People Make Business

HOUSTON (AP) — Texas financier R. Allen Stanford lied to investors and stole their hard-earned savings so he could live the lavish lifestyle of a billionaire, a prosecutor said Tuesday at his fraud trial.

Prosecutor Gregg Costa told jurors in Houston federal court that Stanford used investors’ money to buy homes and yachts and fund cricket matches.

“He treated depositors’ savings like it was his own personal piggy bank,” Costa said.

The prosecution says Stanford’s business empire was built on smoke and mirrors and he bilked investors out of more than $7 billion over 20 years as part of a massive Ponzi scheme centered on sales of certificates of deposit from an Antiguan bank he owned.

Stanford, who denies the claims and says his businesses were legitimate, is charged with 14 counts, including wire and mail fraud. H

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For a start-up, the first round of investment can be the hardest. Without enough proof of concept to go to a venture capitalist, many entrepreneurs turn to their family as investors. Depending on the structure of these investments however, you could be setting yourself up for a more difficult pitch when the second round comes. Inc. gives advice on structuring family investment to maximize the possibilities of future capital requests.

So when Aunt Gladys starts fumbling in her carpetbag for a checkbook, talk her gently out of an equity stake. Instead, structure the investment as convertible debt: a loan that gets swapped for equity in the next big round of financing, says David Cohen, a venture capital investor and CEO of TechStars, a Boulder, Colorado-based angel fund. Convertible debt is attractive because you don’t have to set a valuation as you do with equity. O

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