Stanford had billions from Venezuela wealthy

CARACAS (Reuters) - Up to one-third of the money held by Stanford International Bank (SIB), at the epicenter of an alleged massive fraud, comes from Venezuela, with investors ranging from middle-class professionals with small deposits to multimillionaires, officials said on Wednesday.

Hundreds of clients besieged the local offices of the investment bank Wednesday, trying fruitlessly to withdraw their money after U.S. authorities charged its owner, Texan billionaire Allen Stanford, and two top Stanford executives with selling $8 billion in fraudulent certificates of deposit.

Venezuelans have about $2.5 billion in the company, the banking regulator said. An executive with knowledge of the bank estimated the total at no more than $1.7 billion.

For more than a decade, the privately owned SIB has been a favored investment vehicle for Latin America's wealthy and upper middle class.

Against the backdrop of worried Venezuelan investors at SIB, officials sought to calm clients at a Venezuelan sister company, whose assets are not linked to the business that is the target of the fraud charges.

Venezuelan authorities said Stanford Bank Venezuela, one of the country's smallest retail banks, has healthy finances. Finance Minister Ali Rodriguez said it was important for people not to be alarmed or spark a run on the bank, which takes deposits and makes loans in Venezuelan currency.

Venezuela has strict foreign exchange controls.

Venezuelan clients of SIB include professionals with a few thousand dollars on deposit and others who had invested as much as tens of millions of dollars, said the industry source, who asked not to be named.

Wealthy Venezuelans often keep their money overseas, fearful of the political instability under socialist President Hugo Chavez who draws most his support from the poor.

"We put our money overseas because in Venezuela there is no security for investors," said a retiree, who stood in line at SIB with her husband and whose savings had come from home rentals.

Used to high returns in the oil-exporting nation, Venezuelan investors were attracted by Stanford's high interest payments.

A Stanford executive in Venezuela said he had worked for two days without sleep and received hundreds of calls. He said all accounts were frozen and pleaded for people to go home.

NO STRANGER TO CONTROVERSY

Allen Stanford, the two executives and three companies, including the Houston-based broker-dealer and investment units, were charged Tuesday with "massive fraud."

The U.S. Securities and Exchange Commission accused him of fraudulently selling $8 billion in high-yield certificates of deposits in a scheme that stretched around the world.

The local banking official said Venezuelan business was an early motor of growth for the bank, although investments from the OPEC nation dropped off in recent years.

While individual Venezuelans are affected, the impact on the economy should be minimal because the money was offshore.

SIB is no stranger to controversy in Venezuela. In October, military intelligence officials raided the bank in a case that included accusations of U.S. spying.

The fraud case has had an impact in other parts of Latin America. Panama regulators took over an affiliate, a local arm of Stanford Financial Group halted its activities on the stock exchange in Colombia, and Ecuadorean authorities stopped a brokerage linked to the group from operating.

At a Caracas branch of Stanford's retail bank, there were no long lines, but some people wanted to take their money out.

"I heard (the news) on the radio and practically ran over here in my pajamas" said Karin Dahan, 37, a businesswoman.

Many Venezuelans remember a 1994-1995 crisis that cost the country $11 billion as half of the country's banks failed.

Chavez, who blames problems in the global banking system on capitalist greed, said last year he would expropriate any bank that failed rather than bail it out.