Robert Allen Stanford, Federal prison inmate and mastermind behind a Ponzi scheme which allegedly cost Southeast Louisiana investors several billion dollars as part of an overall estimated loss of $7 billion to all investors in the scheme. On July 23, 2024, sixteen (16) years after the scheme collapsed, the class action lawsuit of his victims against the Louisiana Office of Financial Institutions (OFI) commenced.
In today’s Sound Off Louisiana feature, founder Robert Burns provides an overview of August 6, 2024 proceedings of Lillie et. al. vs. Louisiana Office of Financial Insertions (OFI):
Highlights of August 6, 2024 proceedings of Lillie et. al. vs. OFI.
Click here for Karyl Van Tassel’s webpage at her employer.
One item that Van Tassel testified to which Burns left off in the above video is that, each year, Stanford International Bank (SIB) would simply “make up” its annual financial statement by first placing the necessary capital amount on the balance sheet to appear reasonably capitalized. The next step would be to produce iterations of spreadsheets until sufficient revenue was present to, after expenses, show enough profit to keep that capital ratio stable and adequate.
Meanwhile, sufficient assets would be reported to essentially serve as the plug figure to keep that capital number in place, and the only reliable figure on the bank’s financial statements was the level of SIB CDs.
Van Tassel testified that, at the time of collapse, CDs totaled approximately $7.2 billion when everything was shut down. Approximately $360 million of that $7.2 billion was lost by clients represented by Mr. Preis in this litigation. As reflected on Van Tassel’s video deposition, $7.2 billion in SIB CDs existed, but she indicated that the collective total of all Stanford entities’ assets had a market value of, “less than $1 billion.”
It should be pointed out that no U. S. bank would ever permit a loan concentration of 21.56% ($1.79 billion loan to Stanford personally of the bank’s reported $8.3 billion in assets) to ANY borrower! That is far beyond a mere reckless banking practice. Nevertheless, it would appear that banking “regulators” in Antigua obviously aren’t remotely comparable to banking regulators in the U. S. Furthermore, “auditors” of SIB’s annual statements obviously must be even more dissimilar to auditors of U. S. companies. Finally, there obviously is no comparable insurance for bank CDs in Antigua similar to the FDIC insurance present on bank deposits in the U. S.
So, perhaps that should explain why SIB could offer returns, according to Val Tassel, on the CDs which ranged from 400% of U. S. CDs of comparable maturity (2002) to 150% of U. S. CDs of comparable maturity (2006). So, if a person bought such a CD in 2002, whereas, for example, they may receive 3% at a U. S. Bank, at SIB they’d receive a whopping 12%. In 2006, if CD rates in the U. S. were 5%, the same CD at SIB would return 7.5%.
Obviously, the OFI received no complaints for years because, well, who’s going to complain when they’re getting that sort of return?
Unfortunately, as is the nature of any Ponzi scheme (and Van Tassel testified to this), those returns were only realized from the fact that subsequent investors placed new money in SIB. Remember, the bank went from approximately $4 million in such CDs in 2001 from Louisiana investors to some $360 million derived from Preis clients at the time of collapse.
Sooner or later, the Ponzi scheme collapses when no new investors step up to take out previous investors, and that’s what happened to Preis’ investors, all of whom, according to his opening arguments, made no purchase of these SIB CDs prior to January 1, 2007.
In the end, Perhaps Van Tassel summed it up best in testifying, “If it sounds too good to be true, it is!”
Links for attorney arguing their clients case:
Plaintiffs: Phil Preis and his daughter, Caroline Graham.
Defendant: Dennis Blunt, Nena Eddy, and Michael Victorian.
