Stanford exec charged with obstruction and conspiracy

HOUSTON (Reuters) - A U.S. grand jury in Houston indicted the former chief investment officer of Stanford Financial Group on obstruction and conspiracy charges related to an $8.5 billion (5 billion pound) fraud, federal prosecutors said on Tuesday.

Laura Pendergest-Holt, who was arrested in February on one criminal count of obstruction, is the first executive to be indicted for her role in what the government alleges is a massive fraud that snared investors throughout the Caribbean, the United States and Latin America.

Texas financier Allen Stanford, former CIO Pendergest-Holt and the firm's former chief financial officer, James Davis, and three Stanford firms are accused by the U.S. Securities and Exchange Commission of a scheme involving high-yield certificates of deposit (CDs) issued by Stanford International Bank in Antigua.

The CDs were peddled as safe and liquid to Stanford customers, when the funds were actually invested in illiquid real estate and private equity, according to the SEC.

The indictment alleges that Pendergest-Holt concealed her knowledge of assets held by the offshore bank. She is also accused of having wired $4.3 million of funds from the offshore bank to its operating account in Houston after she lied to SEC investigators in February.

According to the Justice Department, Pendergest-Holt concealed her knowledge of the bank's tiered portfolio of investments, especially Tier III, which contained $3 billion of real estate holdings. The Tier III assets are at the core of the SEC's investigation, in particular a $1.6 billion item labelled"Loan to Shareholder."

The SEC has alleged that Stanford and Davis misappropriated at least $1.6 billion of investor money through "bogus personal loans" to Stanford himself, though Stanford denies that any of the money went to him personally.

According to the indictment, Pendergest-Holt denied any knowledge of the Tier III assets, even though she knew about them as early as November 2008.

"I don't know about Tier III, other than what I've already shared with you in about 20 different ways," she said in sworn testimony before SEC investigators in Fort Worth, Texas, on February 10.

Questioned about the Tier III assets again in Memphis on February 17 -- the day that U.S. marshals raided Stanford offices in Houston -- Pendergest-Holt responded: "If I knew anything about Tier III I'd tell you ... God's honest truth."

Dan Cogdell, a Houston lawyer for Pendergest-Holt, was not immediately available for comment, but he said on Monday that his client would plead not guilty to any charges.

A judge has ordered Pendergest-Holt, who has been free on a $300,000 bond since her arrest, to appear in federal court in Houston on Thursday morning.

Pendergest-Holt faces up to five years in prison and a fine of $250,000 for each of the counts, prosecutors said.

While Allen Stanford does not face any criminal charges, he has said he expects to be indicted and has repeatedly denied any wrongdoing. Davis is cooperating with federal authorities, according to his lawyer.

(Reporting by Anna Driver in Houston; Editing by Steve Orlofsky)