Legal News

?Enemy of Investors? Canned by Home Country

By Ashby Jones

If you read past the allegations filed last week by the DOJ against Allen Stanford, you’ll stumble on some fairly jaw-dropping corruption allegations concerning Leroy King, the administrator of the Antiguan Financial Services Regulatory Commission.

On Tuesday, in the wake of the DOJ’s indictment against Stanford and King, filed last week, King was relieved of his duties.

“He hid his actions from the [FSRC] board, did not consult with or advise them,” said Antiguan Attorney General Justin Simon. “There is correspondence missing from office files.” Click here for the WSJ story; here for the NYT story; and here for some nice commentary from the Houston Chronicle’s Loren Steffy.

The FSRC regulates Antigua’s financial sector, including several offshore banks. Stanford’s firm operated an offshore bank and several other businesses in Antigua.

The Justice Department last week accused Stanford of paying King thousands of dollars a month to conduct fake audits and file inaccurate reports to the Securities and Exchange Commission, which began investigating the bank in 2005.

"I'm sure it slowed down the case," said Alan Bromberg, an expert in securities law at Southern Methodist University in Dallas, to the Houston Chron. "It's ironic you end up with one of the foreign regulators being a villain."

King couldn’t be reached for comment by the WSJ, nor could an attorney who has represented him in other matters.

The SEC alleges King shared documents with Stanford sent by U.S. investigators and allowed Stanford to craft the regulator’s assurance that all was well. Robert Khuzami, SEC enforcement director, described Mr. King as “the enemy of investors” at a press conference Friday.

For our money, the most outrageous allegation reads as follows: In 2005, according to the SEC complaint, King allowed Stanford officials to craft a response to the SEC that read: “We wish to assure the SEC that the FSRC’s most recent onsite examination conducted just five months ago confirmed [Stanford Investment Bank's] compliance with all areas of depositor safety and solvency, as well as all other applicable laws and regulations.”

Stanford was expected to be transported Tuesday to Houston by federal marshals for a detention hearing in federal court later in the week. His lawyer, Dick DeGuerin, has said he will plead not guilty.

Simon, the Antiguan AG, said he expects the U.S. to seek King’s extradition, though it hasn’t done so yet.

Still Jonesing for more Stanford news? Check out this piece, from the FCPA Blog, on why Stanford hasn’t been charged for violating the Foreign Corrupt Practices Act.

Full post as published by Law Blog - WSJ.com on June 24, 2009 (boomark / email).