Month: February 2009

News

Pendergest-Holt Perp-walked in Alleged Ponzi Scheme

Post author By John Branston
Post date February 28, 2009

The pride of Baldwyn, Mississippi, was in handcuffs Friday, making a “perp walk” in a black pantsuit, accompanied by an FBI agent.

Laura Pendergest-Holt, a 35-year-old wonder woman who dispensed financial advice on Memphis radio stations and earned a million dollars last year, earned the dubious distinction of being the first person charged criminally in the ballooning investigation of Stanford Financial Group.

Friday night, the Securities Exchange Commission upgraded its assessment of Stanford to “a massive Ponzi scheme,” invoking the P-Word well after numerous media outlets and fleeced investors had already done so.

Pendergest-Holt was arraigned in court in Houston Friday. But her home is in Baldwyn and her office was in the Crescent Center in East Memphis, where she witnessed the SEC’s fateful raid on February 17th.

People from Baldwyn who knew her were, needless to say, surprised when I visited with them last week.

“She was one of the smartest women to come out of this town,” said Tammy Bullock, general manager of the Baldwyn News. Pendergest-Holt was a 1991 graduate of Baldwyn High School and a 1995 graduate of Mississippi University for Women, winning several honors at both schools, according to Bullock. “She is very success oriented, and has a pleasing personality.”

Baldwyn Mayor Danny Horton called Pendergest-Holt “a fine young lady from a fine family.” Horton also knows her mentor, Stanford’s chief financial officer James M. Davis.

“Our sons went to high school together,” Horton said. “I had no idea. I read it in the paper and heard it on the news. Surprised is a good word. Jim Davis had a deep love and passion for small municipalities and realized that their heart is the downtown area.”

Davis invested in several buildings and small businesses on Baldwyn’s two-block Main Street, giving the otherwise forlorn downtown a touch of Oxford’s trendy square. Davis’ wife operates a store called Patina Decor. A man who answered the door Thursday said no one in the family would have any comment.

Everybody in town is kind of shocked,” Horton said. “Any news travels fast but most people, like me, didn’t know about it. They probably would know more about the Friday night high school football games than about the dealings of Stanford.”

Perhaps, although managers of the Farmers and Merchants Bank and Regions Bank in Baldwyn declined to be interviewed about whether they suspected anything about Davis, Pendergest-Holt, or Stanford’s certificates of deposit that paid twice as much interest as their own products.

The FBI and the SEC say Pendergest-Holt is a liar whose gall verges on the “incredible,” according to documents made public Friday. She lied, they allege, as recently as last week when asked about Stanford’s financial structure. She is charged with obstructing an investigation and is likely to be treated harshly as her case advances. Memphians may remember former state senator Roscoe Dixon, who lied to the FBI in a “last-chance” interview, went to trial, lied again on the witness stand, and got a conviction and a five-year sentence in the Tennessee Waltz investigation.

The small-town-makes-good (for a while, anyway) story has overtones of a novel by Theodore Dreiser or Sinclair Lewis. Pendergest-Holt was a protegee of Davis, who is 60 years old, married, and the father of four sons. They met at First Baptist Church in Baldwyn several years ago. Davis, raised in the community of Dry Creek, subsequently left First Baptist and helped start a new church in another nearby hamlet called Guntown. The administrator at LifeWay Community Church in Guntown confirmed that Davis was “one of the founders” but would not be interviewed. Davis’ wife Laurie still attends First Baptist, according to pastor Stanley Huddleston.

“We have resigned ourselves at the church not to make quick judgments and to wait until all the facts come out,” Huddleston said — a day before the feds’ version of the facts became to come out in Houston.

Bullock said several young people from Baldwyn went to work for Stanford but none rose as high in management as Pendergest-Holt. The FBI and SEC allege that Pendergest-Holt was unprepared for the job of overseeing a complicated financial firm and that the company lacked professional oversight that would have exposed the fraud.

Baldwyn is the home of Hancock Fabrics, a publicly-traded company that was a Memphis investment favorite a decade or so ago. It is about 15 miles north of Tupelo, where Stanford had an office in the recently developed property that used to be the fairgrounds. A Tupelo businessman said Stanford gained entry into the financial business in Tupelo by buying out a company called Executive Financial Planning.

For Tupelo, Stanford’s fall is the second shock in less than a year. Last year Toyota announced that it is indefinitely delaying construction of its new assembly plant northwest of town.

Politics Politics Feature

Ramsey Joins GOP Gubernatorial Field — Now a Quartet

Post author By Jackson Baker
Post date February 28, 2009

The Republican field of gubernatorial candidates has grown by one — Lt. Governor Ron Ramsey of Blountville, who made a formal announcement of sorts in Greeneville at the annual Lincoln Day Dinner sponsored by the Greene County Republican Women.

When Ramsey took the platform to announce the keynote speaker, state GOP chairman Robin Smith, he took note of the three declared gubernatorial candidates who had preceded him — District Attorney Genral Bill Gibbons of Memphis, 3rd District congressman Zack Wamp of Chattanooga, and Knoxville Mayor Bill Haslam — and was reported as saying, “I am here in Greene County to announce that I am going to be a candidate for governor.”

Thus ended speculation that had been rife for several days about the imminence of a Ramsey announcement. Prior to that, there had been serious speculation as well about the likelihood of Ramsey’s ascending to the governor’s office through the departure of current Governor Phil Bredesen, who had until recently been rumored to be a possible nominee for Secretary of Health and Human Services by President Obama.

The entry of Ramsey, from the Tri-City area of the state’s northeast corner, means that each of the state’s major population centers has been accounted for in the Republican primary field except for Nashville.

Politics Politics Feature

Bredesen, Still “Looking at” Unemployment-Funds Package, Responds to Critics and Praises Obama

Post author By Jackson Baker
Post date February 28, 2009

In response to critics of his position on President Obama’s stimulus program, enacted last week by Congress, Tennessee governor Phil Bredesen issued this clarifying statement: “I fully support the President’s economic recovery package. It will
provide much needed jobs for Tennesseans, and will help build a sound foundation for our economic future. The unemployment provisions are very important, and we will be looking at how to best use those to meet our needs in Tennessee. Tennessee is very grateful to President Obama for his vision on this issue.”

Ever since Bredesen had expressed reservations about accepting additional unemployment funds provided for in the stimulus package, he has had to deal with mounting criticism from fellow Democrats — mostly recently expressed on Friday by 9th
District congressman Steve Cohen and several other public officials from the Memphis area.

Noting that the only governors to opt out of accepting additional funds for unemployment insurance had so far been Republican governors from the South, Cohen had challenged Bredesen to “listen to his heart” and accept the funds on behalf of “the purple hearts of this recession.” Not to do so, said Cohen, would be “wrong—socially, morally, and economically.”

Elaborating on Bredesen’s response to the criticism, his spokesperson Lydia Lenker said, “The Governor strongly supports the concept of getting more assistance into the hands of more unemployed workers in the tough economy. He’s simply taking some time to look at the best way to do that without creating a situation where Tennessee’s unemployment trust fund inadvertently runs into solvency issues three years down the road.”

Like Governors Bobby Jindal of Louisiana, Mark Sanford of South Carolina, and Haley Barbour of Mississippi, all of whom are rejecting the unemployment-insurance funds, Bredesen has expressed concern that his state would be obligated to continue paying out extended benefits from its own resources after the federal money plays out.

Cohen and the other officials who implored Bredesen to accept the funds at Friday’s press conference in Memphis disagree. The money would be “targeted, temporary, and timely,” Cohen said.

Bredesen has yet to make a final decision on the issue.

An irony of the current situation, which has Bredesen and the president at potential loggerheads, is that, for the last several weeks, the governor had been widely touted as a possible Obama appointee as Secretary of Health and Human Services.

News

“The Party Is Over” for Stanford Financial

Post author By John Branston
Post date February 27, 2009

Laura Pendergest-Holt was scheduled to be arraigned Friday in Houston on criminal charges of lying to obstruct a federal investigation of Stanford Financial Group and an alleged $8 billion fraud.

Pendergest-Holt, a native of Baldwyn, Mississippi, was working in Stanford’s Memphis office in the Crescent Center last week when it was raided by U.S. marshals and the Securities Exchange Commission. Stanford’s headquarters is in Houston.

Pendergest-Holt, 35, is a protege of one of Stanford’s top executives, James M. Davis, who is also from Baldwyn, a small town 15 miles north of Tupelo. She started working for Stanford in 1997 and quickly rose to the position of chief investment officer, supervising a group of research analysts and producing monthly and quarterly reports.

In interviews yesterday, Baldwyn residents described her as a young woman clearly determined to go places in the world of business.

“She was incredibly smart,” said Tammy Bullock, general manager of the Baldwyn News. Mayor Danny Horton called Pendergest-Holt “a fine young lady from a fine family.”

An FBI criminal complaint says Pendergest-Holt lied several times to obstruct an investigation that began in June of 2008. She met several times with people who were secretly cooperating with the investigation, according to the complaint.

Davis has made several investments in businesses on downtown Baldwyn’s Main Street in an effort to revive it. He is expected to be a key figure in the criminal investigation.

Stanford sold certificates of deposit (CDs) with unusually high rates of return. Financial advisers got a 1 percent commission and additional commissions throughout the term of the CD.

“SFG promoted the CD products as secure investments that were very liquid and had very low risk,” the complaint says.

Accounts at the Stanford office in Memphis have been frozen since last week.

The complaint describes a series of increasingly desperate meetings between Stanford officials and attorneys, some of whom are now cooperating with the government. At the conclusion of a meeting on February 6th, an unidentified cooperating witness “broke down crying,” and an unidentified attorney said, “The party is over.” And it appears to be.

Opinion Viewpoint

Stanford Financial and Street Hustlers Have a Lot in Common

Post author By John Branston
Post date February 27, 2009

As I pulled up to the light at Third and Linden, a man started walking across the street in front of me. He stopped halfway and pointed at the front of my car. I lowered my window, and he said, “Man, your front tire is really …

Read the rest of Bruce VanWyngarden’s letter from the editor.

News

Of Belly Dancers and Buffalo

Post author By
Post date February 27, 2009

Dynamic Belly Dance Dinner Buffet Show at the Racquet Club of Memphis on Saturday night. As women with well-toned abs shake their groove thangs, you can stuff your belly at a full dinner buffet. The show is hosted by the Pyramid Dance Company and begins at 7:30 p.m.

Shelby Farms recently added 28 more buffalo to their herd, so the park is hosting a Welcome Buffalo Party on Sunday in the kite-flying field near the Farm Road and Walnut Grove intersection. Buffalo Wild Wings will be dishing out free wings (made with chicken, not buffalo!). Thomas, the Park’s buffalo mascot, will greet kids, and park rangers will be on hand to answer questions. The party runs from 2 to 4 p.m.

In the fall of 1969, some Memphis City Schools students and teachers began skipping class every Monday to protest a lack of African American school board representation. Over half of the school’s student population was black, but the board was solely white. On Saturday at 2 p.m., former NAACP secretary Maxine Smith and Vasco Smith will lead a panel discussion about the history and impact of Black Monday in Memphis at the Benjamin L. Hooks Central Library.

Mardi Gras may be over, but Memphians will find any excuse to keep the party going. Beale Street becomes Bourbon Street this Saturday at the annual Zydeco Festival, during which Cajun bands play various Beale Street bars and clubs all night long.

For 20 years, the Memphis Gay and Lesbian Community Center has offered local GLBT folks a safe haven for meetings, support groups, art shows, and more. Celebrate the center’s birthday with an open house celebration on Sunday from 2 to 5 p.m.

For more weekend fun, check out the Flyer‘s searchable online listings.

Politics Politics Feature

Cohen and Other Officials Implore Bredesen to Accept Stimulus Funds: “Do the Right Thing.”

Post author By Jackson Baker
Post date February 27, 2009

Hosting a collection of other local public officials Friday, 9th District congressman Steve Cohen led them in imploring Tennessee governor Phil Bredesen not to follow through on recent hints that the will turn down federal stimulus funds for extending unemployment insurance.

Challenging Bredesen to “listen to his heart,” Cohen said, “It’ll tell him what’s the right thing to do.” The congressman said the money in question, some $143 million, is destined for “the purple hearts of this recession,” that the disbursement of the funds would be “temporary, targeted, and timely,” and that “if Tennessee doesn’t use the money, it’ll be spent somewhere else.”

Not to take the funds, said Cohen, would be “wrong—socially, morally, and economically.” Drawing an implicit comparison to Southern officials of an earlier age, Cohen suggested that those Southern governors (few so far, and so far all Republican) who have declined to accept federal stimulus funds for the unemployed are acting in the tradition of “”Jim Crow,” in the mold of former separatist-minded officials like the late Alabama governor George Wallace.

Asked if he would so characterize Bredesen in the same light, should the Tennessee governor also turn down the unemployment funds, Cohen declined to do so, but he said, “It is odd that all of the governors who’ve turned down the money so far are Southerners. Southern governors aren’t the only ones who care about fiscal solvency.”

State Rep. Jeanne Richardson addressed the concern stated by Bredesen, that accepting the unemployment funds would impose long-term obligations on Tennessee after the two-year term of their use expired, if unemployment totals should rise or continue at the present high level.

“That’s perverse logic not to help people right now. You can’t predict the future,” Richardson said.

Others supporting Cohen in calling for Bredesen to accept the federal funds were city council chairman Myron Lowery, county commission chairman Deidre Malone, state Senator Beverly Marrero, state Representatives Richardson, Ulysses Jones, Larry Miller, and Joe Towns, and Memphis Labor Council official Howard Richardson.

News The Fly-By

TERRA Time

Post author By Mary Cashiola
Post date February 26, 2009

CREDIT: Courtesy of the University of Memphis

The area’s newest green house is hoping for the distinction of another color: platinum.

The University of Memphis’ recently completed TERRA house — technologically and environmentally responsive residential architecture — in Uptown is applying for LEED for Homes platinum status.

“That was our goal coming into this project,” says Eric Criswell, one of the principal owners of DPC, the general contractors on the university project. “We said let’s go ahead and set the bar high, and we believe we’ve done that.”

Under the U.S. Green Building Council, the LEED program — leadership in energy and environmental design — certifies high-performance green homes as silver, gold, or platinum. If certified, TERRA will be the first residential project to obtain platinum status in the state of Tennessee.

“Oftentimes, when people think green, they think straw-bale houses,” Criswell says. “We want to show that you can do green and make it beautiful at the same time.”

DPC already uses five green items in the houses it builds: insulated concrete construction, energy-efficient windows, spray-foam insulation, high-efficiency heating and air systems, and tankless water heaters.

But the TERRA house also includes a number of other green features you won’t find in many other places: solar panels, bamboo floors, a metal roof, and the state’s first gray-water recovery system.

“We want to reduce our carbon footprint,” Criswell says. “That’s the idea behind locally originating materials; that’s the idea behind rapidly reproducing materials and durable products.”

The home’s 2.1 kilowatt solar system, which cost about $20,000, is expected to generate half of its utility usage. TERRA is also one of MLGW’s Generation Partners, which means it can potentially sell electricity back to the Tennessee Valley Authority, MLGW’s energy supplier.

Other features of the home, such as the metal roof system, are designed to lower utility usage.

“If you’ve got a shingled, asphalt roof, you don’t have a good solar reflective index. The sunrays are hitting that shingle, which is then transmitting heat into the structure. We want the sun to reflect off of it,” Criswell says. “We want to make sure at the end of the month, you’re saving money.”

The gray-water recovery system collects water from the sinks and showers, cleans it, and sends it back to the toilets — dual-flush, low-flow toilets at that.

Criswell says his company would definitely do another gray-water system in the future: “I think you’ll see more and more of them as these projects progress.”

People involved in TERRA hope the public will begin to see more of all of the home’s features. The university designed the project as a clearinghouse where the public and industry professionals could learn about new technology and features for sustainable homes.

To that end, the house uses 99 percent post-consumer recycled sheetrock, carpet tiles with 75 percent recycled content, a central vacuum with the canister outside to improve the indoor air quality, reclaimed bricks, and built-in shelving that doesn’t emit formaldehyde.

But the project also has resulted in students who know how to build sustainable homes.

Alzbeta Bowden and Mary Carroll are two U of M architecture students who have been involved in the project since its inception.

“When we started all this, I knew there had to be a better way to do things, but what that was, I didn’t know,” Carroll says. “This has shaped my whole life and career.”

Carroll will graduate in August and says she already has been asked to do consulting on green projects. “I want to build more houses just like this,” she says.

Bowden has started a sustainable design firm with a friend.

“The house may be done, but the mission that TERRA started … is just the beginning,” she says. “Now more than anything, the work starts.”

The U of M is expected to build houses similar to TERRA in South Memphis or the university district.

The U of M will host a ribbon cutting at the TERRA house Friday, February 27th, at 9:30 a.m. The house will then be open to the public for tours the entire month of March, from 10 a.m. to 4 p.m. Fridays and Saturdays and noon to 4 p.m. Sundays.

The house is priced at $200,000.

“We’re selling it at cost,” Criswell says. “Someone is going to get a great deal.”

Visit memphisflyer.com to take a virtual tour of the TERRA house.

Letter From The Editor Opinion

Letter from the Editor: The Stanford Financial Scam

Post author By Bruce VanWyngarden
Post date February 26, 2009

“Thanks,” I said. “I appreciate it.” I started to get out of the car to look at the tire. That’s when the guy hit me up for money. And that’s when I realized his Good Samaritan act was a scam. I pulled away, shaking my head. What a jackass, I thought. My tire, needless to say, was fine.

It’s not unlike the scam the Stanford Financial Group pulled on its unsuspecting victims (see Cover Story, page 19). First, they created goodwill by giving hundreds of thousands of dollars to Memphis nonprofit organizations, politicians, and charities, then they exploited their image as a good corporate citizen to con their victims into investing in fraudulant certificates of deposit — to the tune of $8 billion worldwide.

The difference between the millionaire jackass Sir Allen Stanford and the jackass bum downtown was only a matter of scale. But what a scale! You can still go to StanfordFinancial.com and see the incredible trappings of this international sting. Here’s the pitch for their “investment model”:

“The objective of the Stanford Investment Model (SIM) is to provide consistent returns regardless of market volatility. … We target a consistent yield or income stream as agreed upon with our clients, while monitoring risk and managing the overall volatility of the portfolio. Our strategy for diversification to minimize the effects of market volatility is sophisticated and far-reaching.”

I’ll say. The site also details the company’s massive charitable operations — their strategy for “investing in communities” — and the slick Eagle magazine, with articles on the PGA-affiliated “Eagles for St. Jude” program and “Educating Children About Family Wealth.”

Stanford’s scam was brilliantly executed, and I have no doubt most of the company’s employees knew nothing about it. And I do have some sympathy for those who were taken in. After all, if my tire really had been low, I probably would have given that jackass a buck.

Bruce VanWyngarden

brucev@memphisflyer.com