SEC v. STANFORD INTERNATIONAL BANK, No. 3:09-cv-0298, Northern District of Texas (Feb. 17, 2009)

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

SECURITIES AND EXCHANGE COMMISSION, §
        §
Plaintiff,                                    §            FIRST AMENDED
        §      COMPLAINT
v.                                    §
   § Case No.:  3:09-cv-0298-N
  §
STANFORD INTERNATIONAL BANK, LTD.,   §
STANFORD GROUP COMPANY,    §
STANFORD CAPITAL MANAGEMENT, LLC,  §
R. ALLEN STANFORD, JAMES M. DAVIS, and           §
LAURA            PENDERGEST-HOLT,                                                §
        §
    Defendants,                                    §
 and        §
        §
STANFORD FINANCIAL GROUP, and   §
THE STANFORD FINANCIAL GROUP BLDG INC.,  §
        §
                                                Relief            Defendants.                        §
________________________________________________§

 Plaintiff Securities and Exchange Commission alleges:
SUMMARY

 1. For at least a decade, R. Allen Stanford and James M. Davis, through companies
they control, including Stanford International Bank, Ltd. (“SIB”) and its affiliated Houston-based
investment  advisers,  Stanford  Group  Company  (“SGC”)  and  Stanford  Capital  Management
(“SCM”),  executed  a  massive  Ponzi  scheme.    In  carrying  out  the  scheme,  Stanford  and  Davis
misappropriated  billions  of  dollars  of  investor  funds  and  falsified  SIB’s  financial  statements  in
an effort to conceal their fraudulent conduct.
2.         Laura         Pendergest-Holt,         the         chief  investment  officer  of  Stanford  Financial  Group
(“SFG”)  and  a  member  of  SIB’s  investment  committee,  facilitated  the  fraudulent  scheme  by

misrepresenting to investors that she managed SIB’s multi-billion investment portfolio of assets
and employed a sizeable team of analysts to monitor the portfolio.
3.   By   year-end   2008,   SIB   had   sold   approximately   $8   billion   of   self-styled
“certificates of deposits” (the “CD”) by touting: (i) the bank’s safety and security; (ii) consistent,
double-digit returns on the bank’s investment portfolio; and (iii) high return rates on the CD that
greatly exceeded those offered by commercial banks in the United States.
4.  Contrary  to  SIB’s  public  statements,  Stanford  and  Davis,  by  February  2009,  had
misappropriated at least $1.6 billion of investor money through bogus personal loans to Stanford
and  “invested”  an  undetermined  amount  of  investor  funds  in  speculative,  unprofitable  private
businesses controlled by Stanford.
5. In an effort to conceal their fraudulent conduct and maintain the flow of investor
money  into  SIB’s  coffers,  Stanford  and  Davis  fabricated  the  performance  of  the  bank’s
investment  portfolio.    Each  month,  Stanford  and  Davis  decided  on  a  pre-determined  return  on
investment  for  SIB’s  portfolio.    Using  this  pre-determined  number,  SIB’s  internal  accountants
reverse-engineered the bank’s financial statements to report investment income that the bank did
not actually earn.  SIB’s financial statements, which were approved and signed by Stanford and
Davis, bore no relationship to the actual performance of the bank’s investment portfolio.
 6. In addition to sales of the CD, SGC and SCM advisers, since 2004, have sold more
than  $1  billion  of  a  proprietary  mutual  fund  wrap  program,  called  Stanford  Allocation  Strategy
(“SAS”), using materially false and misleading historical performance data.  The false data enabled
SGC/SCM to grow the SAS program from less than $10 million in 2004 to over $1.2 billion in 2009
and generate fees for SGC/SCM (and ultimately Stanford) in excess of $25 million.  The fraudulent
SAS  performance  results  were  also  used  to  recruit  registered  financial  advisers  with  significant
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
2

books  of  business,  who  were  then  heavily  incentivized  to  re-allocate  their  clients’  assets  to  SIB’s
CD program.
7.  By  engaging  in  the  conduct  described  in  this  Complaint,  Defendants  directly  or
indirectly,  singly  or  in  concert,  have  engaged,  and  unless  enjoined  and  restrained,  will  again
engage  in  transactions  acts,  practices,  and  courses  of  business  that  constitute  violations  of
Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 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  described  herein,  Stanford,  SGC,  and  SCM
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 (“Investment Company Act”) [15 U.S.C. § 80a-7(d)].
JURISDICTION AND VENUE

  8.  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)  of  the  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)].
  9.  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.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
3

10.    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].
11.  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 of business alleged
herein.    Certain  of  the  transactions,  acts,  practices,  and  courses  of  business  occurred  in  the
Northern District of Texas.
DEFENDANTS

12.  Stanford  International  Bank,  Ltd. purports  to  be  a  private  international  bank
domiciled  in  St.  John’s,  Antigua,  West  Indies.    SIB  claims  to  serve  50,000  clients  in  over  100
countries,  with  assets  under  management  of  approximately  $8  billion.    Unlike  a  commercial
bank, SIB claims that it does not loan money.  SIB sells the CD to U.S. investors through SGC,
its affiliated investment adviser.
13.  Stanford  Group  Company, a  Houston-based  corporation,  is  registered  with  the
Commission as a broker-dealer and investment adviser.  It has 29 offices located throughout the
United States.   SGC’s principal business consists of sales of SIB-issued securities, marketed as
certificates  of  deposit.    SGC  is  a  wholly  owned  subsidiary  of  Stanford  Group  Holdings,  Inc.,
which in turn is owned by R. Allen Stanford.
14.        Stanford  Capital  Management,  a  registered  investment  adviser,  took  over  the
management  of  the  SAS  program  (formerly  Mutual  Fund  Partners)  from  SGC  in  early  2007.
SCM markets the SAS program through SGC.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
4

15.  R. Allen Stanford, a citizen of the U.S. and Antigua, West Indies, is the chairman
of the board and sole shareholder of SIB and the sole director of SGC’s parent company.  During
the   Commission’s   investigation,   Stanford   refused   to   produce   documents   and   information
accounting for the bank’s multi-billion dollar investment portfolio.
16.  James M. Davis, a U.S. citizen and resident of Baldwyn, Mississippi, is a director
and chief financial officer of SFG and SIB.  Davis maintains offices in Memphis, Tennessee, and
Tupelo,   Mississippi.      During   the   Commission’s   investigation,   Davis   refused   to   provide
documents and information accounting for the bank’s multi-billion dollar investment portfolio.
17.  Laura  Pendergest-Holt,  is  the  chief  investment  officer  of  SFG  and  a  resident  of
Baldwyn, Mississippi.  She was appointed to SIB’s investment committee on December 7, 2005.
She  supervises  a  group  of  analysts  who  “monitor”  the  performance  of  a  small  portion  of  SIB’s
portfolio.
STATEMENT OF FACTS

Stanford International Bank

18.  Stanford  controls  a  web  of  private  affiliated  companies  that  operate  under  the
name Stanford Financial Group.  Stanford is the sole owner of SFG.
19. SIB, one of SFG’s affiliates, is a private, offshore bank located in Antigua.  SIB
purports to have an independent board of directors, an investment committee, a chief investment
officer and teams of global portfolio advisers and analysts.
20.  The  vast  majority  of  the  bank’s  assets  are  managed  exclusively  by  Stanford  and
Davis.  Stanford and Davis surrounded themselves with a close-knit circle of family, friends and
confidants.    Accordingly,  SIB,  and  in  turn  Stanford  and  Davis,  had  no  independent  oversight
over SIB’s assets.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
5

21. As of November 28, 2008, SIB reported approximately $8 billion in total assets.
SIB  aggregated  customer  deposits,  and  then  purportedly  re-invested  those  funds  in  a  “globally
diversified portfolio” of assets.
22. SIB sold more than $1 billion in CDs per year between 2005 and 2008, including
sales to U.S. investors.
23.  SIB  marketed  the  CD  to  investors  in  the  United  States  exclusively  through  SGC
advisers  pursuant  to  a  Regulation  D  private  placement.    In  connection  with  the  private
placement, SIB filed several Forms D with the Commission.
24.  As  indicated  by  the  following  chart  from  SIB’s  training  materials,  for  almost
fifteen  years,  SIB  claimed  that  it  has  earned  consistently  high  returns  on  its  investment  of
deposits (ranging from 11.5% in 2005 to 16.5% in 1993):

ST A NFORD  I NT ERNA T I ONA L   BA NK
Return Vs. Interes t Paid To Depositors
14.6%
16.5%
13.9%
15.7%
14.8%
14.2%14.3%
8.3%
8.0%
7.8%
8.4%
9.5%
9.7%
9.1%
8.5%
8.5%
8.4%
7.7%
6.2%
6.0%
6.7%
11.9%
11.7%
14.0%
14.1%
14.9%
15.7%
11.5%
12.0%
6.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
199219931994199519961997199819992000200120022003200420052006

25. SIB sold the CD using these purported returns on investment.
26.  SIB’s  purportedly  high  returns  on  investment  allegedly  enabled  the  bank  to  pay
significantly higher rates on the CD than those offered by U.S. banks.  For example, SIB offered
7.45%  as  of  June  1,  2005,  and  7.878%  as  of  March  20,  2006,  for  a  fixed  rate  CD  based  on  an
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
6

investment of $100,000.  On November 28, 2008, SIB quoted 5.375% on a 3-year flex CD, while
comparable U.S. bank CDs paid under 3.2%.
27. SIB paid disproportionately large commissions to SGC for the sale of CDs.  SGC
received a 3% trailing fee from SIB on sales of CDs by SGC advisers.  SGC advisers received a
1% commission upon the sale of the CDs, and were eligible to receive as much as a 1% trailing
commission throughout the term of the CD.
28.  SGC  used  this  generous  commission  structure  to  recruit  established  financial
advisers  to  the  firm.    The  commission  structure  also  provided  a  powerful  incentive  for  SGC
financial advisers to aggressively sell CDs to investors.
29. In 2007, SIB paid SGC and its affiliates more  than  $291  million  in  management
fees and CD sales, up from $211 million in 2006.
  30.  SIB  segregated  its  investment  portfolio  into  three  tiers:  (i)  cash  and  cash
equivalents  (“Tier  1”);  (ii)  investments  with  “outside  portfolio  managers  (25+)”  that  were
monitored  by  the  SFG  analysts  (“Tier  2”);  and  (iii)  unknown  assets  managed  by  Stanford  and
Davis (“Tier 3”).  As of December 2008, Tier 1 represented approximately 9% ($800 million) of
SIB’s  portfolio.  Tier  2,  prior  to  the  bank’s  decision  to  liquidate  $250  million  of  investments  in
late 2008, represented approximately 10% of the portfolio. And Tier 3 represented approximately
80% of SIB’s investment portfolio.
SIB’s Fraudulent Sale of CDs

Stanford and Davis Misappropriated Investor Funds and Fabricated SIB’s Financial
Statements

31.  In  selling  the  CD  to  investors,  SIB  touted,  among  other  things,  the  CD’s  safety
and security and SIB’s consistent, double-digit returns on its investment portfolio.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
7

32.  In  its  brochure,  SIB  told  investors,  under  the  heading  “Depositor  Security,”  that
its investment philosophy is “anchored in time-proven  conservative  criteria,  promoting  stability
in  [the  bank’s]  certificate  of  deposit.”    SIB  also  emphasized  that  its  “prudent  approach  and
methodology translate into deposit security for our customers.”
33. Stanford, Davis and Pendergest-Holt approved the use of the brochure.
34.  Contrary  to  SIB’s  representations  in  the  brochure  about  depositor  security,  SIB
made, with Davis’s knowledge, at least $1.6 billion in undocumented “loans” to Stanford.  These
undocumented loans were never disclosed in SIB’s financial statements or other communications
with investors.
35. In an effort to conceal their fraud and ensure that investors continued to purchase
the CD, Stanford and Davis fabricated the performance of SIB’s investment portfolio.
36.  In  SIB’s  Annual  Reports,  SIB  told  investors  that  the  bank  earned  from  its
“diversified” investments approximately $642 million in 2007, and $479 million in 2006.
37.  SIB’s  financial  statements,  including  its  investment  income,  are  fictional.    In
calculating SIB’s investment income, Stanford and Davis provided to SIB’s internal accountants
a  pre-determined  return  on  investment  for  the  bank’s  portfolio.    Using  this  pre-determined
number,   SIB’s   accountants   reverse-engineered   the   bank’s   financial   statements   to   reflect
investment income that SIB did not actually earn.
38. Between February 2 and February 6, 2009, Stanford and Davis admitted, during a
meeting  with  a  core  group  of  senior  employees  (including  Pendergest-Holt)  in  Miami,  Florida,
that they had misappropriated investor funds and falsified SIB’s financial statements.
39.  Incredibly,  four  days  after  the  Miami  meetings,  Pendergest-Holt  made  a  two-hour
presentation  to  the  Commission’s  staff  –  and  subsequently  testified  under  oath  –  regarding  the
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
8

whereabouts  of  SIB’s  multi-billion  dollar  investment  portfolio.    During  her  presentation  and
testimony, Pendergest-Holt denied any knowledge concerning the status of the vast majority of the
bank’s assets and failed to disclose that Stanford and Davis had misappropriated investor funds.
SIB Misrepresented That It Received a Capital Infusion
  40.  In  its  December  2008  Monthly  Report,  SIB  told  investors  that  the  bank  had
received a capital infusion of $541 million on November 28, 2008.
  41.  This  representation  was  false.    SIB  did  not  receive  a  capital  infusion  of  $541
million.  Instead, Stanford contributed to SIB equity interests in two pieces of real estate that the
bank already owned.  The real estate was valued at approximately $88.5 million when acquired.
 42. By virtue of their positions on SIB’s board of directors and investment committee,
Stanford and Davis knew that: (i) Stanford did not make a $541 million capital infusion into SIB;
(ii)  SIB,  not  Stanford,  owned  the  real  estate;  and  (iii)  the  real  estates  value  was  approximately
$88.5 million, not $541 million.
  43.  Stanford,  Davis  and  Pendergest-Holt  approved  the  December  2008  Monthly
Report.
Stanford and Davis Misrepresented the Liquidity of SIB’s Investments
44.  In  its  2006  and  2007  Annual  Reports,  SIB  told  investors  that  the  bank’s  assets
were  invested  in  a  “well-balanced  global  portfolio  of  marketable  financial  instruments,  namely
U.S. and international securities and fiduciary placements.”  More specifically, as shown below,
SIB represented that its 2007 portfolio allocation was 58.6% equity, 18.6% fixed income, 7.2%
precious metals and 15.6% alternative investments:
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
9

45. In its CD brochures, SIB emphasized the importance of investing in “marketable”
securities, saying that “maintaining the highest degree of liquidity” was a “protective factor for
our depositors.”
46.  Consistent  with  its  Annual  Reports  and  brochures,  SIB  trained  SGC  financial
advisers, in February 2008, that “liquidity/marketability of SIB’s invested assets” was the “most
important factor to provide security to SIB clients.”
47.  Stanford  and  Davis  approved  and/or  signed  the  Annual  Reports,  brochure  and
training materials.
48. Contrary to SIB’s representations regarding the liquidity of its portfolio, SIB did
not  invest  in  a  “well-diversified  portfolio  of  highly  marketable  securities.”    Instead,  significant
portions of the bank’s portfolio were misappropriated by Stanford used by him to acquire private
equity  and  real  estate.    In  fact,  at  year-end  2008,  the  largest  segments  of  the  bank’s  portfolio
were: (i) undocumented “loans” to Stanford; (ii) private equity; and (iii) over-valued real estate.

SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
10

SIB Trained Financial Advisers to Misrepresent that Its Multi-Billion Dollar
Investment Portfolio was Managed by a Global Network of Portfolio Advisers,
Monitored By a Team of Analysts and Audited by Regulators

49.  Prior  to  making  investment  decisions,  prospective  investors  routinely  asked  how
SIB safeguarded and monitored its assets.  Investors frequently inquired whether Stanford could
“run off with the money.”
50. In response to this question, at least during 2006 and much of 2007, Pendergest-
Holt trained SIB’s senior investment officer (“SIO”) to tell investors that the bank’s multi-billion
dollar portfolio was managed by a “global network of portfolio managers” and “monitored” by a
team  of  SFG  analysts  in  Memphis,  Tennessee.    In  communicating  with  investors,  the  SIO
followed  Pendergest-Holt’s  instructions,  telling  investors  that  SIB’s  investment  portfolio  was
managed by a global network of money managers and monitored by a team of 20-plus analysts.
51.  Neither  Pendergest-Holt  nor  the  SIO  disclosed  to  investors  that  the  “global
network” of money managers and the team of analysts did not manage any of SIB’s investments
and only monitored approximately 10% of SIB’s portfolio.  In fact, Pendergest-Holt trained the
SIO  “not  to  divulge  too  much”  about  the  oversight  of  SIB’s  portfolio  because  that  information
“wouldn’t  leave  an  investor  with  a  lot  of  confidence.”    Likewise,  Davis  instructed  the  SIO  to
“steer” potential CD investors away from information about SIB’s portfolio.
52.  In  addition,  the  SIO,  at  Pendergest-Holt’s  direction,  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.
53.  Contrary  to  SIB’s  representations  to  investors,  the  FSRC  did  not  audit  or  verify
the assets SIB claimed in its financial statements.  Instead, SIB’s accountant, C.A.S. Hewlett &
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
11

Co.,  a  small  local  accounting  firm  in  Antigua  was  responsible  for  auditing  SIB’s  multi-billion
dollar investment portfolio.
Stanford, Davis and Pendergest-Holt Lied to Financial Advisers
54.  On  January  10,  2009,  Stanford,  Davis  and  Pendergest-Holt  spoke  to  SIB’s  Top
Performer’s Club in Miami, Florida.
55.  During  the  meeting,  Davis  stated  that  SIB  was  “stronger”  than  at  any  time  in
history.    Stanford,  Davis  and  Pendergest-Holt  represented  that  SIB  was  secure  and  built  on  a
strong foundation, and that its financial condition was shored up by capital infusions.
56. But Davis failed to disclose that he had been informed only days earlier by the
head of SIB’s treasury that, despite their best efforts to liquidate tier two assets, SIB’s cash
position had fallen from the June 30, 2008 reported balance of $779 million to less than $28
million.
57.  Stanford  and  Davis  failed  to  disclose  to  the  attendees  that:  (i)  they  had  invested
SIB funds in a manner inconsistent with offering documents and its own financial statements and
(ii) the November 28, 2008 capital infusion was a fiction.
58.  During  her  speech,  Pendergest-Holt,  after  being  introduced  as  SFG’s  chief
investment officer and a “member of the investment committee of the bank,” answered questions
about SIB’s investment portfolio.  In so doing, she failed to disclose to attendees that she and her
team  of  analysts  did  not  manage  SIB’s  investment  portfolio  and  only  monitored  approximately
10% of the bank’s investments.
59.       Significantly,       Stanford,       Davis and Pendergest-Holt also failed  to  disclose  that  on
or about December 12, 2008, Pershing, citing suspicions about SIB’s investment returns and its
inability to get from the bank “a reasonable level of transparency” into its investment portfolio,
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
12

informed SGC that it would no longer process wire transfers from SGC to SIB for the purchase
of the CD.
60.   Stanford,   Davis   and   Pendergest   knew   that   SGC   advisers   would   use   the
information provided to them during the Top Performer’s Club meeting to sell the CD.
SIB   Misrepresented   That   It   Had   No   Exposure   to   Losses   From   Madoff-related
Investments

61. In the December 2008 Monthly Report, SIB told CD investors that the bank “had
no direct or indirect exposure to any of [Bernard] Madoff’s investments.”
62. Contrary to this statement, Stanford, Davis and Pendergest-Holt knew, prior to the
release of the Monthly Report, that SIB had exposure to losses from investments with Madoff.
63. On December 12, 2008 and again on December 18, 2008, Pendergest received e-
mails from Meridian Capital Partners, a hedge fund with which SIB had invested, detailing SIB’s
exposure to Madoff-related losses.
64. On December 15, 2008, an SFG-affiliated employee notified Pendergest-Holt and
Davis that SIB had exposure to Madoff-related losses in two additional funds through which SIB
had  invested.    That  same  day,  Davis,  Pendergest-Holt  and  others  consulted  with  Stanford
regarding the bank’s exposure to Madoff-related losses.
65. Stanford, Davis and Pendergest-Holt never corrected this misrepresentation.
SGC and SCM’s Fraudulent Mutual Fund Sales

66.   From   2004   through   2009,   SGC   and   SCM   induced   clients,   including   non-
accredited, retail investors, to invest in SAS, a proprietary mutual fund wrap program, by touting
a fraudulent track record of “historical performance.”
67.  SGC/SCM  highlighted  the  purported  SAS  track  record  in  thousands  of  client
presentation  books  (“pitch  books”).    For  example,  the  following  chart  from  a  2006  pitch  book
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
13

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:

68.  SGC/SCM  used  these  performance  results  to  grow  the  SAS  program  to  over  $1
billion in 2008.
69.  SGC/SCM  also  used  the  SAS  track  record  to  recruit  financial  advisers  with
significant books of business away from competitors.  After arriving at Stanford, the newly-hired
financial advisers were incentivized to put their clients’ assets in the CD.
70. Other  than  the  fees  paid  by  SIB  to  SGC/SCM  for  CD  sales,  SAS  was  the  most
significant   source   of   revenue   for   SGC/SCM.      In   2007   and   2008,   SGC/SCM   received
approximately $25 million in fees from the marketing of SAS.
71.  The  SAS  performance  results  used  in  the  2005  through  2009  pitch  books  were
fictional  and/or  inflated.    SGC/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 did not reflect the results of actual trading.
72.  SGC/SCM,  with  the  benefit  of  hindsight,  picked  mutual  funds  that  performed
extremely well from 1999 through 2004, and presented the performance of those top-performing
funds to potential clients as if they were actual returns earned by the SAS program.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
14

73. SGC/SCM also used “actual” model SAS performance results for 2005 and 2006
that were inflated by as much as 4 percentage points.
74. SGC/SCM told investors that SAS had positive returns for periods in which actual
SAS  clients  lost  substantial  amounts.    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%  to
negative 2.1%.  And, in 2002, actual SAS client returns ranged from negative 26.6% to negative
8.7%.
75. SGC/SCM’s management knew that the advertised SAS performance results were
misleading  and  inflated.    And  they  also  knew  that  the  pre-2005  track  record  was  purely
hypothetical.
76.  As  early  as  November  2006,  SGC/SCM  investment  advisers  began  to  question
why  their  clients  were  not  receiving  the  returns  advertised  in  the  pitch  books.    In  response  to
these  questions,  SGC/SCM  hired  an  outside  performance  reporting  expert  to  review  the  SAS
performance results.
77. In late 2006 and early 2007, the expert informed SGC/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  SGC/SCM  managers  that  the  inflated
performance  results  included  unexplained  “bad  math”  that  consistently  inflated  the  purported
SAS  performance  results  over  actual  client  performance.    Finally,  in  March  2008,  the  expert
informed SGC/SCM managers that the SAS performance results for 2005 were also inflated by
as much as 3.25 percentage points.
78.  Despite  its  knowledge  of  the  inflated  SAS  returns,  SGC/SCM  management
continued  using  the  pre-2005  track  record  and  never  asked  the  performance  expert  to  audit  the
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
15

pre-2005  performance.    In  fact,  in  2008  pitch  books,  SGC/SCM  presented  the  back-tested  pre-
2005 performance data under the heading “Historical Performance” and “Manager Performance”
alongside the audited 2005 through 2008 figures.  SGC/SCM’s outside consultant testified that it
was “misleading” to present audited performance figures alongside back-tested figures.
79.   Finally,   as   indicated   the   chart   below,   SGC/SCM   blended   the   back-tested
performance with audited composite performance to create annualized 5 and 7 year performance
figures that bore no relation to actual SAS client performance:

80.  As evidence by its use of fictional and/or inflated performance results in the pitch
books, SGC/SCM knowingly misled investors in connection with the sale of SAS.
CAUSES OF ACTION

FIRST CLAIM
AS TO ALL DEFENDANTS
Violations of Section 10(b) of the Exchange Act and Rule 10b-5

81. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
16

 82. 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
commerce and by use of the mails have:  (i) employed devices, schemes and artifices to defraud;
(ii) made untrue statements of material facts and 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; and (iii) engaged in acts, practices and courses of business which operate as a fraud
and deceit upon purchasers, prospective purchasers and other persons.
  83.  As  a  part  of  and  in  furtherance  of  their  scheme,  Defendants,  directly  and
indirectly,  prepared,  disseminated  or  used  contracts,  written  offering  documents,  financial
statements,  promotional  materials,  investor  and  other  correspondence,  and  oral  presentations,
which contained untrue statements of material facts and misrepresentations of material facts, 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.
84.  Defendants  made  the  referenced  misrepresentations  and  omissions  knowingly  or
grossly recklessly disregarding the truth.
85. 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 10(b) and Rule 10b-5

86. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
87.  If  Stanford,  Davis,  and  Pendergest-Holt  did  not  violate  Exchange  Act  Section
10(b) and Rule 10b-5, in the alternative, Stanford, Davis, and Pendergest-Holt, in the manner set
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
17

forth above, knowingly or with severe recklessness provided substantial assistance in connection
with  the  violations  of  Exchange  Act  Section  10(b)  [15  U.S.C.  §  78j(b)]  and  Rule  10b-5  [17
C.F.R. § 240.10b-5] alleged herein.
88.  For  these  reasons,  Stanford,  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 10b-5 [17 C.F.R. § 240.10b-5].
THIRD CLAIM
AS TO ALL DEFENDANTS
Violations of Section 17(a) of the Securities Act
89. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
 90. 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: (i) employed devices, schemes or artifices to
defraud;  (ii)  obtained  money  or  property  by  means  of  untrue  statements  of  material  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  (iii)  engaged  in  transactions,
practices or courses of business which operate or would operate as a fraud or deceit.
91.  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.
 92. Defendants made the referenced misrepresentations and omissions knowingly or
grossly recklessly disregarding the truth.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
18

 93. 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

            94. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
95.  Stanford,  SGC  and  SCM,  directly  or  indirectly,  singly  or  in  concert  with  others,
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)]: (i) have employed, are employing, or are about to
employ  devices,  schemes,  and  artifices  to  defraud  any  client  or  prospective  client;  or  (ii)  have
engaged,  are  engaging,  or  are  about  to  engage  in  acts,  practices,  or  courses  of  business  which
operates as a fraud or deceit upon any client or prospective client.
96.    For  these  reasons,  Stanford,  SGC  and  SCM  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)].
FIFTH CLAIM
AS TO STANFORD, DAVIS, AND PENDERGEST-HOLT
Aiding and Abetting Violations of Sections 206(1) and 206(2) of the Advisers Act

97. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
98. 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
connection  with  the  violations  of  Advisers  Act  Sections  206(1)  and  206(2)  [15  U.S.C.  §§ 80b-
6(1) and 80b-6(2)] alleged herein.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
19

99.  For  these  reasons,  Stanford,  Davis,  and  Pendergest-Holt  aided  and  abetted  and,
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 SIB AND SGC
Violations of Section 7(d) of the Investment Company Act
100.     Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.
101.     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 of which 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.
102.      SGC,   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
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.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
20

103.     For these reasons, SIB 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 the Court:
I.
  Temporarily,  preliminarily  and  permanently  enjoin:  (i)  Defendants  from  violating,  or
aiding  and  abetting  violations  of,  Section  10(b)  and  Rule  10b-5  of  the  Exchange  Act;  (ii)
Defendants from violating Section 17(a) of the Securities Act; (iii) Stanford, Davis, Pendergest-
Holt,  SGC,  and  SCM  from  violating,  or  aiding  and  abetting  violations  of,  Sections  206(1)  and
206(2) of the Advisers Act; and (iv) SIB and SCG from violating Section 7(d) of the Investment
Company Act.
II.
  Enter  an  Order  immediately  freezing  the  assets  of  Defendants  and  directing  that  all
financial  or  depository  institutions  comply  with  the  Court’s  Order.    Furthermore,  order  that
Defendants  immediately  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 of this 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
oath,  detailing  all  of  their  assets  and  all  funds  or  other  assets  received  from  investors  and  from
one another.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
21

IV.
 Order  that  Defendants  be  restrained  and  enjoined  from  destroying,  removing,  mutilating,
altering,  concealing,  or  disposing  of,  in  any  manner,  any  of  their  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 of the 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 of documents, 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
the  Investment  Company  Act  [15  U.S.C.  §  80a-41(e)],  and  Section  209(e)  of  the  Advisers  Act
[15 U.S.C. §  80b-9(e)] for their securities law violations.
SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
22

SEC v. Stanford International Bank, Ltd., et al.
First Amended Complaint
23
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.

Respectfully submitted,

        s/ David B. Reece

                                                                        STEPHEN            J.            KOROTASH
                                                                        Oklahoma            Bar            No.            5102
                                                                        J.            KEVIN            EDMUNDSON
                                                                        Texas            Bar            No.            24044020
                                                                        DAVID            B.            REECE
                                                                        Texas            Bar            No.            24002810
      MICHAEL D. KING
                                                                        Texas            Bar            No.            24032634
                                                                        D.            THOMAS            KELTNER
                                                                        Texas            Bar            No.            24007474
      JASON ROSE
                                                                        Texas            Bar            No.            24007946

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)

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

DALLAS DIVISION 
 
SECURITIES AND EXCHANGE COMMISSION, § 
        § 

Plaintiff,   § FIRST AMENDED 
        §      COMPLAINT 
v.   §  
   § Case No.:  3:09-cv-0298-N  

  § 
STANFORD INTERNATIONAL BANK, LTD.,  § 
STANFORD GROUP COMPANY,    § 
STANFORD CAPITAL MANAGEMENT, LLC,  § 
R. ALLEN STANFORD, JAMES M. DAVIS, and §  
LAURA PENDERGEST-HOLT,    § 
        § 
    Defendants,   § 
 and        § 
        § 
STANFORD FINANCIAL GROUP, and   § 
THE STANFORD FINANCIAL GROUP BLDG INC.,  § 
        § 
    Relief Defendants.  § 
________________________________________________§ 
 
 Plaintiff Securities and Exchange Commission alleges: 

SUMMARY 

 1. For at least a decade, R. Allen Stanford and James M. Davis, through companies 

they control, including Stanford International Bank, Ltd. (“SIB”) and its affiliated Houston-based 

investment advisers, Stanford Group Company (“SGC”) and Stanford Capital Management 

(“SCM”), executed a massive Ponzi scheme.  In carrying out the scheme, Stanford and Davis 

misappropriated billions of dollars of investor funds and falsified SIB’s financial statements in 

an effort to conceal their fraudulent conduct.   

2. Laura Pendergest-Holt, the chief investment officer of Stanford Financial Group 

(“SFG”) and a member of SIB’s investment committee, facilitated the fraudulent scheme by 

Case 3:09-cv-00298-N     Document 48      Filed 02/27/2009     Page 1 of 23



misrepresenting to investors that she managed SIB’s multi-billion investment portfolio of assets 

and employed a sizeable team of analysts to monitor the portfolio.       

3. By year-end 2008, SIB had sold approximately $8 billion of self-styled 

“certificates of deposits” (the “CD”) by touting: (i) the bank’s safety and security; (ii) consistent, 

double-digit returns on the bank’s investment portfolio; and (iii) high return rates on the CD that 

greatly exceeded those offered by commercial banks in the United States.      

4. Contrary to SIB’s public statements, Stanford and Davis, by February 2009, had 

misappropriated at least $1.6 billion of investor money through bogus personal loans to Stanford 

and “invested” an undetermined amount of investor funds in speculative, unprofitable private 

businesses controlled by Stanford.  

5. In an effort to conceal their fraudulent conduct and maintain the flow of investor 

money into SIB’s coffers, Stanford and Davis fabricated the performance of the bank’s 

investment portfolio.  Each month, Stanford and Davis decided on a pre-determined return on 

investment for SIB’s portfolio.  Using this pre-determined number, SIB’s internal accountants 

reverse-engineered the bank’s financial statements to report investment income that the bank did 

not actually earn.  SIB’s financial statements, which were approved and signed by Stanford and 

Davis, bore no relationship to the actual performance of the bank’s investment portfolio.      

 6. In addition to sales of the CD, SGC and SCM advisers, since 2004, have sold more 

than $1 billion of a proprietary mutual fund wrap program, called Stanford Allocation Strategy 

(“SAS”), using materially false and misleading historical performance data.  The false data enabled 

SGC/SCM to grow the SAS program from less than $10 million in 2004 to over $1.2 billion in 2009 

and generate fees for SGC/SCM (and ultimately Stanford) in excess of $25 million.  The fraudulent 

SAS performance results were also used to recruit registered financial advisers with significant 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

2

Case 3:09-cv-00298-N     Document 48      Filed 02/27/2009     Page 2 of 23



books of business, who were then heavily incentivized to re-allocate their clients’ assets to SIB’s 

CD program.  

7. By engaging in the conduct described in this Complaint, Defendants directly or 

indirectly, singly or in concert, have engaged, and unless enjoined and restrained, will again 

engage in transactions acts, practices, and courses of business that constitute violations of 

Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 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 described herein, Stanford, SGC, and SCM 

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 (“Investment Company Act”) [15 U.S.C. § 80a-7(d)].   

JURISDICTION AND VENUE 

 8. 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) of the 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)]. 

 9. 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. 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

3

Case 3:09-cv-00298-N     Document 48      Filed 02/27/2009     Page 3 of 23



10.  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].   

11. 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 of business alleged 

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

Northern District of Texas. 

DEFENDANTS 

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

domiciled in St. John’s, Antigua, West Indies.  SIB claims to serve 50,000 clients in over 100 

countries, with assets under management of approximately $8 billion.  Unlike a commercial 

bank, SIB claims that it does not loan money.  SIB sells the CD to U.S. investors through SGC, 

its affiliated investment adviser.     

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

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

United States.   SGC’s principal business consists of sales of SIB-issued securities, marketed as 

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

which in turn is owned by R. Allen Stanford.   

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

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

SCM markets the SAS program through SGC.   

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

4

Case 3:09-cv-00298-N     Document 48      Filed 02/27/2009     Page 4 of 23



15.  R. Allen Stanford, a citizen of the U.S. and Antigua, West Indies, is the chairman 

of the board and sole shareholder of SIB and the sole director of SGC’s parent company.  During 

the Commission’s investigation, Stanford refused to produce documents and information 

accounting for the bank’s multi-billion dollar investment portfolio.   

16.  James M. Davis, a U.S. citizen and resident of Baldwyn, Mississippi, is a director 

and chief financial officer of SFG and SIB.  Davis maintains offices in Memphis, Tennessee, and 

Tupelo, Mississippi.  During the Commission’s investigation, Davis refused to provide 

documents and information accounting for the bank’s multi-billion dollar investment portfolio.   

17.  Laura Pendergest-Holt, is the chief investment officer of SFG and a resident of 

Baldwyn, Mississippi.  She was appointed to SIB’s investment committee on December 7, 2005.  

She supervises a group of analysts who “monitor” the performance of a small portion of SIB’s 

portfolio. 

STATEMENT OF FACTS 

Stanford International Bank 

18. Stanford controls a web of private affiliated companies that operate under the 

name Stanford Financial Group.  Stanford is the sole owner of SFG. 

19. SIB, one of SFG’s affiliates, is a private, offshore bank located in Antigua.  SIB 

purports to have an independent board of directors, an investment committee, a chief investment 

officer and teams of global portfolio advisers and analysts.    

20. The vast majority of the bank’s assets are managed exclusively by Stanford and 

Davis.  Stanford and Davis surrounded themselves with a close-knit circle of family, friends and 

confidants.  Accordingly, SIB, and in turn Stanford and Davis, had no independent oversight 

over SIB’s assets.     

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

5

Case 3:09-cv-00298-N     Document 48      Filed 02/27/2009     Page 5 of 23



21. As of November 28, 2008, SIB reported approximately $8 billion in total assets.  

SIB aggregated customer deposits, and then purportedly re-invested those funds in a “globally 

diversified portfolio” of assets.    

22. SIB sold more than $1 billion in CDs per year between 2005 and 2008, including 

sales to U.S. investors.     

23. SIB marketed the CD to investors in the United States exclusively through SGC 

advisers pursuant to a Regulation D private placement.  In connection with the private 

placement, SIB filed several Forms D with the Commission.      

24. As indicated by the following chart from SIB’s training materials, for almost 

fifteen years, SIB claimed that it has earned consistently high returns on its investment of 

deposits (ranging from 11.5% in 2005 to 16.5% in 1993):   

  

 

 

 

 

 

STANFORD INTERNATIONAL BANK 
Return Vs. Interest Paid To Depositors

14.6%

16.5%

13.9%

15.7%
14.8% 14.2% 14.3%

8.3% 8.0% 7.8%
8.4%

9.5% 9.7%
9.1%

8.5% 8.5% 8.4%
7.7%

6.2% 6.0%
6.7%

11.9%
11.7%

14.0%
14.1%14.9%

15.7%

11.5% 12.0%

6.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

 

25. SIB sold the CD using these purported returns on investment.  

26. SIB’s purportedly high returns on investment allegedly enabled the bank to pay 

significantly higher rates on the CD than those offered by U.S. banks.  For example, SIB offered 

7.45% as of June 1, 2005, and 7.878% as of March 20, 2006, for a fixed rate CD based on an 

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First Amended Complaint 

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investment of $100,000.  On November 28, 2008, SIB quoted 5.375% on a 3-year flex CD, while 

comparable U.S. bank CDs paid under 3.2%.     

27. SIB paid disproportionately large commissions to SGC for the sale of CDs.  SGC 

received a 3% trailing fee from SIB on sales of CDs by SGC advisers.  SGC advisers received a 

1% commission upon the sale of the CDs, and were eligible to receive as much as a 1% trailing 

commission throughout the term of the CD.   

28. SGC used this generous commission structure to recruit established financial 

advisers to the firm.  The commission structure also provided a powerful incentive for SGC 

financial advisers to aggressively sell CDs to investors. 

29. In 2007, SIB paid SGC and its affiliates more than $291 million in management 

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

 30. SIB segregated its investment portfolio into three tiers: (i) cash and cash 

equivalents (“Tier 1”); (ii) investments with “outside portfolio managers (25+)” that were 

monitored by the SFG analysts (“Tier 2”); and (iii) unknown assets managed by Stanford and 

Davis (“Tier 3”).  As of December 2008, Tier 1 represented approximately 9% ($800 million) of 

SIB’s portfolio. Tier 2, prior to the bank’s decision to liquidate $250 million of investments in 

late 2008, represented approximately 10% of the portfolio. And Tier 3 represented approximately 

80% of SIB’s investment portfolio.  

SIB’s Fraudulent Sale of CDs 
 

Stanford and Davis Misappropriated Investor Funds and Fabricated SIB’s Financial 
Statements 
 
31. In selling the CD to investors, SIB touted, among other things, the CD’s safety 

and security and SIB’s consistent, double-digit returns on its investment portfolio.      

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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32. In its brochure, SIB told investors, under the heading “Depositor Security,” that 

its investment philosophy is “anchored in time-proven conservative criteria, promoting stability 

in [the bank’s] certificate of deposit.”  SIB also emphasized that its “prudent approach and 

methodology translate into deposit security for our customers.”  

33. Stanford, Davis and Pendergest-Holt approved the use of the brochure.  

34. Contrary to SIB’s representations in the brochure about depositor security, SIB 

made, with Davis’s knowledge, at least $1.6 billion in undocumented “loans” to Stanford.  These 

undocumented loans were never disclosed in SIB’s financial statements or other communications 

with investors.   

35. In an effort to conceal their fraud and ensure that investors continued to purchase 

the CD, Stanford and Davis fabricated the performance of SIB’s investment portfolio.   

36. In SIB’s Annual Reports, SIB told investors that the bank earned from its 

“diversified” investments approximately $642 million in 2007, and $479 million in 2006. 

37. SIB’s financial statements, including its investment income, are fictional.  In 

calculating SIB’s investment income, Stanford and Davis provided to SIB’s internal accountants 

a pre-determined return on investment for the bank’s portfolio.  Using this pre-determined 

number, SIB’s accountants reverse-engineered the bank’s financial statements to reflect 

investment income that SIB did not actually earn.   

38. Between February 2 and February 6, 2009, Stanford and Davis admitted, during a 

meeting with a core group of senior employees (including Pendergest-Holt) in Miami, Florida, 

that they had misappropriated investor funds and falsified SIB’s financial statements.   

39. Incredibly, four days after the Miami meetings, Pendergest-Holt made a two-hour 

presentation to the Commission’s staff – and subsequently testified under oath – regarding the 

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whereabouts of SIB’s multi-billion dollar investment portfolio.  During her presentation and 

testimony, Pendergest-Holt denied any knowledge concerning the status of the vast majority of the 

bank’s assets and failed to disclose that Stanford and Davis had misappropriated investor funds. 

SIB Misrepresented That It Received a Capital Infusion 

 40. In its December 2008 Monthly Report, SIB told investors that the bank had 

received a capital infusion of $541 million on November 28, 2008.   

 41. This representation was false.  SIB did not receive a capital infusion of $541 

million.  Instead, Stanford contributed to SIB equity interests in two pieces of real estate that the 

bank already owned.  The real estate was valued at approximately $88.5 million when acquired. 

 42. By virtue of their positions on SIB’s board of directors and investment committee, 

Stanford and Davis knew that: (i) Stanford did not make a $541 million capital infusion into SIB; 

(ii) SIB, not Stanford, owned the real estate; and (iii) the real estates value was approximately 

$88.5 million, not $541 million.     

 43. Stanford, Davis and Pendergest-Holt approved the December 2008 Monthly 

Report.   

Stanford and Davis Misrepresented the Liquidity of SIB’s Investments 

44. In its 2006 and 2007 Annual Reports, SIB told investors that the bank’s assets 

were invested in a “well-balanced global portfolio of marketable financial instruments, namely 

U.S. and international securities and fiduciary placements.”  More specifically, as shown below, 

SIB represented that its 2007 portfolio allocation was 58.6% equity, 18.6% fixed income, 7.2% 

precious metals and 15.6% alternative investments:  

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First Amended Complaint 

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45. In its CD brochures, SIB emphasized the importance of investing in “marketable” 

securities, saying that “maintaining the highest degree of liquidity” was a “protective factor for 

our depositors.”    

46. Consistent with its Annual Reports and brochures, SIB trained SGC financial 

advisers, in February 2008, that “liquidity/marketability of SIB’s invested assets” was the “most 

important factor to provide security to SIB clients.”     

47. Stanford and Davis approved and/or signed the Annual Reports, brochure and 

training materials. 

48. Contrary to SIB’s representations regarding the liquidity of its portfolio, SIB did 

not invest in a “well-diversified portfolio of highly marketable securities.”  Instead, significant 

portions of the bank’s portfolio were misappropriated by Stanford used by him to acquire private 

equity and real estate.  In fact, at year-end 2008, the largest segments of the bank’s portfolio 

were: (i) undocumented “loans” to Stanford; (ii) private equity; and (iii) over-valued real estate. 

 
 
 
 
 

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First Amended Complaint 

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SIB Trained Financial Advisers to Misrepresent that Its Multi-Billion Dollar 
Investment Portfolio was Managed by a Global Network of Portfolio Advisers, 
Monitored By a Team of Analysts and Audited by Regulators 

 
49. Prior to making investment decisions, prospective investors routinely asked how 

SIB safeguarded and monitored its assets.  Investors frequently inquired whether Stanford could 

“run off with the money.”   

50. In response to this question, at least during 2006 and much of 2007, Pendergest-

Holt trained SIB’s senior investment officer (“SIO”) to tell investors that the bank’s multi-billion 

dollar portfolio was managed by a “global network of portfolio managers” and “monitored” by a 

team of SFG analysts in Memphis, Tennessee.  In communicating with investors, the SIO 

followed Pendergest-Holt’s instructions, telling investors that SIB’s investment portfolio was 

managed by a global network of money managers and monitored by a team of 20-plus analysts.   

51. Neither Pendergest-Holt nor the SIO disclosed to investors that the “global 

network” of money managers and the team of analysts did not manage any of SIB’s investments 

and only monitored approximately 10% of SIB’s portfolio.  In fact, Pendergest-Holt trained the 

SIO “not to divulge too much” about the oversight of SIB’s portfolio because that information 

“wouldn’t leave an investor with a lot of confidence.”  Likewise, Davis instructed the SIO to 

“steer” potential CD investors away from information about SIB’s portfolio.  

52. In addition, the SIO, at Pendergest-Holt’s direction, 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.   

53. Contrary to SIB’s representations to investors, the FSRC did not audit or verify 

the assets SIB claimed in its financial statements.  Instead, SIB’s accountant, C.A.S. Hewlett & 

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First Amended Complaint 

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Co., a small local accounting firm in Antigua was responsible for auditing SIB’s multi-billion 

dollar investment portfolio. 

Stanford, Davis and Pendergest-Holt Lied to Financial Advisers      

54. On January 10, 2009, Stanford, Davis and Pendergest-Holt spoke to SIB’s Top 

Performer’s Club in Miami, Florida.   

55. During the meeting, Davis stated that SIB was “stronger” than at any time in 

history.  Stanford, Davis and Pendergest-Holt represented that SIB was secure and built on a 

strong foundation, and that its financial condition was shored up by capital infusions. 

56. But Davis failed to disclose that he had been informed only days earlier by the 

head of SIB’s treasury that, despite their best efforts to liquidate tier two assets, SIB’s cash 

position had fallen from the June 30, 2008 reported balance of $779 million to less than $28 

million.   

57. Stanford and Davis failed to disclose to the attendees that: (i) they had invested 

SIB funds in a manner inconsistent with offering documents and its own financial statements and 

(ii) the November 28, 2008 capital infusion was a fiction. 

58. During her speech, Pendergest-Holt, after being introduced as SFG’s chief 

investment officer and a “member of the investment committee of the bank,” answered questions 

about SIB’s investment portfolio.  In so doing, she failed to disclose to attendees that she and her 

team of analysts did not manage SIB’s investment portfolio and only monitored approximately 

10% of the bank’s investments. 

59. Significantly, Stanford, Davis and Pendergest-Holt also failed to disclose that on 

or about December 12, 2008, Pershing, citing suspicions about SIB’s investment returns and its 

inability to get from the bank “a reasonable level of transparency” into its investment portfolio, 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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informed SGC that it would no longer process wire transfers from SGC to SIB for the purchase 

of the CD.   

60. Stanford, Davis and Pendergest knew that SGC advisers would use the 

information provided to them during the Top Performer’s Club meeting to sell the CD. 

SIB Misrepresented That It Had No Exposure to Losses From Madoff-related 
Investments  
 
61. In the December 2008 Monthly Report, SIB told CD investors that the bank “had 

no direct or indirect exposure to any of [Bernard] Madoff’s investments.”   

62. Contrary to this statement, Stanford, Davis and Pendergest-Holt knew, prior to the 

release of the Monthly Report, that SIB had exposure to losses from investments with Madoff.   

63. On December 12, 2008 and again on December 18, 2008, Pendergest received e-

mails from Meridian Capital Partners, a hedge fund with which SIB had invested, detailing SIB’s 

exposure to Madoff-related losses.    

64. On December 15, 2008, an SFG-affiliated employee notified Pendergest-Holt and 

Davis that SIB had exposure to Madoff-related losses in two additional funds through which SIB 

had invested.  That same day, Davis, Pendergest-Holt and others consulted with Stanford 

regarding the bank’s exposure to Madoff-related losses. 

65. Stanford, Davis and Pendergest-Holt never corrected this misrepresentation.   

SGC and SCM’s Fraudulent Mutual Fund Sales 

66. From 2004 through 2009, SGC and SCM induced clients, including non-

accredited, retail investors, to invest in SAS, a proprietary mutual fund wrap program, by touting 

a fraudulent track record of “historical performance.”   

67. SGC/SCM highlighted the purported SAS track record in thousands of client 

presentation books (“pitch books”).  For example, the following chart from a 2006 pitch book 

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First Amended Complaint 

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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:   

 

 
 
68. SGC/SCM used these performance results to grow the SAS program to over $1 

billion in 2008.   

69. SGC/SCM also used the SAS track record to recruit financial advisers with 

significant books of business away from competitors.  After arriving at Stanford, the newly-hired 

financial advisers were incentivized to put their clients’ assets in the CD.  

70. Other than the fees paid by SIB to SGC/SCM for CD sales, SAS was the most 

significant source of revenue for SGC/SCM.  In 2007 and 2008, SGC/SCM received 

approximately $25 million in fees from the marketing of SAS.   

71. The SAS performance results used in the 2005 through 2009 pitch books were 

fictional and/or inflated.  SGC/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 did not reflect the results of actual trading.   

72. SGC/SCM, with the benefit of hindsight, picked mutual funds that performed 

extremely well from 1999 through 2004, and presented the performance of those top-performing 

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

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First Amended Complaint 

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73. SGC/SCM also used “actual” model SAS performance results for 2005 and 2006 

that were inflated by as much as 4 percentage points.   

74. SGC/SCM told investors that SAS had positive returns for periods in which actual 

SAS clients lost substantial amounts.  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% to 

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

8.7%.       

75. SGC/SCM’s management knew that the advertised SAS performance results were 

misleading and inflated.  And they also knew that the pre-2005 track record was purely 

hypothetical.   

76. As early as November 2006, SGC/SCM investment advisers began to question 

why their clients were not receiving the returns advertised in the pitch books.  In response to 

these questions, SGC/SCM hired an outside performance reporting expert to review the SAS 

performance results.   

77. In late 2006 and early 2007, the expert informed SGC/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 SGC/SCM managers that the inflated 

performance results included unexplained “bad math” that consistently inflated the purported 

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

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

as much as 3.25 percentage points.      

78. Despite its knowledge of the inflated SAS returns, SGC/SCM management 

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

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

2005 performance data under the heading “Historical Performance” and “Manager Performance” 

alongside the audited 2005 through 2008 figures.  SGC/SCM’s outside consultant testified that it 

was “misleading” to present audited performance figures alongside back-tested figures.      

79. Finally, as indicated the chart below, SGC/SCM blended the back-tested 

performance with audited composite performance to create annualized 5 and 7 year performance 

figures that bore no relation to actual SAS client performance:   

 

 
 
80.  As evidence by its use of fictional and/or inflated performance results in the pitch 

books, SGC/SCM knowingly misled investors in connection with the sale of SAS.     

CAUSES OF ACTION 
 

FIRST CLAIM 
AS TO ALL DEFENDANTS 

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

81. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.   

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First Amended Complaint 

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 82. 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 

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

(ii) made untrue statements of material facts and 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; and (iii) engaged in acts, practices and courses of business which operate as a fraud 

and deceit upon purchasers, prospective purchasers and other persons. 

 83. As a part of and in furtherance of their scheme, Defendants, directly and 

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

statements, promotional materials, investor and other correspondence, and oral presentations, 

which contained untrue statements of material facts and misrepresentations of material facts, 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. 

84. Defendants made the referenced misrepresentations and omissions knowingly or 

grossly recklessly disregarding the truth. 

85. 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 10(b) and Rule 10b-5  
 

86. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.   

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

10(b) and Rule 10b-5, in the alternative, Stanford, Davis, and Pendergest-Holt, in the manner set 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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

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

C.F.R. § 240.10b-5] alleged herein. 

88. For these reasons, Stanford, 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 10b-5 [17 C.F.R. § 240.10b-5].   

THIRD CLAIM 
AS TO ALL DEFENDANTS 

Violations of Section 17(a) of the Securities Act 

89. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.  

 90. 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: (i) employed devices, schemes or artifices to 

defraud; (ii) obtained money or property by means of untrue statements of material 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 (iii) engaged in transactions, 

practices or courses of business which operate or would operate as a fraud or deceit. 

91.  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. 

 92. Defendants made the referenced misrepresentations and omissions knowingly or 

grossly recklessly disregarding the truth. 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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 93. 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 

 94. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.  

95.  Stanford, SGC and SCM, directly or indirectly, singly or in concert with others, 

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)]: (i) have employed, are employing, or are about to 

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

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

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

96.  For these reasons, Stanford, SGC and SCM 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)]. 

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

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

97. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.  

98. 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 

connection with the violations of Advisers Act Sections 206(1) and 206(2) [15 U.S.C. §§ 80b-

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

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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99. For these reasons, Stanford, Davis, and Pendergest-Holt aided and abetted and, 

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 SIB AND SGC 

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

100. Plaintiff Commission repeats and realleges paragraphs 1 through 80 above.   

101. 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 of which 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. 

102. SGC, 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 

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. 

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

20

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

RELIEF REQUESTED 

 Plaintiff Commission respectfully requests that the Court: 

I. 

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

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

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

Holt, SGC, and SCM from violating, or aiding and abetting violations of, Sections 206(1) and 

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

Company Act. 

II. 

 Enter an Order immediately freezing the assets of Defendants and directing that all 

financial or depository institutions comply with the Court’s Order.  Furthermore, order that 

Defendants immediately 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 of this 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 

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

one another. 

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First Amended Complaint 

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IV. 

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

altering, concealing, or disposing of, in any manner, any of their 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 of the 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 of documents, 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 

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

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

SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

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SEC v. Stanford International Bank, Ltd., et al. 
First Amended Complaint 

23

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. 

 

Respectfully submitted,  
 
 
 

        s/ David B. Reece     
      STEPHEN J. KOROTASH 
      Oklahoma Bar No. 5102 
      J. KEVIN EDMUNDSON 
      Texas Bar No. 24044020 
      DAVID B. REECE 
      Texas Bar No. 24002810 
      MICHAEL D. KING 
      Texas Bar No. 24032634 
      D. THOMAS KELTNER 
      Texas Bar No. 24007474 
      JASON ROSE 
      Texas Bar No. 24007946 

 
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)  

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