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Stanford CIO's fast path to top a red flag

HOUSTON/BOSTON (Reuters) - Laura Pendergest-Holt, who oversaw investments at Stanford Group Co. and is now accused of participating in an $8 billion fraud, had an unusual background for a top executive in the investment industry.

There was no business school degree, no internship at a Wall Street firm or stint as an analyst at a mutual fund company managing billions of dollars. Rather she learned the job of being the chief investment officer at Texas billionaire Allen Stanford’s group of companies while working for him.

In the hyper-competitive $10 trillion asset management industry where resumes routinely boast Ivy League degrees and recommendations from firms such as Goldman Sachs, Pendergest-Holt stood out for what she did not have, according to recruiters, analysts and Stanford investors.

“In selecting Pendergest-Holt for this position, Allen Stanford and his deputy, Jim Davis, probably needed someone they could trust and not someone who could pick stocks,” said Lawrence Lieberman, senior managing director at Orion Group, an executive recruiter focused on the money management industry.

A lawyer for Pendergest-Holt did not have an immediate comment.

The 35-year old, who ranked as one of America’s most senior women in the money management industry, got her start in a position that paid about $1 million a year through a connection made at church.

At a church in her hometown of Baldwyn, Mississippi -- population 3,300 -- Pendergest-Holt met her mentor, Stanford’s chief lieutenant Jim Davis, as a teenager. He recruited her to work at Stanford in 1997 after she earned math degrees from Mississippi University for Women and Mississippi State University.

Even in an industry dominated by young hedge fund managers, Pendergest-Holt’s rise to the top of Stanford’s sprawling financial empire was unusually quick, industry experts agreed.

“I don’t consider a degree in math education to be interchangeable with finance,” said Cornelius Hurley, a professor and Director of the Morin Center for Banking and Financial Law at Boston University.

“Age alone would not have disqualified her, but typically you would look for someone who had been an analyst somewhere, either on Wall Street or one of the big mutual fund complexes,” Hurley said.

QUICKLY MOVED UP THE RANKS

Now that U.S. regulators have accused Stanford Group, including Allen Stanford and Jim Davis, of having run a long-time Ponzi scheme, experts said Pendergest-Holt’s main qualification might have been her loyalty.

In a Ponzi scheme, older investors are typically paid proceeds from the funds of newer investors.

“From what it sounds like here, this company may not have wanted a legitimate CIO because that person might have asked a lot more questions and not played ball,” Lieberman said.

Pendergest-Holt’s high-profile career collapsed last week when she was arrested and led away in handcuffs for allegedly obstructing the authorities investigating the Stanford Group.

She started as research analyst at the company. She quickly moved up to be managing director of research and investments and was named chief investment officer four or five years ago, she told the U.S. Securities and Exchange Commission in an interview in February.

“I was hired to research various financial markets, really study charts from a technical or statistical study,” she said describing her first job at Stanford to SEC lawyers.

Davis, her direct supervisor, trained her on markets and she supervised a commodity portfolio, she told the SEC.

Pendergest-Holt worked from the Stanford office in Tupelo, Mississippi, about 20 miles south of Baldwyn.

A former classmate of Pendergest-Holt’s described her to the Northeast Mississippi Daily Journal as being “intelligent,” “brilliant” and “very sharp.”

Pendergest-Holt, a tall brunette whose photograph was used in client reports, climbed the ladder at Stanford so fast that it was a big red flag for some potential clients.

“While this might not be a typical educational path for a CIO of a large institution, I think most investors would want to know more before they judged whether a person like this was capable of handling that job well,” said Randy Shain a private investigator. He reviewed Stanford for a potential investor who passed on the opportunity to invest.

QUIZZED BY REGULATORS

In a deposition with SEC lawyers, Pendergest-Holt lists her duties as overseeing about 20 research analysts, helping to produce the Stanford investment model, and editing newsletters published by the research group.

But under intense quizzing from regulators, court documents show that Pendergest-Holt was unable to answer questions about where the firm’s assets were allocated, Allen Stanford’s role in certain businesses and her position on the investment committee of Stanford’s Antigua bank.

In one instance the regulators asked her about her role in preparing the Stanford International Bank quarterly report. She replied it was her job to edit the report, checking the report’s pie charts “to make sure they equal 100.”

Some of her statements to the SEC were disputed by cooperating witnesses. So on February 26, Pendergest-Holt was arrested on a criminal charge of obstruction in Houston after a meeting with the company’s court-appointed receiver.

After a hearing where she was led to court in handcuffs, her lawyers told a federal judge that she is not guilty of the criminal charge and has argued that she was the only defendant who has tried to help the SEC in its probe.

Reporting by Anna Driver; Editing by Bernard Orr

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