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Part I (background) is here, but I’d start with a post describing the locals involved, along with their connections to places like Baldwin and Dry Creek in Northeast Mississippi. Part III is linked at the end of this post.

The Stanford Group had been subpoenaed by the SEC, along with some of their top executives. They decided to meet to coordinate what to say and select the sacrificial executive who they’d offer up to testify, and trooped down to a Stanford office in Florida to prepare the sacrificial executive.

Assembled we have Ms. Pendergest-Holt, Jim Davis (Pendergest-Holt’s “visionary mentor,” apparently sufficiently visionary to send Ms. Pendergest-Holt to talk to the SEC instead of going himself), Thomas Sjoblom, who was the Stanford Group lawyer on regulatory matters, and three individuals known so far only as Cooperating Witnesses 1, 2, and 3.

(Since yesterday was Dr. Seuss’s birthday and I can’t have a picture of these anonymous whoevers, I really wanted a picture of Little Cats A, B, and C from The Cat in the Hat at this point, but there’s none to be found. Oh well, I’ll have to settle).

The SEC staff met with attorney Sjoblom and told him that they wanted a deposition with individuals who knew about the “entire investment portfolio.” Sjoblom told the SEC that Executives A & B (Stanford and Davis) were not the individuals the SEC wanted, but that the SEC should depose Pendergest-Holt and the president of SIB, the “bank” in Antigua. In the meeting, Sjoblom told the SEC that “this is not a criminal enterprise.”

After the meeting where he offered up Pendergest-Holt in sacrifice, Sjoblom sent an internal email that Pendergest-Holt was going to have 2-3 hours to explain her supervision to SEC staff, and noted that “one problem…is that she knows about tier 1 and tier 2, but little about tier 3″ and “will have to get up to speed on tier 3….”

Recall that Tier 3 was the mystery box where all the money went.

So on February 3, Pendergest-Holt, Davis, Sjoblom, the SIB affiliate President, and CW1, CW2, and CW3 met at the SFG office in Miami. This meeting focused on SIB and banking in Antigua, but not on the three tiers. The next morning, CW1 sent an email to Davis saying

I am confused. I was surprised yesterday during our meeting to learn… that SIB’s latest capital contribution [allegedly $541M]…and some of SIB’s holdings in excess of 2 Billion…

consisted of equity in real estate companies that SIB had actually paid only $17.5M and $68M to acquire.

Somehow, they’d publicly booked a capital contribution of $541M in December of 2008 with property they’d privately bought for $88.5M.

Later in the day, Pendergest-Holt, Sjoblom, Davis, the SIB Affiliate President, and CW1, CW2, and CW3 met again. This time, Pendergest-Holt made a presentation focused on Tier II. She said the asset values were $360M, down from about $850M in June 2008. All three CW’s were “very surprised and unnerved by [her] revelations, [but] observed that [Davis] did not appear surprised by these revelations.”

Pendergest-Holt and Davis prepared a PowerPoint document about Tier III. Davis gave her a removable drive with information to make a pie chart. It showed Tier III containing “over $3 billion in real estate, and $1.6 billion labeled as ‘Loan to Shareholder.” The shareholder was Stanford. Before seeing this, CW2 and CW3 did not know that any Tier III funds had been loaned to Stanford. On seeing this presentation by Pendergest-Holt, CW3 felt he “had been kicked.” The president of the SIB affiliate voiced concerns about the true nature of the Tier III investments and said if the pie chart showed the actual assets of Tier III, then SIB was insolvent. With Davis, Pendergest-Holt, and Sjoblom listening, the SIB president “vowed he would not testify before the SEC” because what he was learning at this meeting was not what he’d disclosed to investors or to Antiguan regulators.

The group met again on February 5th, joined by Stanford. CW2 and CW3 told CW1 and  Sjoblom that they wanted to report what they’d learned in these Miami meetings to the SEC. When Stanford heard what they were saying, he “began pounding the table” and said “the assets are there.”

The next day, they all met (including Stanford). Before they began, “CW2 broke down crying” about the revelations and said “if we are going to go through more information I didn’t know, I don’t want to be there, and I’m going to the authorities.” Soon after,  Sjoblom walked over to CW2 “and suggested they pray together.”

By and large, I find it alarming when professionals suggest resort to prayer. I prefer they rely on the efficacy of their services.

At the end of the meeting, Stanford stood up and said to the whole group, “there are at least $850 million more in assets than liabilities” in SFG investments.

There were private meetings through the day, after which CW3 asked Sjoblom why he was not smiling. Sjoblom said “The party is over.” In an afternoon session where everyone was present, Sjoblom announced that the SIB Affiliate president was not going to testify on Monday, and that Pendergest-Holt would testify on Tuesday. CW3 asked about their plan, given what they knew. Stanford said he would “probably” report to the SEC “on Tuesday.”

Two days later, on Sunday, Sjoblom had several phone calls with CW1. In one he said, “The earnings calculations were not calculated properly. The assets may not be there.” The next day, Sjoblom sent CW1 an email admitting he’d helped Pendergest-Holt prepare the SEC presentation. He wrote, “The SEC will also ask for her thumb drive, since she revealed all this information to them.” He wrote that she would be asked “lots of questions” about all players, SIB, marketing materials, and a little about Tier III to the extent she knew. CW1 responded with frustration about the presentation, saying it “needs to be complete, accurate and correct. Thus you need to postpone her appearance before the SEC.”

Read Part Three here.

Note: Unless specifically stated, the facts are from the FBI affidavit attached to the criminal complaint filed against Ms. Pendergest-Holt, which will be attached to a later post.