers that their deposits are safe because the bank: (i) re-invests client 
funds primarily in "liquid" financial instruments (the ''portfolio''); 
(ii) monitors the portfolio through 
a team of20-plus analysts; and (iii) is subject to yearly audits 
by Antiguan regulators. Recently, as 
the market absorbed the news 
ofBernard Madoff's massive Ponzi scheme, sm has attempted to 
calm its own investors 
by claiming the bank has no "direct or indirect" exposure to Madoff's 
scheme. 
9. These assurances are false. Contrary to these representations, 
sm's investment 
portfolio was not invested in liquid financial instruments or allocated in the manner described 
in its 
promotional material and public reports. Instead, a substantial portion ofthe bank's portfolio was 
3
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

placed in illiquid investments, such as real estate and private equity. Further, the vast majority 
SIB's multi-billion dollar investment portfolio was not monitored by a team ofanalysts, but rather 
by two people -  AlleI! Stanford and James Davis. And contrary to SIB's representations, the . 
.. . 
Antiguan regulator responsible for oversight ofthe bank's portfolio, the Financial Services 
I 
.1 
I 
I 
; 
! 
Regulatory Commission, does not audit SIB's portfolio 
or verify the assets SIB claims ill its 
financial statements. Perhaps most alarming is that SIB has exposure to losses from the Madoff 
fraud scheme despite the 
bank's public assurances to the contrary. 
10. SGC has failed to disclose material facts to its advisory clients. Alarmingly, recent 
weeks 
have seen an increasing amount ofliquidation activity by SIB and attempts to wire money 
out ofits investment portfolio. The Commission has received information indicating that in just 
the last two weeks, SIB has sought to remove over $178 million from its accounts. And, a major 
clearing 
firm -after unsuccessfully attempting to find information about SIB's financial 
condition and because 
it could not obtain adequate transparency into SIB's financials-has 
recently informed SGC that it would no longer process wires from SGC accounts at the clearing 
firm to sm for the purchase ofsm issued CDs, even ifthey were accompanied by customer 
letters 
of authorization. 
11. Stanford's fraudulent conduct is not limited to the sale 
ofCDs. Since 2005, SGC 
advisers have sold more than 
$1 billion ofa proprietary mutual fund wrap program, called Stanford 
Allocation Strategy{"SAS"), by using materially false and misleading historical performance data. 
The false data has helped SGC grow the SAS program from less than $10 million in around 2004 to 
I 
over $1.2 billion, generating fees for SGC (and ultimately Stanford) in excess of$25 million. And 
the fraudulent SAS performance was used 
to recruit registered financial advisers with significant 
SEC v. Stanford International Bank, Ltd., et al. 
4 
COMPLAINT 

books ofbusiness, who were then heavily incentivized to re-allocate their clients' assets to sm's 
CD program. 
12. Moreover, 
sm and Stanford Group Company have violated Section 7(~) ofthe 
InvestmentCompanyAct 
of1940byfailingtoregisterwiththeCommission inorderto sell sm's 
CDs. Had they complied with this registration requirement, the Commission would have been able 
to examineeach 
ofthose entities concerning sm's CD investmentportfolio. 
13. 
By engaging in the conduct described in this Complaint, defendants Stanford, 
Davis, Pendergest-Holt, 
sm, SGC, and Stanford Capital, directly or indirectiy, singly or in 
concert, have engaged, and unless enjoined and restrained, will again engage in transactions acts, 
practices, andcourses 
ofbusinessthatconstituteviolations ofSection 17(a) oftheSecuritiesAct 
of 1933 ("Securities Act") [15 U.S.c. §§ 77e(a), 77e(c) and 77q(a)], and Section 10(b) ofthe 
Securities Exchange Act 
of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)], and Exchange Act Rule 
10b-5 [17 C.F.R. § 240.10b-5] or, in the alternative, have aided and abetted such violations. In 
addition, through their conduct 
.<:lescribed herein, Stanford, SGC, and Stanford Capital have 
violated Section 206(1) and (2) 
ofthe Investment Advisers Act of 1940 ("Adviser's Act") [15 
U.S.C. §§ 80b-6(1) and 80b-6(2)] and Davis and Pendergest-Holt have aided and abetted such 
violations. Finally, through their actions, SIB and SGC have violated Section 7(d) 
ofthe 
Investment Company Act 
of 1940 ("ICA") [15 U.S.C. § 80a-7(d)]. 
14. The Commission, in the interest 
of protecting the public from any further 
unscrupulous and illegal activity,brings this action against the defendants, seeking temporary, 
preliminary and permanent injunctive relief, disgorgement 
of all illicit profits and benefits 
defendants have received plus accrued prejudgment interest and a civil monetary penalty. The 
Commission also seeks an asset freeze, an accounting and other incidental relief, as 
well as the 
5
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

", 
appointmentofa receivertotakepossessionandcontrol ofdefendants' assetsfortheprotection 
ofdefendants' victims. 
JURISDICTION AND VENUE 
15. The investments offered and sold 
by the defendants are "securities" under Section 
2(1)
oftheSecuritiesAct[15U.S.C. § 77b],Section 3(a)(10) oftheExchangeAct[15U.S.C. § 
78c], Section 2(36) 
ofthe Investment Company Act [15 U.S.C. § 80a-2(36)], and Section 
202(18) 
ofthe Advisers Act [15 U.S.C. § 80b-2(18)]. 
16. Plaintiff Commission brings this action under the authority conferred upon 
it by 
Section 20(b) ofthe Securities Act [15 U.S.C. § 77t(b)], Section 21(d) ofthe Exchange Act [15 
U.S.C. 
§ 78u(d)], Section 41(d) ofthe Investment Company Act [15 U.S.C. § 80a-41(d)], and 
Section 209(d) 
ofthe Advisers Act [15 U.S.C. § 80b-9(d)] to temporarily, preliminarily, and 
permanently enjoin Defendants from future violations 
ofthe federal securities laws. 
17. This Court has jurisdiction over this action, and venue 
is proper, under Section 
22(a) 
ofthe Securities Act [15 U.S.C. § 77v(a)], Section 27 ofthe Exchange Act [15 U.S.C. § 
78aa],Section43 oftheInvestmentCompanyAct[15U.S.C. § 80a-43],andSection214 ofthe 
Advisers Act [15 U.S.C. 
§ 80b-14]. 
18. Defendants have, directly or indirectly, made use ofthe means or instruments of 
transportation and communication, and the means or instrumentalities ofinterstate commerce, or 
ofthe mails, in connection with the transactions, acts, practices, and courses ofbusiness alleged 
herein. Certain 
ofthe transactions, acts, practices, and courses ofbusiness occurred in the 
Northern District ofTexas. 
6
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

DEFENDANTS 
19. Stanford International Bank, Ltd. purports to be private international bank 
domiciled in St. Jo1m's, Antigua, West Indies. SIB claims to serve 
~O,OOO clients in 131 
countries and holds $7.2 billion in assets under management. SIB's Annual Report for 2007 
states that SIB has 50,000 clients. SIB's multi-billion portfolio 
ofinvestments is purportedly 
moriitored 
by the SFG's chief financial officer in Memphis, Tennessee. Unlike a commercial 
bank, 
sm does riot loan money. SIB sells the CD to U.S. investors through SGC, its affiliated 
investment adviser. 
20. Stanford Group Company, a Houston-based corporation, is registered with the 
Co:nnnission as a broker-dealer and investment adviser. 
It has 29 offices located throughout the 
U.S. 
SGC'sprincipalbusinessconsists ofsalesofSIB-issuedsecurities,marketedas 
certificates
ofdeposit. SGCis a whollyownedsubsidiary ofStanfordGroupHoldings,Inc., 
which 
in tum is owned by R. Allen Stanford ("Stanford"). 
21. Stanford Capital Management, a registered investment adviser, took over the 
management 
ofthe SAS program (fonnerly Mutual Fund Partners) from SGC in early 2007. 
Stanford Group Company markets the SAS program through SCM. 
22. 
R. Allen Stanford, a U.S. citizen, is the Chainnan ofthe Board and sole 
shareholder 
of SIB and the sole director ofSGC's parent company. Stanford refused to appear 
and give testimony in the investigation. 
23. James 
M. Davis, a U.S. citizen and resident ofBaldwin, Mississippi and who 
offices 
in Memphis, Tennessee and Tupelo, Mississippi, is  a director and chieffinancial officer 
of SFG and SIB. Davis refused to appear and give testimony in this investigation. 
7
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

24. Laura Pendergest-Holt, is the ChiefInvestment Officer ofSIB and its affiliate 
Stanford Financial Group. She supervises a group ofanalysts in Memphis, Tupelo, and St. Croix 
who "oversee" perfonnance ofSIB's Tier II assets. 
STATEMENT OF FACTS AND ALLEGATIONS 
RELEVANT TO ALL CAUSES OF ACTION 
A. The Stanford International Bank 
25. Allen Stanford has created a complex web ofaffiliated companies that exist and 
operate under the brand Stanford Financial Group ("SFG"). SFG is described as a privately-held
., 
group ofcompanies that has in excess of$50 billion "under advisement." 
26. SIB, one 
ofSFG's affiliates, is a private, offshore bank that purports to have an 
independent Board 
of Directors, an Investment Committee, a Chief Investment Officer and a 
team 
ofresearch analysts. While SIB may be domiciled in Antigua, a small group ofSFG 
employees who maintain offices 
in Memphis, Tennessee, and Tupelo, Mississippi, purportedly 
monitor the assets. 
27. As 
ofNovember 28,2008, SIB reported $8.5 billion in total assets. SIB's primary 
product is the CD. SIB aggregates customer deposits, and then re-invests those funds 
in a 
"globally diversified portfolio" 
ofassets. SIB claims its investment portfolio is approximately 
$8.4 billion. SIB sold more than 
$1 billion in CDs per year between 2005 and 2007, including 
sales to u.S. investors. The bank's deposits increased from $3.8 billion in 2005, to $5 billion in 
2006, and $6.7 billion in 2007. SIB had approximately $3.8 billion in CD sales to 35,000 
customers in 2005. 
By the end of2007, SIB sold $6.7 billion of CDs to 50,000 customers. 
8
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

8.0% 
6.0% 
4.0% 
2.0% 
28. For almost fifteen years, SIB represented that it has experienced consistently high 
returns 
on its investment ofdeposits (ranging from 11.5% in 2005 to 16.5% in 1993): 
STAhRlRD INrB<NATIONAL BAN< 
Return Va. Interest PaId To Deposltora 
18.0% 
16.0% 
14.0% 
.A 18.5% 
~% 
"-.L"
... 
15.7% 
>N 
.1A.1% 
~ 
12.0% 
"'" 11.7% ....
... 
.~70 
11 <... 
...... 
U,O% 
10.0% 
--...Ol. 
~.
.%
--.~,. 
-
,~ 
~ 
~ "n. 
-
~.7'll. 
7% 
. 
-
0.0% 
1992 1993 1994 1995 1996 1997 1998 1999 2000 
2001 2002 2003 2004 2005 2008 
29. In fact, since 1994, SIB has never failed to hit targeted investment returns in 
excess of 10%. And, SIB claims that its "diversified portfolio ofinvestments" lost only $110 
million 
or 1.3% in 2008. During the same time period, the S&P 500 lost 39% and the Dow 
Jones STOXX Europe 500 Fund lost 
41 %. 
30. As performance reporting consultant hired by SOC testified in the Commission's 
investigation, SIB's historical returns are improbable, 
ifnot impossible. In 1995 and 1996, SIB 
reported identical returns 
of 15.71 %, a remarkable .achievement considering the bank's 
"diversified investment portfolio." According to defendant Pendergest-Holt -- the chief 
investment officer 
ofSIB-affiliate SFO -  it is "improbable" that SIB could have managed a 
"global diversified" portfolio 
ofinvestments so that it returned identical results in consecutive 
years. 
SOC's performance reporting consultant was more emphatic, saying that it is 
"impossible" to achieve identical results on a diversified investment portfolio in consecutive 
years. SIB continues to promote its CDs using these improbable, 
ifnot impossible, returns. 
9
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

31. . sm's consistently high returns ofinvestment have enabled the bank to pay a 
consistently and significantly higher rate 
on its CD than conventional banks. For example, sm 
offered 7.45% as ofJune 1,2005, and 7.878% as ofMarch 20,2006, for a fixed rate CD based 
on an investment of$100,000. On November 28,2008, Smquoted 5.375% on a 3 year CD, 
while comparable 
u.s. Banks' CDs paid under 3.2%. And recently, sm quoted rates ofover 
10% 
on five year CDs. 
32. 
sm's extraordinary returns have enabled the bank to pay disproportionately large 
commissions to SOC for the sale 
ofsm CDs. In 2007, sm paid to SOC and affiliates $291.7 
million 
in management fees and commissions from CD sales, up from $211 million in 2006 and 
$161 million in 2005. 
33. 
sm markets CDs to investors in the United States exclusively through SOC 
advisers pursuant to a claimed Regulation D offering, filing a Form D with the SEC. Regulation 
D permits under certain circumstances the sale 
ofunregistered securities (the CDs) to accredited 
investors 
in the United States. , SOC receives 3% based on the aggregate sales ofCDs by SOC 
advisers. Financial advisers also receive a 1% commission upon the sale 
ofthe CDs, and are 
eligible to receive as much as a  1% trailing commission throughout the term ofthe CD. 
34. SOC promoted this generous commission structure 
in its effort to recruit 
established financial advisers to the firm. The commission structure also provided a powerful 
incentive for SOC financial advisers to aggressively sell CDs to United States investors, and 
aggressively expanded its number 
offinancial advisers in the United States. 
35. 
sm purportedly manages the investment portfolio from Memphis and Tupelo. 
SIB's investment portfolio, at least internally, is segregated into 3 tiers: (a) cash and cash 
equivalents ("Tier 1"), (b) investments with "outside portfolio managers (25+)" that are 
10
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

!
 
monitored by the Analysts (''Tier 2"), and (c) unknown assets under the apparent control of 
Stanford and Davis (''Tier 3"). As ofDecember 2008, Tier 1 represented approximately 9% 
($800 million) 
ofthe Bank's portfolio. Tier 2, prior to the Bank's decision to liquidate $250
.	, 
millionofinvestmentsinlate2008,represented10% oftheportfolio. AndTier3 represented 
81%oftheBank'sinvestmentportfolio. Thisdivisionintotiersis notgenerallydisclosedto 
actual 
or potential investors. 
B.	 sm's Fraudulent Sale of CDs 
1.	 SIB Misrepresented that Its Investment Portfolio is Invested Primarily in 
"Liquid" Financial Instruments. 
36. In selling the CD, sm toutedtheliquidity ofitsinvestinentportfolio. For 
example, in its CD brochure, 
sm emphasizes the importance ofthe liquidity, stating, under the 
heading "Depositor Security," that the bank focuses on "maintaining the highest degree 
of 
liquidity as a protective factor for our depositors" and that the bank's assets are "invested in a 
well-diversified portfolio 
ofhighly marketable securities issued by stable governments, strong 
multinational companies and major international banks." Likewise, the bank trained SGC 
advisers that "liquidity/marketability 
of SIB's invested assets" was the "most important factor to 
provide security to 
sm clients." Davis and Pendergest-Holt were aware, or were reckless in not 
knowing, 
ofthese representations. 
37. 
In its 2007 annual report, which was signed and approved by Stanford and Davis, 
SIB represented that its portfolio was allocated 
in the following manner: 58.6% "equity," 18.6% 
fixed income, 7.2% precious metals and 15.6% alternative investments. These allocations were 
depicted in a pie chart, which was approved 
by Davis. The bank's annual reports for 2005 and 
2006 make similar representations about the allocation 
of the bank's portfolio. Davis and 
Stanford knew or were reckless in not knowing of these representations. 
SEC v. Stanford International Bank, Ltd., et al.	 
11 
COMPLAINT 

...
 
38. SIB's investment portfolio is not, however, invested in a "w~ll-diversified 
portfolio ofhighly marketable securities issued by stable governments, strong multinational 
companies and major international banks." Instead, Tier 3 (i.e., approximately 90%) consisted 
primarily 
ofilliquid investments -  namely private equity and real estate. Indeed, it SIB's 
portfolio included at least 23% private equity. The bank never disclosed in its financial 
statements its exposure to private equity and real estate investments
.. Stanford, Davis and 
Pendergest-Holt were aware, or were reckless in not knowing, that SIB's investments were not 
allocated as advertised 
by SIB's investment objectives or as detailed in SIB's financial 
statements. 
39. Further, on December 15, 2008, Pendergest-Holt met with her team 
ofanalysts 
following SIB's decision to liquidate more than 30% 
of its Tier 2 investments (approximately 
$250 million). During the meeting, at least one analyst expressed concern about the amount 
of 
liquidations in Tier 2, asking why it was necessary to liquidate Tier 2, rather than Tier 3 assets, 
to increase SIB's liquidity. Pendergest-Holt told the analyst that Tier 3 was pnmarily invested 
in private equity and real estate and Tier 2 was more liquid than Tier 
3. Pendergest-Holt also 
stated that Tier 3 "always had real estate investments in it." Pendergest's statements contradicts 
12
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

what she had previously stated to SIB's senior investment adviser, knowing, or reckless in not 
knowing, that the senior investment advisor would provide this misrepresentation to investors. 
2.	 .SIB Misrepresented that Its Multi-Billion Dollar Investment Portfolio is 
Monitored By a 
Team ofAnalysts 
40. Prior to making their investment decision, prospective investors routinely asked 
how SIB safeguarded and monitored its assets. In fact, investors frequently inquired whether 
Allen Stanford could ''run offwith the [investor's] money." In response to this question, at least 
during 2009 and much of2007, the bank's senior investment officer -  as instructed by 
Pendergest-Holt -  told investors thatSIB had sufficient controls and safeguards in place to 
protect assets. 
41. 
Inparticular, the SIO was trained by Ms. Pendergest-Holt to tell investors that the 
bank's multi-billion portfolio was "monitored" by the analyst team in Memphis. In 
communicating with investors, the SIO followed Pendergest's instructions, misrepresenting that 
a 
team of20-plus analysts monitored the bank's investment portfolio. In so doing, the SIO never 
disclosed to investors that the analyst only monitor approximately 10% of SIB's money. In fact, 
Pendergest-Holt trained the SIO 
"not to divulge too much" about oversight ofthe Bank's 
portfolio because that information ''wouldn't leave an investor with a lot ofconfidence." 
Likewise, Davis instructed him to "steer" potential CD investors away from information about 
SIB's portfolio. As a result, both Davis and Pendergest-Holt knew, or were reckless in not 
knowing, ofthese fraudulent misstatements. 
42. Contrary to the representation that responsibility for 
SIB's multi-billion portfolio 
was "spread out" among 20-plus people, only Stanford and Davis know the whereabouts ofthe 
vast majority ofthe bank's multi-billion investment portfolio. Pendergest-Holt and her team of 
analysts claim that they have never been privy to Tier 1 or Tier 3 investments. In fact, the SIO 
13
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

was repeatedly denied access to the Bank's records relating to Tier 3, even though he was 
responsible, as the 
Bank's Senior Investment Officer, for "closing" deals with large investors, 
"overseeit?-g the 
Bank's investment portfolio" and "ensuring that the investment side is c,?mpliant 
with the various banking regulatory authorities." 
In fact, in preparing the Bank's period reports 
(quarterly newsletters, month reports, mid-year reports and annual reports, Pendergest and the 
Analyst send to Davis the performance results for Tier 2 investments. And Davis calculates the 
investment returns for the aggregated portfolio 
ofassets. 
3.	 SIB Misrepresented that its Investment Portfolio is Overseen by a Regulatory 
Authority in Antigua that Conducts a  Yearly Audit 
of the Fund's Financial 
Statements. 
43. SID told investors that their deposits were safe because the Antiguan regulator 
responsible for oversight 
ofthe Bank's investment portfolio, the Financial Services Regulatory 
Commission (the "FSRC"), audited its financial statements. But, contrary to the Bank's 
representations to investors, the FSRC does not verify the assets SID claims in its financial 
statements. Instead, 
SIB's accountant, c.A.S. Hewlett & Co., a small local accounting firm in 
Antigua is responsible forauditing the multi-billion dollar SID's investment portfolio. The 
Commission attempted several times to contact Hewlett 
by telephone. No one ever answered the 
phone. 
4.	 SIB Misrepresented that Its Investment Portfolio is Without "Direct or 
Indirect" Exposure 
to Fraud Perpetrated by Bernard Madoff. 
44. In a December 2008 Monthly Report, the bank told investors that their money was 
safe because SID "had no direct or indirect exposure to any 
of [Bernard] Madoffs investments." 
But, contrary to this statement, at least $400,000 in Tier 2 was invested in Meridian, a New 
York-based hedge fund that used Tremont Partners as its asset manager. Tremont invested 
approximately 6-8% 
ofthe SIB assets they indirectly managed with Madoffs investment firm. 
14
SEC v. Stanford International Bank, Ltd" et ai, 
COMPLAINT 

45. Pendergest, Davis and Stanford knew about this exposure to loss relating to the 
Meridian investment. On December 15, 2008, an Analyst informed Pendergast, Davis and 
Stanford 
in a weekly report that his "rough estimate is a loss of$400k ... based on the indirect 
. -' 
exposure" to Madofl'. 
5. Market ConcernsAboutSIB's LackofTransparency 
46. On or about December 12, 2008, Pershing, citing suspicions about the bank's 
investment returns and its inability to get from the Bank "a reasonable level oftransparency" into 
its investment portfolio informed SOC that it would no longer process wife transfers from SOC 
toSIBfor thepurchaseoftheCD. Sincethespring of2008,Pershingtriedunsuccessfullytoget 
an independent report regarding SIB's financialscondition. On November 28,2008, SOC's 
President, Danny Bogar, informed Pershing that "obtaining the independent report was not a 
priority." Between 2006 and December 12,2008, Pershing sent to SIB 1,635 wire transfers, 
totaling approximately $517 million, from approximately 1,199 customer accounts. 
D. From at least 2004, SCM misrepresented SAS performance results. 
47. From 2004 through 2009, SCM induced clients, including non-accredited, retail 
investors, to invest in excess of$1 billion in its SAS program by touting its track record of 
"historical perfonnance." SCM highlighted the purported SAS track record in thousands of 
client presentation books ("pitch books"). 
48. For example, the following chart from a 2006 pitch book presented clients with 
the false impression that SAS accounts, from 2000 through 2005, outperformed the S&P 500 by 
an average ofapproximately 13 percentage points: 
15
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

"," . 
:::~ ¥~ t ~, ... 
, 
-
2005 2004 2003 2002 2001 2000 
SASGmwIh 12.09% 16.15% 32.84% -3.33% 
4.32% 18.04% 
S&P500 4-.91% 
10.88% 2.s.~ 
-22.16% 
-11.88% -9.11% 
SCM used these impressive, but fictitious, performance results to grow the SAS program from 
less than $10 million 
in assets in 2004 to over $1 billion in 2008. 
49. sac also used the SAS track record to recruit financial advisers away from 
legitimate advisory firms who had significant books 
ofbusiness. After arriving at Stanford, the 
newly-hired financial advisors were encouraged and highly incentivized to put their clients' 
assets 
in the sm CD. 
50. The SAS performance results used in the pitch books from 2005 through 2009 
were fictional and/or 
inflat~d. Specifically, SCM misrepresented that SAS performance results, 
for 1999 through 2004, reflected "historical performance" when, in fact, those results were 
fictional, 
or "back-tested", numbers that do not reflect results ofactual trading. Instead, SCM, 
with the benefit 
ofhindsight, picked mutual funds that performed extremely well during years 
1999 through 2004, and presented the back-tested performance 
ofthose top-performing funds to 
potential clients 
as ifthey were actual returns earned by the SAS program. 
51. Similarly, SCM used "actual" model SAS performance results for years 2005 
through 2006 that were inflated 
by as much as 4%. 
52. SCM told investors that SAS has positive returns for periods in which actual SAS 
clients 
lost substantial amounts. For example, in 2000, actual SAS client returns ranged from 
negative 7.5% to positive 
1.1 %. In 2001, actual SAS client returns ranged from negative 10.7% 
16
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

to negative 2.1 %.. And, in 2002, actual SAS client returns ranged from negative 26.6% to 
negative 8.7%. These return figures are all gross 
of SCM advisory fees ranging from 1.5% to 
2.75%. Thus, Stanford's claims 
ofsubstantial market out perfo~ance were blatantly false. 
(e.g., a claimed return 
of 18.04% in 2000, when actual SAS investors lost as much as 7.5%). 
53. SOC/SCM's management knew that the advertised SAS performance results were 
misleading and inflated. From the beginning, SCM management knew that the pre-2005 track 
record was purely hypothetical, bearing no relationship to actual trading. And, as early as 
November 2006, SCM investment advisers began to question 
why their actual clients were not 
receiving the returns advertised in pitch books. 
54. 
In response to these questions, SOC/SCM hired an outside performance reporting 
expert, to review certain 
ofits SAS performance results. In late 2006 and early 2007, the expert 
informed SCM that its performance results for the twelve months ended September 30, 2006 
were inflated by as much as 3.4 percentage points. Moreover, the expert informed SCM 
managers that the inflated performance results included unexplained ''bad math" that consistently 
inflated the SAS performance results over actual client performance. Finally, 
in March 2008, the 
expert informed SCM managers that the SAS performance results for 2005 were also inflated 
by 
as much as 3.25 percentage points. 
55. Despite their knowledge 
ofthe inflated SAS returns, SOC/SCM management 
continued using the pre-2005 track record and never asked Riordan to audit the pre-2005 
performance. In fact, in 2008 pitch books, SCM presented the back-tested pre-2005 performance 
data under the heading "Historical Performance" and "Manager Performance" along side the 
audited 2005 through 2008 figures. According to SCM's outside consultant, it was "[grossly 
misleading]" to present audited performance figures along side back-tested figures. 
17
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

i 
YTD 
1,s1' 
3~ 
l5JIID 
1liU1i 
5Inl:e
-. 
SASGmwth 
-7.44% 0.10% 
9..36% 15.31% 
lUI3% 
12.30% 
S&P500 
-9.44% 
.s.un. 5.B5'Xo 
11.32% 
3.70% 2.45% 
56. Finally, SGC/SCM compounded the deceptive nature ofthe SAS track record by 
blending the back-tested perfonnance with audited composite perfonnance to create annualized 5 
and 7 year perfonnance figures that bore no relation to a'?tual SAS client perfonnance. A sample 
ofthis misleading disclosure used in 2008 and 2009 follows: 
OaJendarYI!iII" Return
 
As of MBrd12DOB
 
YlD 
2007 2.ODIl 2IlIJ5 2!J04 
2003 
2IlII2 2001 20IID 19l19 
SASGmwth 
-TAeI. 
~ 1l.lM. a.:BZ'Jo 
16.1510 
32lIeIo -3.3W. om. 
1ll.Dt§ 
22.5!i% 
S&P500 
-!tMl' 
5.4!J5 
15.1!Is. 
491% 
1lIJ!llS, 
~ 
-22.10'5 1t.l111% -!L11'r. 21.114% 
rnot 
less ItJ3n 1 rl5ll"1 
57. Other than the fees paid by SIB to SGC for the sale ofthe CD, SAS was the 
second most significant source 
ofrevenue for the finn. In 2007 and 2008, approximately $25 
million in fees from the marketing 
ofthe SAS program. 
CAUSES 
OF ACTION 
FIRST CLAIM
 
AS TO ALL DEFENDANTS
 
Violations 
of Section 10Cb) of the Exchange Act and Rule 10-5
 
58. Plaintiff Commission repeats and realleges paragraphs 1 through 57 ofthis 
Complaint and incorporated herein 
by reference as if set forth verbatim, 
59. Defendants, directly or indirectly, singly or in concert with others, in connection 
with thepurchase and sale 
ofsecurities,byuse ofthe means and instrumentalities ofinterstate 
18
SEC v. Stanford International Bank, Ltd., et ai, 
COMPLAINT 

commerce and by use ofthe mails have: (a) employed devices, schemes and artifices to defraud; 
(b) made untrue statements 
ofmaterial facts and omitted to state material facts necessary in order 
to make the statements made, in light 
ofthe circ~stances under which they were made, not 
misleading; and (c) engaged 
in acts, practices and courses ofbusiness which operate as a fraud 
and deceit upon purchasers, prospective purchasers and other persons. 
60. As a part 
of and in furtherance oftheir scheme, defendants, directly and 
indirectly, prepared, disseminated or used contracts, written offering documents, promotional 
materials, investor and other correspondence, and oral presentations, which contained untrue 
statements 
ofmaterial facts and misrepresentations ofmaterial facts, and which omitted to state 
material facts necessary in order to make the statements made, in light 
ofthe circumstances 
under which they were made, not misleading. 
61. Defendants made the referenced misrepresentations and omissions knowingly 
or 
grossly recklessly disregarding the truth. 
62. For these reasons, Defendants have violated and, unless enjoined, will continue to 
violate Section 10(b) 
ofthe Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5 
[17 C.F.R. 
§ 240.10b-5]. 
SECOND 
CLAIM
 
AS TO STANFORD, DAVIS, AND PENDERGEST-HOLT
 
Aiding and Abetting Violations of Exchange Act Section lO(b) and Rule lOb-5
 
63. Plaintiff Commission repeats andrealleges paragraphs 1 through 57 ofthis 
Complaint and incorporated herein by reference as ifset forth verbatim. 
64. 
If Stanford, Davis, and Pendergest-Holt did not violate Exchange Act Section 
lO(b) and Rule lOb-5, in the alternative, Stanford, Davis, and Pendergest-Holt, in the manner set 
forth above, knowingly 
or with severe recklessness provided substantial assistance in connection 
SEC v. Stanford International Bank, Ltd., et al. 19 
COMPLAINT 

with the violations ofExchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 
C.F.R. 
§ 240.lOb-5] alleged herein. 
65. For these reasons, Stanfor~, Davis, and Pendergest-Holt aided and abetted and, 
unless enjoined,will continuetoaidandabetviolations ofSection10(b) oftheExchangeAct 
[15 U.S.C. 
§ 78j(b)] and Rule lOb-5 [17 C.F.R. § 240.10b-5]. 
THIRD CLAIM
 
AS TO ALL DEFENDANTS
 
Violations ofSection 17(a) ofthe Securities Act
 
66. PlaintiffCommissionrepeatsandreallegesparagraphs1 through57 
ofthis 
Complaint and incorporated herein 
by reference as ifset forth verbatim. 
67. Defendants, directly 
or indirectly, singly or in concert with others, in the offer and 
sale 
of securities, by use ofthe means and instruments oftransportation and communication in 
interstate commerce and 
by use ofthe mails, have: (a) employed devices, schemes or artifices to 
defraud; 
(b)obtainedmoney orpropertybymeansofuntruestatements ofmaterialfact or 
omissions to state material facts necessary in order to make the statements made, in light ofthe 
circumstances under which they were made, not misleading; and (c) engaged in transactions, 
practices 
or courses ofbusiness which operate or would operate as a fraud or deceit. 
68. Aspart 
ofandinfurtherance ofthisscheme,defendants,directlyandindirectly, 
prepared, disseminated or used contracts, written offering documents, promotional materials, 
investor and other correspondence, and oral presentations, which contained untrue statements 
of 
material fact and which omitted to state material facts necessary in order to make the statements 
made, in light ofthe circumstances under which they were made, not misleading. 
69. Defendants made the referenced misrepresentations and omissions knowingly or 
grossly recklessly disregarding the truth. 
SEC v. Stanford International Bank, Ltd., et al. 
20 
COMPLAINT 

70. For these reasons, Defendants have violated, and unless enjoined, will continue to 
violate Section 17(a) 
ofthe Securities Act [15 U.S.C. § 77q(a)]. 
FOURTH CLAIM
 
AS TO STANFORD, SGC, AND STANFORD CAPITAL
 
Violations of Sections 206(1) and 206(2) of the Advisers Act
 
71. PlaintiffCommissionrepeatsandreallegesparagraphs1 through57 ofthis 
Complaint and incorporated herein 
by reference as ifset forth verbatim. 
72. Stanford, 
~OC,and Stanford Capital, directly or indirectly, singly or inconc~rt, 
knowingly or recklessly, through the use ofthe mails or any means or instrumentality of 
interstate commerce, while acting as investment advisers within the meaning of Section 202(11) 
ofthe Advisers Act [15 U.S.C. § 80b-2(11)]: (a) have employed, are employing, or are about to 
employ devices, schemes, and artifices to defraud any client 
or prospective client; or (b) have 
engaged, are engaging, 
or are about to engage in acts, practices, or courses ofbusiness which 
operates as a fraud 
or deceit upon any client or prospective client. 
73. For these reasons, Stanford, SOC, and Stanford Capital have violated, and unless 
enjoined, will continue to violate Sections 206(1) and 206(2) 
ofthe Advisers Act [15 U.S.C. §§ 
80b-6(1) and 80b-6(2)]. 
FIFfHCLAIM
 
AS TO STANFORD, DAVIS, AND PENDERGEST-HOLT
 
Aiding and Abetting Violations of Sections 206(1) and 206(2) of the Advisers Act
 
74. Plaintiff Commission repeats and realleges paragraphs 1 through 57 ofthis 
Complaint and incorporated herein by reference as if set forth verbatim. 
75. Based on the conduct alleged herein, Stanford, Davis, and Pendergest-Holt, in the 
manner set forth above, knowingly or with severe recklessness provided substantial assistance in 
21
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

I 
I
i
i 
connection with the viQlations ofAdvisers Act Sections 206(1) and 206(2) [15 U.S.C. §§ 80b­
6(1) and 80b-6(2)] alleged herein. 
76. For 
thes~ reasons,Stanford, Davis, and Pendergest-Holt aided and abetted ~d, 
unless enjoined~ will continue to aid and abet violations ofSections206(1) and 206(2) ofthe 
Advisers Act [15 U.S.C. 
§§ 80b-6(1) and 80b-6(2)]. 
SIXTH CLAIM
 
AS TO sm AND SGC
 
Violations of Section 7(d) ofthe Investment Company Act
 
77. PlaintiffCommissionrepeatsandreallegesparagraphs1 through57 ofthis 
Complaint and incorporated herein 
by reference as ifset forth verbatim. 
78. SIB, an investment company not organized or otherwise created under the laws of 
the United States or ofa State, directly or indirectly, singly or in concert with others, made use of 
the mails or any means or instrumentality ofinterstate commerce, directly or indirectly, to offer 
for sale, sell, 
or deliver after sale, in connection with a public offering, securities ofwhich SIB 
was the issuer, without obtaining an order from the Commission permitting it to register as an 
investment company organized or otherwise created under the laws 
ofa foreign country and to 
make a public offering ofits securities byuseofthe mails andmeans orinstrumentalitiesof 
interstate commerce. 
79. SOC, directly or indirectly, singly or in concert with others, acted as an 
underwriter for SIB, an investment company not organized or otherwise created under the laws 
ofthe United States or of a State that made use ofthe mails or any means or instrumentality of 
interstate commerce, directly or indirectly, to offer for sale, sell, or deliver after sale, in 
connection with a public offering, securities of which SIB was the issuer, without obtaining an 
order from the Commission permitting it to register as an investment company organized or 
SEC v. Stanford International Bank, Ltd., et al. 
22 
COMPLAINT 

otherwise created underthe laws ofa foreign countryand to make a public offering ofits 
securitiesbyuseofthe mails andmeans orinstrumentalities ofinterstate commerce. 
80. 
~or these reasons, sm and SGC have violated, and unless enjoined~ will continue 
to violate Section 7(d) ofthe Investment Company Act [15 U.S.C. § 80a-7(d)]. 
RELIEF REQUESTED
 
Plaintiff Commission respectfully requests that this Court:
 
I. 
Temporarily, preliminarily, and permanently enjoin: (a) Defendants-from violating, or 
aiding and abetting violations of, Section 1O(b) and Rule 10b-5 ofthe Exchange Act; (b) 
Defendants from violating Section 17(a) 
ofthe Securities Act; (c) Stanford, Davis, Pendergest-
Holt, SGC, and Stanford Capital from violating, or aiding and abetting violations of, Sections 
206(1) and 206(2) 
ofthe Advisers Act; and (d) SIB and SCG from violating Section 7(d) ofthe 
Investment Company Act. 
II. 
Enter an Order immediately freezing the assets ofDefendants and directing that all 
financial or depository institutions comply with the Court's Order. Furthennore, order that 
Defendants inunediately repatriate any funds held at any bank or other financial institution not 
subjectto thejurisdiction 
oftheCourt, andthattheydirectthedeposit ofsuchfunds inidentified 
accounts in the United States, pending conclusion ofthis matter. 
III. 
Order that Defendants shall file with the Court and serve upon Plaintiff Commission and 
theCourt,within 10days 
oftheissuance ofthisorder orthreedayspriortoa hearingonthe 
Commission's motion for a preliminary injunction, whichever comes first, an accounting, under 
23
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

oath, detailing all oftheir assets and all funds or other assets received from investors and from 
one another. 
IV. 
Order that Defendants be restrained and enjoined from destroying, removing, mutilating, 
altering, concealing, ordisposingof, 
in anymanner, any oftheirbooksandrecords ordocuments 
relating to the matters set forth 
in the Complaint, or the books and records and such documents of 
any entities under their control, until further order ofthe Court. 
v. 
Order the appointment ofa temporary receiver for Defendants, for the benefit of 
investors, to marshal, conserve, protect, and hold funds and assets obtained by the defendants 
and their agents, co-conspirators, and others involved 
in this scheme, wherever such assets may 
be found, or, with the approval ofthe Court, dispose of any wasting asset in accordance with the 
application and proposed order provided herewith. 
VI. 
Order that the parties may commence discovery immediately, and that notice periods be 
shortened to permit the parties to require production ofdocuments, and the taking ofdepositions 
on 72 hours' notice. 
VII. 
Order Defendants to disgorge an amount equal to the funds and benefits they obtained 
illegally as a result 
ofthe violations alleged herein, plus prejudgment interest on that amount. 
VIII. 
Order civil penalties against Defendants pursuant to Section 20(d) ofthe Securities Act 
[15 U.S.C. 
§ 77t(d)], Section 21(d) ofthe Exchange Act [15 U.S.C. § 78u(d)], Section 41(e) of 
24
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

,. ~l 
the Investment Company Act [15 U.S.C. § 80a-41(e)], and Section 209(e) ofthe Advisers Act 
[15 U.S.C. § 80b-9(e)] for their securities law violations. 
IX. 
Order that Stanford, Davis, and Pendergest-Holt immediately surrender their passports to 
the Clerk 
ofthis Court, to hold until further order ofthis Court. 
x. 
Order such further relief as this Court may deem just and proper. 
For the Commission, by its attorneys: 
February 16, 2009 
Respectfully submitted, 
STEPHEN 
J.KOROTASH 
Oklahoma BarNo. 5102 
1. KEVIN EDMUNDSON 
Texas Bar No. 24044020 
DAVID 
B. REECE 
Texas 
BarNo. 24002810 
MICHAEL D. KING 
Texas Bar No. 24032634 
D. THOMAS KELTNER 
Texas Bar No. 24007474 
U.S. Securities and Exchange Commission 
Burnett 
Plaza, Suite 1900 
801 Cherry Street, Unit #18 
Fort Worth, 
TX 76102-6882 
(817) 978-6476 (dbr) 
(817) 978-4927 (fax) 
25
SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 

IN THE UNITED STATES DISTRICT COURT
 
FOR THE NORTHERN DISTRICT OF TEXAS
 

DALLAS DIVISION
 

SECURITIES AND EXCHANGE COMl\JlSSION, §
 
§
 

Plaintiff, §
 
§
 

v. § COMPLAINT 
§ 

STANFORD INTERNATIONAL nANK, LTD., § 
STANFORD GROUP COMPANY, § 
STANFORD CAPITAL MANAGEMENT, LLC, § 
R. ALLEN STANFORD, JAMES M. DAVIS, and § 
LAURA PENDERGEST-HOLT § 

§ 
Defendants. § 

Plaintiff Securities and Exchange Commission alleges:
 

SUMMARY
 

1. The Coriunission seeks emergency relief to halt a massive, ongoing fraud 

orchestrated by R. Allen Stanford and James M. Davis and executed through companies they 

control, including Stanford International Bank, Ltd. ("Sill") and its affiliated Houston-based 

investm~nt advisers, Stanford Group Company ("SOC") and Stanford Capital Management 

("SCM"). Laura Pendergest-Holt, the chief investment officer ofa Stanford affiliate, was 

indispensable to this scheme by helping to preserve the appearance of safety fabricated by 

Stanford and by training others to mislead investors. For example, she trained training SIB's 

. senior investment officer to provide false information to investors. 

2. Through this fraudulent scheme, SIB, acting through a network of SOC financial 

advisors, has sold approximately $8 billion of self-styled "certificates of deposits" by promising 

high return rates that exceed those available through true certificates of deposits offered by 

traditional banks. 



3. sm claims that its unique investment strategy has allowed it to achieve double-

digit returns on its investments over the past 15 years, allowing it offer high yields to CD 

purchasers. Indeed, sm claims that ~ts "diversified portfolio of investments" lost only 1.3% in 

2008, a time during which the S&P 500 lost 39% and the Dow Jones STOXX Europe 500 Fund 

lost 41 %. 

4. Perhaps even more strange, sm reports identical returns in 1995 and 1996 of 

exactly 15.71%. As Pendergest-Holt - sm investment committee member and the chief 

investment officer of Stanford Group Financial (a Stanford affiliate) - admits, it is simply 

"improbable" that sm could have managed a "global diversified" portfolio ofinvestments in a 

way that returned identical results in consecutive years. A perfonnance reporting consultant 

hired by SGC, when asked about these "improbable" returns, responded simply that it is 

"impossible" to achieve identical results on a diversified investment portfolio in consecutive 

years. Yet, sm continues to promote its CDs using these improbable returns. 

5. These improbable results are made even more suspicious by the fact that, contrary 

to assurances provided to investors~ at most only two people - Stanford and Davis - know the 

details concerning the bulk ofSm's investment portfolio. And sm goes to great lengths to 

prevent any true independent examination of those portfolios. For example, its long-standing 

auditor is reportedly retained based on a "relationship of trust" between the head of the auditing 

finn and Stanford. 

6. Importantly, contrary to recent public statements by SIB, Stanford and Davis (and 

through them SGC) have wholly-failed to cooperate with the Commission's efforts to account 

for the $8 billion of investor funds purportedly held by SIB. In short, approximately 90% of 

2SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



SIB's claimed investment portfolio resides in a ''black box" shielded from any independent 

oversight. 

7. In fact, far fro~ "cooperating" with the Commission's enforcement investigation 

(which Stanford has reportedly tried to characterize as only involving routine examinations), 

SOC appears to have used press reports speculating about the Commission's investigation as 

way to further mislead investors, falsely telling at least one customer during the week of 

February 9, 2009, that his multi-million dollar sm CD could not be redeemed because ''the SEC 

had frozen the account for two months." At least one other customer who recently inquired 

about redeeming a multi-million dollar CD claims that he was informed that, contrary to 

representations made at the time ofpurchase that the CD could be redeemed early upon payment 

/ 

of a penalty, R. Allen Stanford had ordered a two-month moratorium on CD redemptions. 

8. This secrecy and recent misrepresentations are made even more suspicious by 

extensive and fundamental misrepresentations sm and its advisors have made to CD purchasers 

in order to lull them into thinking their investment is safe. sm and its advisers have 

misrepresented to CD purchasers that their deposits are safe because the bank: (i) re-invests client 

funds primarily in "liquid" financial instruments (the ''portfolio''); (ii) monitors the portfolio through 

a team of20-plus analysts; and (iii) is subject to yearly audits by Antiguan regulators. Recently, as 

the market absorbed the news ofBernard Madoff's massive Ponzi scheme, sm has attempted to 

calm its own investors by claiming the bank has no "direct or indirect" exposure to Madoff's 

scheme. 

9. These assurances are false. Contrary to these representations, sm's investment 

portfolio was not invested in liquid financial instruments or allocated in the manner described in its 

promotional material and public reports. Instead, a substantial portion of the bank's portfolio was 

3SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



placed in illiquid investments, such as real estate and private equity. Further, the vast majority 

SIB's multi-billion dollar investment portfolio was not monitored by a team ofanalysts, but rather 

by two people - AlleI! Stanford and James Davis. And contrary to SIB's representations, the . 
.. . 

Antiguan regulator responsible for oversight ofthe bank's portfolio, the Financial Services 

I 
.1 
I 
I 
; 
! 

Regulatory Commission, does not audit SIB's portfolio or verify the assets SIB claims ill its 

financial statements. Perhaps most alarming is that SIB has exposure to losses from the Madoff 

fraud scheme despite the bank's public assurances to the contrary. 

10. SGC has failed to disclose material facts to its advisory clients. Alarmingly, recent 

weeks have seen an increasing amount of liquidation activity by SIB and attempts to wire money 

out of its investment portfolio. The Commission has received information indicating that in just 

the last two weeks, SIB has sought to remove over $178 million from its accounts. And, a major 

clearing firm - after unsuccessfully attempting to find information about SIB's financial 

condition and because it could not obtain adequate transparency into SIB's financials- has 

recently informed SGC that it would no longer process wires from SGC accounts at the clearing 

firm to sm for the purchase ofsm issued CDs, even if they were accompanied by customer 

letters of authorization. 

11. Stanford's fraudulent conduct is not limited to the sale ofCDs. Since 2005, SGC 

advisers have sold more than $1 billion ofa proprietary mutual fund wrap program, called Stanford 

Allocation Strategy{"SAS"), by using materially false and misleading historical performance data. 

The false data has helped SGC grow the SAS program from less than $10 million in around 2004 to 
I 

over $1.2 billion, generating fees for SGC (and ultimately Stanford) in excess of $25 million. And 

the fraudulent SAS performance was used to recruit registered financial advisers with significant 

SEC v. Stanford International Bank, Ltd., et al. 4 
COMPLAINT 



books ofbusiness, who were then heavily incentivized to re-allocate their clients' assets to sm's 

CD program. 

12. Moreover, sm and Stanford Group Company have violated Section 7(~) ofthe 

Investment Company Act of 1940 by failing to register with the Commission in order to sell sm's 

CDs. Had they complied with this registration requirement, the Commission would have been able 

to examine each of those entities concerning sm's CD investment portfolio. 

13. By engaging in the conduct described in this Complaint, defendants Stanford, 

Davis, Pendergest-Holt, sm, SGC, and Stanford Capital, directly or indirectiy, singly or in 

concert, have engaged, and unless enjoined and restrained, will again engage in transactions acts, 

practices, and courses ofbusiness that constitute violations of Section 17(a) of the Securities Act 

of 1933 ("Securities Act") [15 U.S.c. §§ 77e(a), 77e(c) and 77q(a)], and Section 10(b) of the 

Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)], and Exchange Act Rule 

10b-5 [17 C.F.R. § 240.10b-5] or, in the alternative, have aided and abetted such violations. In 

addition, through their conduct .<:lescribed herein, Stanford, SGC, and Stanford Capital have 

violated Section 206(1) and (2) of the Investment Advisers Act of 1940 ("Adviser's Act") [15 

U.S.C. §§ 80b-6(1) and 80b-6(2)] and Davis and Pendergest-Holt have aided and abetted such 

violations. Finally, through their actions, SIB and SGC have violated Section 7(d) of the 

Investment Company Act of 1940 ("ICA") [15 U.S.C. § 80a-7(d)]. 

14. The Commission, in the interest of protecting the public from any further 

unscrupulous and illegal activity,brings this action against the defendants, seeking temporary, 

preliminary and permanent injunctive relief, disgorgement of all illicit profits and benefits 

defendants have received plus accrued prejudgment interest and a civil monetary penalty. The 

Commission also seeks an asset freeze, an accounting and other incidental relief, as well as the 

5SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



", 

appointment ofa receiver to take possession and control ofdefendants' assets for the protection 

ofdefendants' victims. 

JURISDICTION AND VENUE 

15. The investments offered and sold by the defendants are "securities" under Section 

2(1) of the Securities Act [15 U.S.C. § 77b], Section 3(a)(10) ofthe Exchange Act [15 U.S.C. § 

78c], Section 2(36) of the Investment Company Act [15 U.S.C. § 80a-2(36)], and Section 

202(18) of the Advisers Act [15 U.S.C. § 80b-2(18)]. 

16. Plaintiff Commission brings this action under the authority conferred upon it by 

Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)], Section 21(d) of the Exchange Act [15 

U.S.C. § 78u(d)], Section 41(d) of the Investment Company Act [15 U.S.C. § 80a-41(d)], and 

Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)] to temporarily, preliminarily, and 

permanently enjoin Defendants from future violations of the federal securities laws. 

17. This Court has jurisdiction over this action, and venue is proper, under Section 

22(a) of the Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 

78aa], Section 43 of the Investment Company Act [15 U.S.C. § 80a-43], and Section 214 of the 

Advisers Act [15 U.S.C. § 80b-14]. 

18. Defendants have, directly or indirectly, made use of the means or instruments of 

transportation and communication, and the means or instrumentalities of interstate commerce, or 

of the mails, in connection with the transactions, acts, practices, and courses ofbusiness alleged 

herein. Certain of the transactions, acts, practices, and courses ofbusiness occurred in the 

Northern District ofTexas. 

6SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



DEFENDANTS 

19. Stanford International Bank, Ltd. purports to be private international bank 

domiciled in St. Jo1m's, Antigua, West Indies. SIB claims to serve ~O,OOO clients in 131 

countries and holds $7.2 billion in assets under management. SIB's Annual Report for 2007 

states that SIB has 50,000 clients. SIB's multi-billion portfolio of investments is purportedly 

moriitored by the SFG's chief financial officer in Memphis, Tennessee. Unlike a commercial 

bank, sm does riot loan money. SIB sells the CD to U.S. investors through SGC, its affiliated 

investment adviser. 

20. Stanford Group Company, a Houston-based corporation, is registered with the 

Co:nnnission as a broker-dealer and investment adviser. It has 29 offices located throughout the 

U.S. SGC's principal business consists ofsales of SIB-issued securities, marketed as 

certificates ofdeposit. SGC is a wholly owned subsidiary of Stanford Group Holdings, Inc., 

which in tum is owned by R. Allen Stanford ("Stanford"). 

21. Stanford Capital Management, a registered investment adviser, took over the 

management of the SAS program (fonnerly Mutual Fund Partners) from SGC in early 2007. 

Stanford Group Company markets the SAS program through SCM. 

22. R. Allen Stanford, a U.S. citizen, is the Chainnan of the Board and sole 

shareholder of SIB and the sole director ofSGC's parent company. Stanford refused to appear 

and give testimony in the investigation. 

23. James M. Davis, a U.S. citizen and resident ofBaldwin, Mississippi and who 

offices in Memphis, Tennessee and Tupelo, Mississippi, is a director and chief financial officer 

of SFG and SIB. Davis refused to appear and give testimony in this investigation. 

7SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



24. Laura Pendergest-Holt, is the Chief Investment Officer of SIB and its affiliate 

Stanford Financial Group. She supervises a group ofanalysts in Memphis, Tupelo, and St. Croix 

who "oversee" perfonnance of SIB's Tier II assets. 

STATEMENT OF FACTS AND ALLEGATIONS 
RELEVANT TO ALL CAUSES OF ACTION 

A. The Stanford International Bank 

25. Allen Stanford has created a complex web of affiliated companies that exist and 

operate under the brand Stanford Financial Group ("SFG"). SFG is described as a privately-held. , 

group of companies that has in excess of $50 billion "under advisement." 

26. SIB, one ofSFG's affiliates, is a private, offshore bank that purports to have an 

independent Board of Directors, an Investment Committee, a Chief Investment Officer and a 

team of research analysts. While SIB may be domiciled in Antigua, a small group of SFG 

employees who maintain offices in Memphis, Tennessee, and Tupelo, Mississippi, purportedly 

monitor the assets. 

27. As ofNovember 28,2008, SIB reported $8.5 billion in total assets. SIB's primary 

product is the CD. SIB aggregates customer deposits, and then re-invests those funds in a 

"globally diversified portfolio" of assets. SIB claims its investment portfolio is approximately 

$8.4 billion. SIB sold more than $1 billion in CDs per year between 2005 and 2007, including 

sales to u.S. investors. The bank's deposits increased from $3.8 billion in 2005, to $5 billion in 

2006, and $6.7 billion in 2007. SIB had approximately $3.8 billion in CD sales to 35,000 

customers in 2005. By the end of 2007, SIB sold $6.7 billion of CDs to 50,000 customers. 

8SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



8.0% 

6.0% 

4.0% 

2.0% 

28. For almost fifteen years, SIB represented that it has experienced consistently high 

returns on its investment ofdeposits (ranging from 11.5% in 2005 to 16.5% in 1993): 

STAhRlRD INrB<NATIONAL BAN< 
Return Va. Interest PaId To Deposltora 

18.0% 

16.0% 

14.0% 

.A 18.5% 

~% "-.L"... 
15.7% 

>N .1A.1% ~ 

12.0% "'" 11.7% ....... .~70 

11 <... 
...... 

U,O% 

10.0% 

--...Ol. ~.
.%-- .~,. 

- ,~ 

~ ~ "n. - ~.7'll. 
7% 

. 

-

0.0% 
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2008 

29. In fact, since 1994, SIB has never failed to hit targeted investment returns in 

excess of 10%. And, SIB claims that its "diversified portfolio ofinvestments" lost only $110 

million or 1.3% in 2008. During the same time period, the S&P 500 lost 39% and the Dow 

Jones STOXX Europe 500 Fund lost 41 %. 

30. As performance reporting consultant hired by SOC testified in the Commission's 

investigation, SIB's historical returns are improbable, ifnot impossible. In 1995 and 1996, SIB 

reported identical returns of 15.71 %, a remarkable .achievement considering the bank's 

"diversified investment portfolio." According to defendant Pendergest-Holt -- the chief 

investment officer of SIB-affiliate SFO - it is "improbable" that SIB could have managed a 

"global diversified" portfolio of investments so that it returned identical results in consecutive 

years. SOC's performance reporting consultant was more emphatic, saying that it is 

"impossible" to achieve identical results on a diversified investment portfolio in consecutive 

years. SIB continues to promote its CDs using these improbable, ifnot impossible, returns. 

9SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



31. . sm's consistently high returns of investment have enabled the bank to pay a 

consistently and significantly higher rate on its CD than conventional banks. For example, sm 

offered 7.45% as of June 1,2005, and 7.878% as ofMarch 20,2006, for a fixed rate CD based 

on an investment of $100,000. On November 28,2008, Smquoted 5.375% on a 3 year CD, 

while comparable u.s. Banks' CDs paid under 3.2%. And recently, sm quoted rates ofover 

10% on five year CDs. 

32. sm's extraordinary returns have enabled the bank to pay disproportionately large 

commissions to SOC for the sale of sm CDs. In 2007, sm paid to SOC and affiliates $291.7 

million in management fees and commissions from CD sales, up from $211 million in 2006 and 

$161 million in 2005. 

33. sm markets CDs to investors in the United States exclusively through SOC 

advisers pursuant to a claimed Regulation D offering, filing a Form D with the SEC. Regulation 

D permits under certain circumstances the sale ofunregistered securities (the CDs) to accredited 

investors in the United States. , SOC receives 3% based on the aggregate sales of CDs by SOC 

advisers. Financial advisers also receive a 1% commission upon the sale of the CDs, and are 

eligible to receive as much as a 1% trailing commission throughout the term of the CD. 

34. SOC promoted this generous commission structure in its effort to recruit 

established financial advisers to the firm. The commission structure also provided a powerful 

incentive for SOC financial advisers to aggressively sell CDs to United States investors, and 

aggressively expanded its number of financial advisers in the United States. 

35. sm purportedly manages the investment portfolio from Memphis and Tupelo. 

SIB's investment portfolio, at least internally, is segregated into 3 tiers: (a) cash and cash 

equivalents ("Tier 1"), (b) investments with "outside portfolio managers (25+)" that are 

10SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



!
 
monitored by the Analysts (''Tier 2"), and (c) unknown assets under the apparent control of 

Stanford and Davis (''Tier 3"). As ofDecember 2008, Tier 1 represented approximately 9% 

($800 million) of the Bank's portfolio. Tier 2, prior to the Bank's decision to liquidate $250.	 , 

million ofinvestments in late 2008, represented 10% ofthe portfolio. And Tier 3 represented 

81 % ofthe Bank's investment portfolio. This division into tiers is not generally disclosed to 

actual or potential investors. 

B.	 sm's Fraudulent Sale of CDs 

1.	 SIB Misrepresented that Its Investment Portfolio is Invested Primarily in 
"Liquid" Financial Instruments. 

36. In selling the CD, sm touted the liquidity ofits investinent portfolio. For 

example, in its CD brochure, sm emphasizes the importance of the liquidity, stating, under the 

heading "Depositor Security," that the bank focuses on "maintaining the highest degree of 

liquidity as a protective factor for our depositors" and that the bank's assets are "invested in a 

well-diversified portfolio ofhighly marketable securities issued by stable governments, strong 

multinational companies and major international banks." Likewise, the bank trained SGC 

advisers that "liquidity/marketability of SIB's invested assets" was the "most important factor to 

provide security to sm clients." Davis and Pendergest-Holt were aware, or were reckless in not 

knowing, of these representations. 

37. In its 2007 annual report, which was signed and approved by Stanford and Davis, 

SIB represented that its portfolio was allocated in the following manner: 58.6% "equity," 18.6% 

fixed income, 7.2% precious metals and 15.6% alternative investments. These allocations were 

depicted in a pie chart, which was approved by Davis. The bank's annual reports for 2005 and 

2006 make similar representations about the allocation of the bank's portfolio. Davis and 

Stanford knew or were reckless in not knowing of these representations. 

SEC v. Stanford International Bank, Ltd., et al.	 11 
COMPLAINT 



...
 

38. SIB's investment portfolio is not, however, invested in a "w~ll-diversified 

portfolio ofhighly marketable securities issued by stable governments, strong multinational 

companies and major international banks." Instead, Tier 3 (i.e., approximately 90%) consisted 

primarily of illiquid investments - namely private equity and real estate. Indeed, it SIB's 

portfolio included at least 23% private equity. The bank never disclosed in its financial 

statements its exposure to private equity and real estate investments.. Stanford, Davis and 

Pendergest-Holt were aware, or were reckless in not knowing, that SIB's investments were not 

allocated as advertised by SIB's investment objectives or as detailed in SIB's financial 

statements. 

39. Further, on December 15, 2008, Pendergest-Holt met with her team of analysts 

following SIB's decision to liquidate more than 30% of its Tier 2 investments (approximately 

$250 million). During the meeting, at least one analyst expressed concern about the amount of 

liquidations in Tier 2, asking why it was necessary to liquidate Tier 2, rather than Tier 3 assets, 

to increase SIB's liquidity. Pendergest-Holt told the analyst that Tier 3 was pnmarily invested 

in private equity and real estate and Tier 2 was more liquid than Tier 3. Pendergest-Holt also 

stated that Tier 3 "always had real estate investments in it." Pendergest's statements contradicts 

12SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



what she had previously stated to SIB's senior investment adviser, knowing, or reckless in not 

knowing, that the senior investment advisor would provide this misrepresentation to investors. 

2.	 .SIB Misrepresented that Its Multi-Billion Dollar Investment Portfolio is 
Monitored By a Team ofAnalysts 

40. Prior to making their investment decision, prospective investors routinely asked 

how SIB safeguarded and monitored its assets. In fact, investors frequently inquired whether 

Allen Stanford could ''run offwith the [investor's] money." In response to this question, at least 

during 2009 and much of2007, the bank's senior investment officer - as instructed by 

Pendergest-Holt - told investors thatSIB had sufficient controls and safeguards in place to 

protect assets. 

41. In particular, the SIO was trained by Ms. Pendergest-Holt to tell investors that the 

bank's multi-billion portfolio was "monitored" by the analyst team in Memphis. In 

communicating with investors, the SIO followed Pendergest's instructions, misrepresenting that 

a team of20-plus analysts monitored the bank's investment portfolio. In so doing, the SIO never 

disclosed to investors that the analyst only monitor approximately 10% of SIB's money. In fact, 

Pendergest-Holt trained the SIO "not to divulge too much" about oversight of the Bank's 

portfolio because that information ''wouldn't leave an investor with a lot of confidence." 

Likewise, Davis instructed him to "steer" potential CD investors away from information about 

SIB's portfolio. As a result, both Davis and Pendergest-Holt knew, or were reckless in not 

knowing, of these fraudulent misstatements. 

42. Contrary to the representation that responsibility for SIB's multi-billion portfolio 

was "spread out" among 20-plus people, only Stanford and Davis know the whereabouts of the 

vast majority of the bank's multi-billion investment portfolio. Pendergest-Holt and her team of 

analysts claim that they have never been privy to Tier 1 or Tier 3 investments. In fact, the SIO 

13SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



was repeatedly denied access to the Bank's records relating to Tier 3, even though he was 

responsible, as the Bank's Senior Investment Officer, for "closing" deals with large investors, 

"overseeit?-g the Bank's investment portfolio" and "ensuring that the investment side is c,?mpliant 

with the various banking regulatory authorities." In fact, in preparing the Bank's period reports 

(quarterly newsletters, month reports, mid-year reports and annual reports, Pendergest and the 

Analyst send to Davis the performance results for Tier 2 investments. And Davis calculates the 

investment returns for the aggregated portfolio of assets. 

3.	 SIB Misrepresented that its Investment Portfolio is Overseen by a Regulatory 
Authority in Antigua that Conducts a Yearly Audit of the Fund's Financial 
Statements. 

43. SID told investors that their deposits were safe because the Antiguan regulator 

responsible for oversight of the Bank's investment portfolio, the Financial Services Regulatory 

Commission (the "FSRC"), audited its financial statements. But, contrary to the Bank's 

representations to investors, the FSRC does not verify the assets SID claims in its financial 

statements. Instead, SIB's accountant, c.A.S. Hewlett & Co., a small local accounting firm in 

Antigua is responsible forauditing the multi-billion dollar SID's investment portfolio. The 

Commission attempted several times to contact Hewlett by telephone. No one ever answered the 

phone. 

4.	 SIB Misrepresented that Its Investment Portfolio is Without "Direct or 
Indirect" Exposure to Fraud Perpetrated by Bernard Madoff. 

44. In a December 2008 Monthly Report, the bank told investors that their money was 

safe because SID "had no direct or indirect exposure to any of [Bernard] Madoffs investments." 

But, contrary to this statement, at least $400,000 in Tier 2 was invested in Meridian, a New 

York-based hedge fund that used Tremont Partners as its asset manager. Tremont invested 

approximately 6-8% of the SIB assets they indirectly managed with Madoffs investment firm. 

14SEC v. Stanford International Bank, Ltd" et ai, 
COMPLAINT 



45. Pendergest, Davis and Stanford knew about this exposure to loss relating to the 

Meridian investment. On December 15, 2008, an Analyst informed Pendergast, Davis and 

Stanford in a weekly report that his "rough estimate is a loss of$400k ... based on the indirect . -' 

exposure" to Madofl'. 

5. Market Concerns About SIB's Lack ofTransparency 

46. On or about December 12, 2008, Pershing, citing suspicions about the bank's 

investment returns and its inability to get from the Bank "a reasonable level of transparency" into 

its investment portfolio informed SOC that it would no longer process wife transfers from SOC 

to SIB for the purchase of the CD. Since the spring of 2008, Pershing tried unsuccessfully to get 

an independent report regarding SIB's financialscondition. On November 28,2008, SOC's 

President, Danny Bogar, informed Pershing that "obtaining the independent report was not a 

priority." Between 2006 and December 12,2008, Pershing sent to SIB 1,635 wire transfers, 

totaling approximately $517 million, from approximately 1,199 customer accounts. 

D. From at least 2004, SCM misrepresented SAS performance results. 

47. From 2004 through 2009, SCM induced clients, including non-accredited, retail 

investors, to invest in excess of $1 billion in its SAS program by touting its track record of 

"historical perfonnance." SCM highlighted the purported SAS track record in thousands of 

client presentation books ("pitch books"). 

48. For example, the following chart from a 2006 pitch book presented clients with 

the false impression that SAS accounts, from 2000 through 2005, outperformed the S&P 500 by 

an average of approximately 13 percentage points: 

15SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



"," . :::~ ¥~ t ~, ... , 

-
2005 2004 2003 2002 2001 2000 

SASGmwIh 12.09% 16.15% 32.84% -3.33% 4.32% 18.04% 

S&P500 4-.91% 10.88% 2.s.~ -22.16% -11.88% -9.11% 

SCM used these impressive, but fictitious, performance results to grow the SAS program from 

less than $10 million in assets in 2004 to over $1 billion in 2008. 

49. sac also used the SAS track record to recruit financial advisers away from 

legitimate advisory firms who had significant books ofbusiness. After arriving at Stanford, the 

newly-hired financial advisors were encouraged and highly incentivized to put their clients' 

assets in the sm CD. 

50. The SAS performance results used in the pitch books from 2005 through 2009 

were fictional and/or inflat~d. Specifically, SCM misrepresented that SAS performance results, 

for 1999 through 2004, reflected "historical performance" when, in fact, those results were 

fictional, or "back-tested", numbers that do not reflect results ofactual trading. Instead, SCM, 

with the benefit ofhindsight, picked mutual funds that performed extremely well during years 

1999 through 2004, and presented the back-tested performance of those top-performing funds to 

potential clients as if they were actual returns earned by the SAS program. 

51. Similarly, SCM used "actual" model SAS performance results for years 2005 

through 2006 that were inflated by as much as 4%. 

52. SCM told investors that SAS has positive returns for periods in which actual SAS 

clients lost substantial amounts. For example, in 2000, actual SAS client returns ranged from 

negative 7.5% to positive 1.1 %. In 2001, actual SAS client returns ranged from negative 10.7% 

16SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



to negative 2.1 %.. And, in 2002, actual SAS client returns ranged from negative 26.6% to 

negative 8.7%. These return figures are all gross of SCM advisory fees ranging from 1.5% to 

2.75%. Thus, Stanford's claims of substantial market out perfo~ance were blatantly false. 

(e.g., a claimed return of 18.04% in 2000, when actual SAS investors lost as much as 7.5%). 

53. SOC/SCM's management knew that the advertised SAS performance results were 

misleading and inflated. From the beginning, SCM management knew that the pre-2005 track 

record was purely hypothetical, bearing no relationship to actual trading. And, as early as 

November 2006, SCM investment advisers began to question why their actual clients were not 

receiving the returns advertised in pitch books. 

54. In response to these questions, SOC/SCM hired an outside performance reporting 

expert, to review certain of its SAS performance results. In late 2006 and early 2007, the expert 

informed SCM that its performance results for the twelve months ended September 30, 2006 

were inflated by as much as 3.4 percentage points. Moreover, the expert informed SCM 

managers that the inflated performance results included unexplained ''bad math" that consistently 

inflated the SAS performance results over actual client performance. Finally, in March 2008, the 

expert informed SCM managers that the SAS performance results for 2005 were also inflated by 

as much as 3.25 percentage points. 

55. Despite their knowledge of the inflated SAS returns, SOC/SCM management 

continued using the pre-2005 track record and never asked Riordan to audit the pre-2005 

performance. In fact, in 2008 pitch books, SCM presented the back-tested pre-2005 performance 

data under the heading "Historical Performance" and "Manager Performance" along side the 

audited 2005 through 2008 figures. According to SCM's outside consultant, it was "[grossly 

misleading]" to present audited performance figures along side back-tested figures. 

17SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



i 
YTD 1,s1' 3~ l5JIID 1liU1i 5Inl:e-. 

SASGmwth -7.44% 0.10% 9..36% 15.31% lUI3% 12.30% 

S&P500 -9.44% .s.un. 5.B5'Xo 11.32% 3.70% 2.45% 

56. Finally, SGC/SCM compounded the deceptive nature ofthe SAS track record by 

blending the back-tested perfonnance with audited composite perfonnance to create annualized 5 

and 7 year perfonnance figures that bore no relation to a'?tual SAS client perfonnance. A sample 

of this misleading disclosure used in 2008 and 2009 follows: 

OaJendarYI!iII" Return
 
As of MBrd12DOB
 

YlD 2007 2.ODIl 2IlIJ5 2!J04 2003 2IlII2 2001 20IID 19l19 

SASGmwth -TAeI. ~ 1l.lM. a.:BZ'Jo 16.1510 32lIeIo -3.3W. om. 1ll.Dt§ 22.5!i% 

S&P500 -!tMl' 5.4!J5 15.1!Is. 491% 1lIJ!llS, ~ -22.10'5 1t.l111% -!L11'r. 21.114% 

rnot less ItJ3n 1 rl5ll"1 

57. Other than the fees paid by SIB to SGC for the sale of the CD, SAS was the 

second most significant source ofrevenue for the finn. In 2007 and 2008, approximately $25 

million in fees from the marketing of the SAS program. 

CAUSES OF ACTION 

FIRST CLAIM
 
AS TO ALL DEFENDANTS
 

Violations of Section 10Cb) of the Exchange Act and Rule 10-5
 

58. Plaintiff Commission repeats and realleges paragraphs 1 through 57 of this 

Complaint and incorporated herein by reference as if set forth verbatim, 

59. Defendants, directly or indirectly, singly or in concert with others, in connection 

with the purchase and sale of securities, by use of the means and instrumentalities of interstate 

18SEC v. Stanford International Bank, Ltd., et ai, 
COMPLAINT 



commerce and by use of the mails have: (a) employed devices, schemes and artifices to defraud; 

(b) made untrue statements ofmaterial facts and omitted to state material facts necessary in order 

to make the statements made, in light of the circ~stances under which they were made, not 

misleading; and (c) engaged in acts, practices and courses ofbusiness which operate as a fraud 

and deceit upon purchasers, prospective purchasers and other persons. 

60. As a part of and in furtherance of their scheme, defendants, directly and 

indirectly, prepared, disseminated or used contracts, written offering documents, promotional 

materials, investor and other correspondence, and oral presentations, which contained untrue 

statements ofmaterial facts and misrepresentations ofmaterial facts, and which omitted to state 

material facts necessary in order to make the statements made, in light ofthe circumstances 

under which they were made, not misleading. 

61. Defendants made the referenced misrepresentations and omissions knowingly or 

grossly recklessly disregarding the truth. 

62. For these reasons, Defendants have violated and, unless enjoined, will continue to 

violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5 

[17 C.F.R. § 240.10b-5]. 

SECOND CLAIM
 
AS TO STANFORD, DAVIS, AND PENDERGEST-HOLT
 

Aiding and Abetting Violations of Exchange Act Section lO(b) and Rule lOb-5
 

63. Plaintiff Commission repeats andrealleges paragraphs 1 through 57 of this 

Complaint and incorporated herein by reference as if set forth verbatim. 

64. If Stanford, Davis, and Pendergest-Holt did not violate Exchange Act Section 

lO(b) and Rule lOb-5, in the alternative, Stanford, Davis, and Pendergest-Holt, in the manner set 

forth above, knowingly or with severe recklessness provided substantial assistance in connection 

SEC v. Stanford International Bank, Ltd., et al. 19 
COMPLAINT 



with the violations ofExchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 

C.F.R. § 240.lOb-5] alleged herein. 

65. For these reasons, Stanfor~, Davis, and Pendergest-Holt aided and abetted and, 

unless enjoined, will continue to aid and abet violations of Section 10(b) of the Exchange Act 

[15 U.S.C. § 78j(b)] and Rule lOb-5 [17 C.F.R. § 240.10b-5]. 

THIRD CLAIM
 
AS TO ALL DEFENDANTS
 

Violations of Section 17(a) of the Securities Act
 

66. Plaintiff Commission repeats and realleges paragraphs 1 through 57 of this 

Complaint and incorporated herein by reference as if set forth verbatim. 

67. Defendants, directly or indirectly, singly or in concert with others, in the offer and 

sale of securities, by use of the means and instruments of transportation and communication in 

interstate commerce and by use of the mails, have: (a) employed devices, schemes or artifices to 

defraud; (b) obtained money or property by means ofuntrue statements ofmaterial fact or 

omissions to state material facts necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; and (c) engaged in transactions, 

practices or courses ofbusiness which operate or would operate as a fraud or deceit. 

68. As part of and in furtherance of this scheme, defendants, directly and indirectly, 

prepared, disseminated or used contracts, written offering documents, promotional materials, 

investor and other correspondence, and oral presentations, which contained untrue statements of 

material fact and which omitted to state material facts necessary in order to make the statements 

made, in light of the circumstances under which they were made, not misleading. 

69. Defendants made the referenced misrepresentations and omissions knowingly or 

grossly recklessly disregarding the truth. 

SEC v. Stanford International Bank, Ltd., et al. 20 
COMPLAINT70. For these reasons, Defendants have violated, and unless enjoined, will continue to 

violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

FOURTH CLAIM
 
AS TO STANFORD, SGC, AND STANFORD CAPITAL
 

Violations of Sections 206(1) and 206(2) of the Advisers Act
 

71. PlaintiffCommission repeats and realleges paragraphs 1 through 57 of this 

Complaint and incorporated herein by reference as if set forth verbatim. 

72. Stanford, ~OC,and Stanford Capital, directly or indirectly, singly or inconc~rt, 

knowingly or recklessly, through the use of the mails or any means or instrumentality of 

interstate commerce, while acting as investment advisers within the meaning of Section 202(11) 

of the Advisers Act [15 U.S.C. § 80b-2(11)]: (a) have employed, are employing, or are about to 

employ devices, schemes, and artifices to defraud any client or prospective client; or (b) have 

engaged, are engaging, or are about to engage in acts, practices, or courses ofbusiness which 

operates as a fraud or deceit upon any client or prospective client. 

73. For these reasons, Stanford, SOC, and Stanford Capital have violated, and unless 

enjoined, will continue to violate Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 

80b-6(1) and 80b-6(2)]. 

FIFfHCLAIM
 
AS TO STANFORD, DAVIS, AND PENDERGEST-HOLT
 

Aiding and Abetting Violations of Sections 206(1) and 206(2) of the Advisers Act
 

74. Plaintiff Commission repeats and realleges paragraphs 1 through 57 of this 

Complaint and incorporated herein by reference as if set forth verbatim. 

75. Based on the conduct alleged herein, Stanford, Davis, and Pendergest-Holt, in the 

manner set forth above, knowingly or with severe recklessness provided substantial assistance in 

21SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



I 

I
i
i 

connection with the viQlations ofAdvisers Act Sections 206(1) and 206(2) [15 U.S.C. §§ 80b­

6(1) and 80b-6(2)] alleged herein. 

76. For thes~ reasons,Stanford, Davis, and Pendergest-Holt aided and abetted ~d, 

unless enjoined~ will continue to aid and abet violations of Sections 206(1) and 206(2) of the 

Advisers Act [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. 

SIXTH CLAIM
 
AS TO sm AND SGC
 

Violations of Section 7(d) of the Investment Company Act
 

77. Plaintiff Commission repeats and realleges paragraphs 1 through 57 ofthis 

Complaint and incorporated herein by reference as if set forth verbatim. 

78. SIB, an investment company not organized or otherwise created under the laws of 

the United States or of a State, directly or indirectly, singly or in concert with others, made use of 

the mails or any means or instrumentality of interstate commerce, directly or indirectly, to offer 

for sale, sell, or deliver after sale, in connection with a public offering, securities ofwhich SIB 

was the issuer, without obtaining an order from the Commission permitting it to register as an 

investment company organized or otherwise created under the laws of a foreign country and to 

make a public offering of its securities by use of the mails and means or instrumentalities of 

interstate commerce. 

79. SOC, directly or indirectly, singly or in concert with others, acted as an 

underwriter for SIB, an investment company not organized or otherwise created under the laws 

of the United States or of a State that made use of the mails or any means or instrumentality of 

interstate commerce, directly or indirectly, to offer for sale, sell, or deliver after sale, in 

connection with a public offering, securities of which SIB was the issuer, without obtaining an 

order from the Commission permitting it to register as an investment company organized or 

SEC v. Stanford International Bank, Ltd., et al. 22 
COMPLAINT 



otherwise created under the laws ofa foreign country and to make a public offering ofits 

securities by use of the mails and means or instrumentalities ofinterstate commerce. 

80. ~or these reasons, sm and SGC have violated, and unless enjoined~ will continue 

to violate Section 7(d) of the Investment Company Act [15 U.S.C. § 80a-7(d)]. 

RELIEF REQUESTED
 

Plaintiff Commission respectfully requests that this Court:
 

I. 

Temporarily, preliminarily, and permanently enjoin: (a) Defendants -from violating, or 

aiding and abetting violations of, Section 1O(b) and Rule 10b-5 of the Exchange Act; (b) 

Defendants from violating Section 17(a) of the Securities Act; (c) Stanford, Davis, Pendergest-

Holt, SGC, and Stanford Capital from violating, or aiding and abetting violations of, Sections 

206(1) and 206(2) of the Advisers Act; and (d) SIB and SCG from violating Section 7(d) of the 

Investment Company Act. 

II. 

Enter an Order immediately freezing the assets ofDefendants and directing that all 

financial or depository institutions comply with the Court's Order. Furthennore, order that 

Defendants inunediately repatriate any funds held at any bank or other financial institution not 

subject to the jurisdiction of the Court, and that they direct the deposit of such funds in identified 

accounts in the United States, pending conclusion ofthis matter. 

III. 

Order that Defendants shall file with the Court and serve upon Plaintiff Commission and 

the Court, within 10 days of the issuance of this order or three days prior to a hearing on the 

Commission's motion for a preliminary injunction, whichever comes first, an accounting, under 

23SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



oath, detailing all oftheir assets and all funds or other assets received from investors and from 

one another. 

IV. 

Order that Defendants be restrained and enjoined from destroying, removing, mutilating, 

altering, concealing, or disposing of, in any manner, any oftheir books and records or documents 

relating to the matters set forth in the Complaint, or the books and records and such documents of 

any entities under their control, until further order ofthe Court. 

v. 

Order the appointment of a temporary receiver for Defendants, for the benefit of 

investors, to marshal, conserve, protect, and hold funds and assets obtained by the defendants 

and their agents, co-conspirators, and others involved in this scheme, wherever such assets may 

be found, or, with the approval of the Court, dispose of any wasting asset in accordance with the 

application and proposed order provided herewith. 

VI. 

Order that the parties may commence discovery immediately, and that notice periods be 

shortened to permit the parties to require production ofdocuments, and the taking of depositions 

on 72 hours' notice. 

VII. 

Order Defendants to disgorge an amount equal to the funds and benefits they obtained 

illegally as a result of the violations alleged herein, plus prejudgment interest on that amount. 

VIII. 

Order civil penalties against Defendants pursuant to Section 20(d) of the Securities Act 

[15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 41(e) of 

24SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT 



,. ~l 

the Investment Company Act [15 U.S.C. § 80a-41(e)], and Section 209(e) ofthe Advisers Act 

[15 U.S.C. § 80b-9(e)] for their securities law violations. 

IX. 

Order that Stanford, Davis, and Pendergest-Holt immediately surrender their passports to 

the Clerk of this Court, to hold until further order of this Court. 

x. 

Order such further relief as this Court may deem just and proper. 

For the Commission, by its attorneys: 

February 16, 2009 Respectfully submitted, 

STEPHEN J.KOROTASH 
Oklahoma BarNo. 5102 
1. KEVIN EDMUNDSON 
Texas Bar No. 24044020 
DAVID B. REECE 
Texas BarNo. 24002810 
MICHAEL D. KING 
Texas Bar No. 24032634 
D. THOMAS KELTNER 
Texas Bar No. 24007474 

U.S. Securities and Exchange Commission 
Burnett Plaza, Suite 1900 
801 Cherry Street, Unit #18 
Fort Worth, TX 76102-6882 
(817) 978-6476 (dbr) 
(817) 978-4927 (fax) 

25SEC v. Stanford International Bank, Ltd., et al. 
COMPLAINT