Because Stanford’s businesses constantly hemorrhaged money, he routinely stole from SIB in the form of undisclosed 'loans...' By 2008, Stanford infused approximately $1 million dollars a day in depositor funds to keep his businesses afloat...by the end of 2008, over $2 billion in depositor funds had gone to Stanford-affiliated companies...Stanford spent millions of dollars...on private planes and mansions around the world. He regularly used private planes to fly dry cleaning to Texas or Florida from the Caribbean; bottled artesian water to his St. Croix home; fish to his koi pond in St. Croix; and an IT employee to Antigua to bring him replacement laptops after Stanford repeatedly destroyed his by throwing it against the wall.
- Response brief, p. 40
The Department of Justice (the "Department") has responded to Allen Stanford's request to overturn his 110-year sentence for operating the second largest Ponzi scheme in history, providing an in-depth recitation of the massive fraud that Stanford was convicted of operating and arguing that "overwhelming evidence in the form of testimony and supporting documentary evidence support his convictions." After Stanford filed a 299-page handwritten brief filed by Stanford back in October 2014, the Department responded with a 196-page brief that expounds on Stanford's fraud in excruciating detail and summarily disproves Stanford's numerous alleged grounds meriting the vacatur of his convictions. For a fraud that spanned nearly twenty years and defrauded thousands of investors out of billions of dollars, the Department rejected any notion that Stanford was somehow entitled to any relief from his current term - one which carries a current prospective release date of April 17, 2105.
The factual overview of Stanford's scheme was provided in painstaking detail in the Response brief, and included the following notable disclosures:
After the SEC investigation surged in December 2008 and again after subpoenas issued in 2009, Kelly Taylor, the manager of Stanford’s St. Croix estate, complied with Stanford’s instructions to fill empty barrels with his bank records and personal financial information and burn the documents (USCA5 Supp. 6 8138-8144; GX 726C, 735). Taylor had never been asked by Stanford to burn documents prior to December 2008 (USCA5 Supp. 6 8139).
- Response brief, p.28
Leroy King became the head of the [Antiguan securities regulator Financial Services Regulatory Commission] and regularly accepted cash bribes from Stanford to overlook the false financial reports submitted by SIB to the FSRC (USCA5 Supp. 6 6871-6872, 7091). Stanford and King sealed the deal by cutting themselves in a blood-oath ceremony
- Response brief, p. 26
Stanford advised Davis that the bank never had a profitable year after 1986, but he needed to show a profit nonetheless to ensure CD sales
- Response brief, p. 11
Beginning on Montserrat, Stanford hired only one auditor, C.A.S. Hewlett, a one-man independent auditor from Antigua (USCA5 Supp. 6 4487). Hewlett rubber-stamped the bank’s false financial statements without performing any audits (USCA5 Supp. 6 7140)...Stanford commented to Davis, “God led me to Hewlett”
- Response brief, p. 25
When Green suggested that Stanford also solicit wealthy friends to contribute, Stanford responded “I’ll go to the Libyans. They love me” (USCA5 Supp. 6 5014-5015, 5026-5027). Stanford’s trip to Libya proved unsuccessful
- Response brief, p. 29
By the end of 2008, over $2 billion in CD monies went to over 50 of Stanford’s failing businesses in the Caribbean and elsewhere, including, among others: restaurants, two airlines, a newspaper, and a group of companies that existed exclusively for tax purposes for Stanford’s fleet of jets and boats, including a 112-foot yacht that he spent $13 million renovating
- Response brief, p. 14
Stanford's appeal included a number of grounds which he contended should warrant the reversal of his 2012 conviction. For example, Stanford argued that the U.S. lacked jurisdiction to bring charges against him since his bank, Stanford International Bank, was located in Antigua and thus not subject to U.S. laws. Additionally, Stanford argued that the certificates of deposit issued by Stanford International Bank could not be considered "securities" under federal securities laws. As Stanford contended, "simply put, Stanford International Bank was regulated by—and only by—Financial Services Regulatory Commission of Antigua and Barbuda."
Stanford also argues that he was deprived of his right to a fair trial after he was found competent to stand trial despite his claims that a prison beating had irreparably impaired his memory functions and affected his ability to confer with defense lawyers. A federal judge overseeing his criminal trial found Stanford fit to stand trial after a three-day competency hearing. Stanford claimed that his injuries "profoundly affected [my] ability to communicate with [my] attorneys and prepare [my] defense.”
The Department addresses each of Stanford's arguments in detail, which frequently included assertions that Stanford was misrepresenting or taking certain portions of the record out of context. For example, Stanford claimed that the Department's decision to remove certain counts from the original indictment was compelled by Stanford's argument that the certificates of deposit sold by Stanford International Bank were not "securities," and that the inclusion of the securities fraud charge was simply a precursor to use evidence gathered by the Securities and Exchange Commission in his criminal case. To this, the Department explained that those counts were simply renumbered in the subsequent indictment.
In another argument, Stanford argued that the trial judge's definition of the word "scheme," in response to a question submitted by jurors during deliberations, contributed to a poisonous atmosphere that had been prejudiced by the inflammatory connotation of the word "scheme." According to Stanford, the word appeared dozens of times in the indictment, area newspapers, and even by the trial judge. However, the Department responded that the word "scheme" was used in the statutory language of both mail fraud and wire fraud as well as the pattern jury instructions in the Fifth Circuit. Additionally, the Department pointed to an explicit instruction from the trial judge that the jury was to ignore all publicity surrounding the case. In short, the Department characterized Stanford's argument as "frivolous."
While Stanford argues that oral argument is necessary, the Department's response maintains that oral argument would be unnecessary. Stanford will now have the opportunity to file a reply brief in response of his original brief.
The Department's Response brief is below: