February 21, 2009 / 2:20 AM / in 9 years

UPDATE 1-Ecuador police raid Stanford office

(Updates with raid, prosecutor’s comments, adds background)

By Alonso Soto

QUITO, Feb 20 (Reuters) - Ecuadorean police raided a unit of Stanford Financial Group in Quito late on Friday as part of an investigation into the local operations of the firm, charged with fraud in the United States.

Police wearing plastic gloves and carrying empty boxes entered the towering glass building that holds the posh offices of Stanford’s brokerage firm in the capital of the Andean nation.

“This was a raid as we are carrying out an investigation,” state money laundry prosecutor Mauricio Garrido told Reuters on the phone from inside the Stanford offices. Garrido declined to give more details about the investigation.

The reason was not yet clear for the raid only a day after Ecuadorean regulators seized control of two local Stanford units following U.S. authorities’ move to freeze the assets of Texas billionaire Allen Stanford.

U.S. authorities accused Stanford of fraudulently selling $8 billion in certificates of deposits with improbably high interest rates in a scheme that stretched around the world.

Peru, a top cocaine producer, is investigating possible Stanford links to drug trafficking, a Peruvian regulator said. Neighboring Ecuador, a cocaine-smuggling corridor, has not mentioned any such probe.

Ecuador is investigating if Stanford’s local units illegally sold financial instruments linked to a bank in Antigua owned by Stanford. The total exposure of Ecuadorean investors was not yet clear.

A government official close to the situation said police were likely searching for the identities of Stanford investors who illegally held their funds overseas.

The scandal engulfing Stanford and his financial empire rippled through Latin America, where well-off investors placed their money overseas because of fears of political and economic instability in their home countries.

Stanford units in Antigua and Venezuela were seized by local authorities to calm worried investors who were desperately trying to withdraw their money.

ECUADOR GETS TOUGHER ON FRAUD

The banking regulator’s office said earlier on Friday it was proposing tougher penalties on people who trick investors in financial schemes.

The proposed bill aims to penalize as money laundering the transfer of funds abroad by people and firms not allowed to do so by law.

“This way authorities can sanction the ones behind pyramid schemes that have resulted in millions of dollars worth of losses for the public,” the regulator said in a statement, adding that the penalties include higher fines.

Ecuadorean President Rafael Correa, a U.S.-educated economist, often lambastes Wall Street bankers as “greedy vultures” and blames them for a global financial crisis that is hurting his OPEC nation’s economy.

Ecuadoreans are not new to swindles.

An angry mob dug up the body of man accused of a pyramid scheme in 2005 that left thousands of mostly poor Ecuadoreans without their savings. They exhumed his body to make sure he was dead and had not fled the country with their money. (For more information about the fallout of the Stanford’s scandal in Latin America double click on [N20461653]) (Reporting by Alonso Soto; editing by Gary Hill)

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