Prosecutor: Stanford executives knew that shredding thousands of documents was illegal

Prosecutor: Stanford execs knew shredding wrong

MIAMI — Two senior employees at disgraced financier Allen Stanford’s worldwide security office knew it was wrong to shred thousands of documents but did it to thwart an investigation into what became a $7 billion Ponzi scheme, a federal prosecutor said Wednesday in closing arguments at the men’s trial.

Numerous company e-mails and other evidence showed that Stanford Financial Group’s former security chief, Thomas Raffanello, and technology officer Bruce Perraud were well aware in February 2009 that the Securities and Exchange Commission had obtained a court order requiring preservation of all Stanford documents, said senior Justice Department litigator Jack Patrick.

“It’s a case of knowing what you should do and not doing it,” Patrick told a 12-person jury and three alternates after a weeklong trial. “It seems like their mantra was not to cooperate, but to frustrate.”

The jury will begin deliberations Thursday.

Raffanello, before joining Stanford the longtime head of the U.S. Drug Enforcement Administration’s Miami office, and Perraud are charged with conspiracy, obstruction of an SEC investigation and two related charges. If convicted of all four counts, they face maximum prison terms of 50 years each.

The document shredding took place at Stanford’s office in Fort Lauderdale just as the company’s banking empire was collapsing last year. Stanford, awaiting trial in Houston, is accused of using certificates of deposit billed as paying double market rates to bilk thousands of investors out of $7 billion, mainly by using money from new investors to pay off older ones in a classic Ponzi scam.

Attorneys for Raffanello and Perraud contend that no crime was committed because the records in question were duplicated in electronic form and that the shredding was a normal part of Stanford’s everyday business. Raffanello attorney Richard Sharpstein called the charges “an insult” because they are based on flimsy or misleading evidence.

“Everything was loaded in the computer,” Sharpstein said. “They decided, ‘We can shred this’ because it’s there. That is a fantastically ridiculous, fatal flaw in this case.”

The shredded records included information about investors, background checks on Stanford employees, security contacts in foreign countries, properties owned by Stanford and his companies and business travel records by company executives. Testimony showed that Perraud initially halted the shredding when he found out about the document preservation order on Feb. 17, 2009, but complied after Raffannello ordered it to take place a week later.

Key evidence was a series of e-mails between Stanford employees as investigators began to close in. “Feds at building in Houston!” says one frantic e-mail to Raffanello. Another, calmer in tone, advised Raffanello that a receiver had been appointed to take control of Stanford’s assets.

“How could you possibly think you could destroy hardcopy records on the theory they might be scanned and stored on a server somewhere?” Patrick said.