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Well-off Venezuelans say Chavez led them to Stanford

CARACAS, Feb 19 (Reuters) - Droves of middle-class and well-heeled Venezuelans invested with Texan financier Allen Stanford, who is accused of “massive fraud,” because they say they feared their money was not safe at home under socialist President Hugo Chavez.

Venezuelan money is estimated to represent more than one-quarter of the $8 billion that U.S. investigators say was invested in fraudulent Stanford certificates of deposit with impossibly high interest rates.

The government seized Stanford’s local commercial bank, a small operation holding local currency accounts, on Thursday after a run by customers using Internet facilities. The government promised to auction off the bank.

Many wealthy and middle-class Venezuelans say they are intimidated by Chavez, who often characterizes the rich as bad people and has imposed tough limits on currency flows and periodically expropriates companies and land.

But individuals in the oil-exporting nation who got their fingers burnt by Allen Stanford, a 58-year-old billionaire, now have a new problem. Venezuela’s banking regulator estimates they may have had more than $2 billion invested in his offshore companies.

“We love that Stanford man like we love Chavez,” one well-dressed young investor said bitterly, smoking at a Stanford office, where hundreds have lined up in recent days seeking their money.

After a major banking collapse in the 1990s, Venezuelans started to keep their savings offshore, even before Chavez became president. With many of the wealthy scared that his socialist revolution would one day make them flee the country, they decided that building up savings overseas was indispensable.

“When the time comes to run from Venezuela it’s important to have something outside,” said Monica Pena, who had invested her parents’ inheritance in Stanford because of its high rates and marble and dark wood-paneled offices suggesting respectability.

Inflation in South America’s top oil exporter is higher than savings rates, and many see the dollar as a safe-haven currency. Chavez, an ally of Cuba, exacerbates the anxiety with actions against the private sector such as nationalizations.

“Where are you going to take your two cents? You can’t trust the banks here, and you don’t want to have much money here because this government wants to take it,” said one investor whose family entrusted about $250,000 to Stanford.

“This lunatic we have here makes you feel like your money is running through your fingers,” she said.

Many investors asked not to be named because they feared they would be identified as wealthy and targeted by criminals or even by the government for higher taxes. Some worried they might suffer reprisals from the bank.

MIAMI IN CARACAS

Stanford employed trusted figures to sell his investment scheme in Venezuela including respected local bankers. For several years, Luis Giusti, a former head of state-oil company PDVSA and a high-profile Chavez opponent, was a member of the advisory board of Stanford Financial Group.

Starting in Venezuela after the bank crisis, Stanford sales began slowly in a simple office, but soon snowballed as clients, happy with high-interest gains, brought in friends and family.

The bank offered a 24-hour service and allowed investors to withdraw dollar-denominated checks.

With limits on buying and selling foreign currency, many Venezuelans used black-market third parties to convert their bolivars before they invested in Stanford’s dollar-denominated accounts.

“It was as if this branch in Caracas was actually located in Miami,” said one Stanford client who invested for 14 years.

Investors gathered at Stanford International Bank’s Caracas offices on Thursday fretted that the government would take an interest in the overseas investment operation and find out people had sidestepped currency controls.

“Lots of people are worried the government will come in and ask where their million dollar deposit came from,” said a client with a 14-year history with Stanford.

Another concern for Venezuelan investors is that the government could make them repatriate any money recovered from Stanford at the official exchange rate, increasing losses. (Additional reporting by Ana Isabel Martinez; editing by Saul Hudson and Jeffrey Benkoe)

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