BOSTON, Feb 17 (Reuters) - Shouting reverberated through the hallway of a Houston office building as one investor demanded the return of the $250,000 he had invested with Stanford Financial Group.
In the company’s Baton Rouge office, another banged his fist on a desk, insisting he get his money back.
Then there were the hundreds of telephone calls to Stanford’s army of investment advisers from anguished clients who just wanted to know where their money was.
Emotions, already running high last week on news that regulators were probing Stanford, exploded on Tuesday when the U.S. Securities and Exchange Commission charged that billionaire Allen Stanford and three of his companies had run an $8 billion “massive ongoing fraud,” offering and paying unusually high interest rates for certificates of deposit.
The charges come only two months after regulators arrested Wall Street investment manager Bernard Madoff for allegedly masterminding the biggest-ever Ponzi scheme.
“On a scale of one to 10, infinity,” said Brett Zagone in Houston, describing the anxiety she was feeling about the whereabouts of the life savings and inheritance from her mother that she had entrusted to Stanford.
Houston-based Stanford, which sold CDs issued by its Antigua-based Stanford International Bank, promised Zagone an 8 percent return, a tantalizingly high rate at a time U.S. banks’ yields on these types of investments are far less.
“People are frightened, panicking and looking for help,” said Jacob Zamansky, an investor lawyer and founder of law firm Zamansky & Associates in New York.
Just a few weeks ago, some investors had heaved a sigh of relief when Stanford officials told them it had not bought subprime mortgage debt and had avoided investing with Madoff.
Madoff, who is accused of running a $50 billion fraud, cultivated an exclusive image and hunted for customers at tony golf courses and charity events.
Allen Stanford, on the other hand, made nearly everyone feel welcome to invest.
The flamboyant Texan, who ran the firm founded by his grandfather, attracted investments via television commercials and built a wide-reaching network of financial advisers hired from prominent firms like U.S. Trust and Wachovia.
Stanford also underwrote sports events ranging from golf and tennis to sailing and cricket.
In turn, a wide swath of investors including retired businessmen, young entrepreneurs and middle-class Americans put their money into the short-term CDs that promised the high returns. Many expected the CDs would be federally insured.
Lawyers for the investors said they had not received Stanford documents that indicated the products were insured.
In the United States, CDs are often insured by the Federal Deposit Insurance Corp.
“Many people automatically thought Stanford CDs were insured,” said William Shepherd, a partner who specializes in securities fraud at law firm Shepherd Smith Edwards & Kantas.
In recent days, Shepherd said he had fielded a flood of telephone calls from concerned investors and advised them to move their money as quickly as possible.
That advice may have come too late. Financial advisers in Stanford’s offices in Louisiana, Florida and Texas told investors the money was locked up for a little while.
“One of my clients wanted to pull out $700,000 that he had invested in Stanford CDs and was told there was a 60-day moratorium on withdrawing the money,” lawyer James Dunlap of Atlanta said. Even a client whose $250,000 CD matured on Feb. 9 could not get the money out, Dunlap said.
Stanford spokesman Brian Bertsch directed all questions to the SEC.
Some investors now say there had been problems in getting money out, supporting suspicions of rival investment advisers that Stanford’s claims were too good to be true.
“There had been delays of three or four days in getting the money out in the past,” Dunlap said, noting that Stanford had claimed technical difficulties at that time, and later made investors whole.
Other investors are ready to go to court to try and get their money back.
“We are trying to figure out what can be done in terms of a lawsuit but right now we are still getting the facts,” said Houston attorney William Shepherd, who is representing some investors.
Dunlap said he was getting ready to file a lawsuit as early as Tuesday, possibly accusing Stanford of breach of contract. (With additional reporting by Martha Graybow in New York and Anna Driver in Houston; editing by Jeffrey Benkoe and Ted Kerr)