By Dennis Seid

Daily Journal

While criminal charges haven't yet been filed against Stanford Financial Group Chairman R. Allen Stanford or against his top deputy Chief Financial Officer James M. Davis, it's likely only a matter of time.

And bringing them down could be another company executive, Laura Pendergest-Holt, who along with Stanford and Davis were charged last week by the U.S. Securities and Exchange Commission of taking part in a $9.2 billion investment fraud.

In its civil complaint, the SEC said that Stanford companies and top executives helped orchestrate the sale of $8 billion in certificates of deposit. Authorities said SFG sold the CDs by promising "improbable and unsubstantiated" high interest rates.

The SEC also said another scheme involved $1.2 billion in sales of a mutual fund program that used false historical performance data.

On Friday, Pendergest-Holt, SFG's chief investment officer and Baldwyn native, faced additional criminal charges in a Houston federal court. She was accused Thursday of obstructing the SEC's investigation of the Stanford scandal.

Pendergest-Holt on Friday was freed on $300,000 bond. On condition of her release, she will be tracked electronically.

Former federal prosecutor and SEC enforcement official Jacob Frenkel, who is not connected to the case, said the government was giving Pendergest-Holt a little room to maneuver.

The criminal charge "is a leverage charge," he said. "This is as close to an olive branch that the government will offer toward her."

Criminal charges against R. Allen Stanford and Davis, his former college roommate, aren't "a matter of if, but when," Frenkel said.

Federal authorities are "in the process of climbing the corporate ladder," Frenkel added, "and what they can't find at the top, they'll start talking to people in the field, and they better have their ducks in order."

Also on Friday, the SEC amended its civil complaint against R. Allen Stanford, alleging he had misappropriated $1.6 billion of investor money as part of a decade-long "massive Ponzi scheme."

The SEC said Stanford and Davis used investor money to make "bogus personal loans" to Stanford and that they falsified financial statements. Pendergest-Holt also is charged with helping to facilitate the "fraudulent scheme" by misleading investors into believing she led a team of analysts who oversaw the investments.

Meanwhile, Mississippi Secretary of State Delbert Hosemann said Friday that he has asked the receiver in the Stanford civil case to release all monthly transfers to SFG clients in Mississippi.

After the SEC leveled the fraud charges against Stanford last week, Dallas-based attorney Ralph Janvey was named the receiver. He froze all of the company's assets. The move has locked out thousands of investors worldwide, including more than 4,500 in Mississippi.

"Many of our citizens are worrying how they are going to maintain some quality of life if these funds are not released," said Hosemann, who also asked that Janvey speed up the distribution of non-CD accounts for Mississippi residents.

Earlier this week, the receiver did release some funds outside accounts handled by Pershing LLC and J.P. Morgan Clearing Corp.

According to published reports, Janvey has found about $90 million in assets, but no additional details were available.

As for Pendergest-Holt, she may have a reason to tell the government what she knows: Stanford officials may have been trying to throw her under the bus.

In the criminal complaint filed Thursday, a Stanford lawyer seems to suggest that Pendergest-Holt knew more of the details of the scheme and that other unnamed company executives - presumed to be R. Allen Stanford and Davis - were not "micro-managers."

In January, the SEC issued subpoenas to Stanford Financial Group and related companies, as well as to "SFG Executive A," "SFG Executive B" and Pendergest-Holt. The criminal complaint identifies them as Executive A and Executive B. Several other unnamed Stanford officials and cooperating witnesses also are listed in the complaint.

A Stanford attorney identified as "Attorney A," two days after meeting with the SEC, e-mailed several Stanford executives, including Pendergest-Holt, and executives "A" and "B."

Reads the complaint: "Attorney A confirmed in the e-mail that he had persuaded (the SEC's staff) that (SFG Executives A and B) do not micro-manage and instead delegate, so that the better people to explain details about the portfolio are (SIB Affiliate President) and Laura (Pendergest-Holt)."

Cooperation with the government could mean the difference between five years or 25 years of jail time, Frenkel said.

And unlike Stanford and Davis, Pendergest-Holt did appear before SEC investigators.

But she may not have done herself any favors by lying about her knowledge of the alleged fraud, as the criminal complaint states.

However, her attorney, Dan Cogdell, said she was "set up" by Davis, whom Pendergest-Holt once called her mentor, and Stanford.

Contact Dennis Seid at (662) 678-1589 or dennis.seid@djournal.com.