MIAMI (Bloomberg) — Two former Stanford Financial Group Cos. employees oversaw destruction of stacks of corporate records in defiance of a court order to preserve them after the US Securities and Exchange Commission sued company founder Allen Stanford, a federal prosecutor told a Miami jury.

"There was nothing routine about this shred," Assistant US Attorney Matthew Klecka told the jury of 10 men and two women at the outset of the trial yesterday.

Defendants Thomas Raffanello and Bruce Perraud are accused of obstructing the SEC proceeding and destroying records sought in a federal investigation. They have denied the charges.

The trial before Judge Richard Goldberg is the first linked to what US prosecutors and regulators have described as a $7 billion fraud scheme led by Stanford and run through his Antigua-based bank.

Perraud, a global security specialist in the Fort Lauderdale, Florida, office of Houston-based Stanford Financial Group, was indicted in May for allegedly destroying records. Raffanello was added to the case in a revised indictment announced in September.

Raffanello, a former head of the US Drug Enforcement Administration's Miami office, worked as global security director for the Stanford business.

Richard Sharpstein, Raffanello's attorney, told the jury that the shred was in fact routine and that the office didn't even have any of the types of financial documents covered in the initial order appointing a receiver to oversee the company.

Instead, he said, the office had personal and credit information about people on whom Raffanello and Perraud had run background checks.

"It's not like people aren't going through garbage around here. It's a huge issue," Sharpstein said. "Especially documents like the ones they were dealing with.... That's what they were shredding."

He also said Raffanello cancelled the normally scheduled shred on February 17 to make sure the court order didn't apply to his office.

Perraud's attorney, Ed Shohat, said, "Our defence in this case is that no crime was committed."

He and Sharpstein argued that Raffanello and Perraud had ensured that all documents were preserved on a computer server that was turned over to the receiver the day before the shred.

"That office was tiny," Shohat said. "They could not have possibly stored the paper they produced when they produced paper at all."

Stanford and four other people were indicted in June on charges they conspired to sell certificates of deposit issued by Antigua-based Stanford International Bank Ltd. by deceiving investors about the instruments and their oversight.

Stanford, who has denied the civil and criminal allegations, is being held without bail in a Houston jail awaiting a trial scheduled for January 2011.

When the SEC sued on Febraury 16, a Dallas federal judge appointed attorney Ralph Janvey as receiver for Stanford's businesses and issued an order prohibiting the disposal or destruction of company records, according to the US.

By February 23, Raffanello and Perraud allegedly had made arrangements for a commercial shredding company to destroy documents at the Fort Lauderdale office. A 95-gallon bin full of paper was hauled out to the shredding company's truck two days later, prosecutors said in a revamped four-count indictment filed on December 21.

The defence has challenged the validity of the orders they're accused of violating, and the applicability of those orders to Raffanello and Perraud.

"Unfortunately for the Government, the underlying orders upon which it relies are fatally flawed," Raffanello lawyer Janice Sharpstein said in a September bid for dismissal of the case that resulted in part of one count being thrown out.

Perraud and Raffanello each could face 40 years in prison if convicted on all counts. The trial may last as long as eight days, Goldberg told prospective jurors yesterday.

Among those jurors are a nurse, a college student and a corrections officer.