Broke, sick and lonely, Allen Stanford heads to court

R. Allen Stanford arrives at federal court for a hearing before U.S. District Judge Nancy Atlas in Houston August 24, 2010.

HOUSTON (Reuters) - No one calls him Sir Allen Stanford anymore. He is inmate number 35017-183.

On Monday, the Texas financier heads to court in Houston to battle charges that he operated a $7 billion Ponzi scheme from Stanford International Bank Ltd, his offshore bank on the Caribbean island of Antigua. By all accounts, his was a life of luxury, filled with private jets, yachts, mansions and the sport of cricket.

Deemed a flight risk in June 2009 by a federal judge, the 6-foot billionaire has been in jail, sporting prison-issue green and orange jumpsuits and shackles instead of the dark, tailor-made suits he once ordered in bulk.

Stanford, a native Texan who was knighted by the government of Antigua in 2006, is accused of misleading investors about certificates of deposit (CDs) issued by his offshore bank, in one of the biggest white collar fraud cases since Bernard Madoff.

The CDs were touted as safe, with funds "generally invested in investment grade bonds, securities and foreign currency deposit," according to literature distributed by Stanford's brokerage firm.

Instead, prosecutors allege, Stanford invested CD proceeds in illiquid pet-project investments that included Caribbean real estate, a Cowboys and Indians magazine and a pawn shop operator. He also loaned more than $2 billion to himself.

The alleged Ponzi scheme started to unravel in late 2008 as the financial crisis deepened and more and more investors asked for redemptions, a situation that left Stanford scrambling for cash.

Prosecutors will likely rely heavily on the testimony of the firm's former Chief Financial Officer James Davis, who pleaded guilty in August 2009 and has been cooperating with the government. The two men were college roommates at Baylor University in Waco, Texas.

In past interviews, Stanford has blamed Davis, a theme that is likely to be repeated by the defense at trial.

"I didn't oversee anything in the investment portfolio, that was the CFO's responsibility," Stanford told Reuters in a 2009 interview. "The CFO had investment committees, the chief investment officer reports to him."

Stanford, 61, has pleaded not guilty to 14 criminal counts of fraud, obstruction of a federal investigation and conspiracy to launder money.

Among the alleged crimes prosecutors expect to prove to the Houston jury is that Stanford was involved in falsifying financial statements and made false statements about Stanford International Bank's financial condition.

PAUPER IN LOVE

Stanford's health has declined since his arrest. He was injured in a jailhouse brawl in 2009 and suffered from an addiction to a powerful anti-anxiety medication. He has hepatitis B and cirrhosis of the liver, and, if convicted, will likely spend he rest of his life in prison.

The SEC seized all of Stanford's assets in February 2009 after filing a civil lawsuit. His lawyer at the time, Dick DeGuerin, said the government's action did not even leave enough money for his client to buy underwear.

Once No. 205 on Forbes' list of richest Americans, Stanford's defense is paid for with U.S. tax dollars and his 81-year-old mother is struggling to help.

"I've maxed out my credit cards and I'm on my last few thousand dollars of savings," said Sammie Stanford.

She even had to do a reverse mortgage on her home "to get some extra cash," she said in December after a court hearing.

After his arrest, Stanford had a bevy of women, four of whom are mothers of his six children, attend his court hearings. He had a "fiancee" half his age even though he remains legally married.

Stanford lavished the women in his life with trips on private jets, luxury homes and, in one instance, spousal support payments of $100,000 per month, according to court documents.

His oldest daughter, Randi, lived in a luxury Houston high-rise paid for by her father, for whom she worked.

Court records from a 2007 paternity case, that was settled, showed Stanford also paid about $150,000 a year in child support for two other children who lived with their mother in a $10 million house in Florida.

But now, in addition to losing his fortune, Stanford has only the support of his parents and family and not the harem of loyalists seen earlier.

Only his mother lasted through the entire three days of testimony last month at a hearing in which Stanford was judged competent to stand trial.

The man who once ran a business with operations in 140 countries has different priorities now. In a recent court hearing he could be heard complaining about being served a peanut butter sandwich on stale bread.

The case is USA v. Robert Allen Stanford, U.S. District Court for the Southern District of Texas, No. 09-cr-00342. (Reporting by Anna Driver in Houston; Editing by Tim Dobbyn)