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Evidence and court documents from the trial indicate that SIB sold certificates of deposit (CDs) to depositors, who usually paid more than the interest rates on CDs issued by US banks. The bank owed over $8 billion to its CD depositors by 2008. The bank allegedly used CD proceeds to purchase extremely conservative, marketable securities that were also very liquid, allowing the bank to quickly sell its assets and reimburse depositors, according to SIB's annual reports and marketing brochures.[2]
Actually, only roughly 10% to 15% of the bank's assets were managed and invested on the basis of the alleged strategy. In the form of undisclosed "loans," Stanford redirected billions of depositor funds into a number of businesses that he personally owned, which generated a net loss of hundreds of millions of dollars annually.[3]
Stanford perpetuated the scheme by paying out existing depositors who redeemed their CDs using sales from new CDs. He made false claims about personally contributing $741 million to the bank's capital base in 2008, when the financial crisis led to a decline in record redemptions and new CD sales. Although there were no independent appraisals or improvements to the property, Stanford's internal accountants inflated the value of a piece of real estate SIB had bought for $63.5 million earlier in 2008 by 5,000 percent to $3.1 billion on paper to support that false announcement.[4]
Stanford continued his fraud, according to the trial evidence, by bribing Leroy King, the CEO of the Antiguan Financial Services Regulatory Commission (FSRC) at the time, and C.A.S. Hewlett, the SIB's auditor, with money from a Swiss slush fund held at Societe Generale Bank.[3]
Several of his suspected co-conspirators, including former chief financial officer James Davis, former chief investment officer Laura Holt, former chief accounting officer Gilbert Lopez, former controller Mark Kuhrt, and King, were previously indicted by a Southern District of Texas grand jury in addition to Stanford.[5]
Leroy King position
King has been the FSRC's CEO since 2002. As part of his responsibilities, he was in charge of Antigua's regulatory supervision of the investment portfolio of SIBL. This included reviewing SIBL's financial reports and responding to requests for documents and information about SIBL's operations from foreign regulators, such as the Securities and Exchange Commission (SEC).[5]
King, Stanford, and others were charged in June 2009 by US authorities. The indictment accused King of conspiracy to commit money laundering, conspiracy to obstruct and obstruct a SEC investigation, seven counts of wire fraud, ten counts of mail fraud, and one count of conspiracy to commit mail, wire, and securities fraud.
King allegedly accepted over $100,000 in bribes from Stanford in exchange for disregarding SIB's true asset value, according to the indictment. Additionally, he allegedly helped Stanford and others thwart the SEC's bank investigation.[4]
On November 8, 2019, he was finally extradited from Antigua to face charges related to his alleged involvement in the $7 billion investment fraud scheme at Stanford International Bank.[9][5][10][11][12]
King acknowledged that during the conspiracy, Stanford paid him a total of about $520,963.87 in cash. Additionally, Stanford gave King tickets to Super Bowl XL in Detroit (2006) and Super Bowl XXXVIII in Houston (2004). Furthermore, King was given frequent flights on private aircraft owned by Stanford or Stanford Financial Group (SFG) entities. King wrote after rejecting the SEC's request for assistance that the FSRC "had no authority to act in the manner requested and would itself be in breach of law if it were to accede to your request". In actuality, as later admitted by King, the FSRC possessed this power but was unable to use it due to the payments and other advantages Stanford provided to him.[4]
King also acknowledged that misconduct prevented the FSRC from carrying out its regulatory duties by independently confirming the existence and worth of SIBL's investments, instead depending on the figures supplied by Stanford, Davis, and others. He also dishonestly gave Stanford, Davis, and others access to information regarding official inquiries that the FSRC had received from the SEC and other regulators. In particular, he permitted Stanford and his staff to write answers to these regulators that included untrue and deceptive claims and statements. He even made it possible for the responses to be printed on FSRC letterhead, and the letters were then distributed as though they had been written by the FSRC.[13]
On February 24, 2021, Leroy King was sentenced to 10 years in prison for his role in a $7 billion Ponzi scheme involving Stanford International Bank, following the decision being repeatedly delayed because of the COVID-19 pandemic.[14] King was prohibited from interacting with brokers, dealers, or investment advisers as part of his plea deal. Additionally, he is not allowed to take part in any penny stock offering, including acting as a promoter, finder, consultant, agent, or any other individual who works with a broker, dealer, or issuer to issue or trade penny stocks, or to induce or attempt to induce the purchase or sale of penny stocks.[3][15]
King is being held (register number 01512-579) at the FCI BUTNER MEDIUM I, a medium security federal correctional institution with an adjacent minimum security satellite camp, and is scheduled for release on May 17, 2027.[16]
Further investigation by SEC
On October 7, 2022, the SEC issued an order instituting administrative proceedings against Leroy King based on statements he made during the criminal investigation.[13][2]
Due to King's failure to answer the SEC's questions, the proceedings have not yet been concluded.[17][18][19]
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