Allen Stanford Ponzi Scheme

[scion]

Cricket fanatic suddenly on a sticky wicket

By Stacy-Marie Ishmael in New York and Tracy Alloway in,London
Published: February 13 2009 02:00 | Last updated: February 13 2009 02:00
http://www.ft.com/cms/s/0/854cdce8-f971-11dd-90c1-000077b07658.html?nclick_check=1

He's been hailed as the saviour of West Indies cricket and was promising to do the same for the English game. But for Sir Allen Stanford, knighted by the Antiguan authorities rather than the Queen of England, things are looking decidedly sticky - certainly in a financial sense.

On Wednesday, a spokesman for Mr Stanford's sprawling financial empire confirmed to Reuters that three US regulatory bodies - the SEC, the Financial Industry Regulatory Authority and the Florida Office of Financial Regulation - were all looking into the Stanford Financial Group.

At issue are suggestions that Mr Stanford's investment operation produces returns that are simply too good to be true.

Brian Bertsch, a spokesman for Stanford Financial, says: "This is a rehash of old gossip and unsubstantiated allegations . . . The Stanford Financial Group is rigorously managed and fully compliant with all US regulations. All three agencies have stated to us that their visits were part of a routine investigation."

He was responding, specifically, to allegations floated by a Venezuela-based financial analyst, Alex Dalmady, who recently published an analysis of Stanford's affairs.

The controversy centres on the Stanford International Bank, based in St John's, Antigua, an institution that claims $8.5bn in depositors' assets.

It does not operate like a standard bank. Instead, depositors are offered an attractive fixed rate of interest, which SIB pays out of investment returns. It makes no loans - other than to depositors who are overcollateralised with cash on deposit.

It is the investment returns that have been questioned by Mr Dalmady. He has compiled figures on SIB's investment performance from the bank's published annual and half-yearly reports, which show smooth above-average returns.

SIB documents provide scant detail on how the bank has achieved these returns, other than setting out the asset allocation split each year. Aligning these details with SIB's declared investment performance, Mr Dalmady expresses his incredulity that the bank could record such market-beating returns in such a regular fashion.

"I really would like to know which stocks, bonds, funds and metals these folks have invested in to achieve such returns . . . Unfortunately, that is something they don't reveal," he said.

However, Mr Bertsch told FT Alphaville: "We view this as the isolated opinions of one analyst in Latin America and we obviously disagree with his conclusions. The most important opinion for us is that of our clients, some of whom have been with us for over 20 years and have maintained their confidence with Stanford Inter-national Bank."

In December, SIB issued a letter to depositors assuring them that the bank had no investments with Madoff funds, reminding them that the bank was regulated by Antigua's Financial Services Regulatory Commission and the local ministry of finance. This states that the bank has 30,000 clients from 131 countries who have deposited $8.5bn in assets.

It also reveals that in November the bank's directors - led by Sir Allen - injected $541m into the bank, taking shareholder equity up to just over $1bn.

SIB's prime client base is said to be concentrated among wealthy Caribbeans. But it is part of the much wider, US-based Stanford Financial Group, which claims more than $50bn of assets under management.

The entity has sales affiliates across the southern US, along with offices in the Caribbean and also Geneva. Willis, the London-based insurance broker named as an insurance and risk manager for SIB, did not return requests for comment.

SIB has been audited by a local Antiguan firm, CAS Hewlett, the chief executive of which, Charlesworth Hewlett, died last month. A spokesman for the firm could not comment on SIB and said the auditing business was being taken over by one of Mr Hewlett's children, currently based in Britain.

Sir Allen himself took over Stanford Financial in 1993, after his father's retirement, expanding the company into Latin America and the Caribbean at a time when specialist banking was still in its infancy in the area. "Antigua in the 1990s was just not a credible offshore financial centre," noted David Marchant of the specialist publication Offshore Alert.

Sir Allen was cited as the 205th richest American in the 2008 edition of the Forbes 400, with an estimated net worth of $2.2bn - dwarfing the GDP of Antigua and Bermuda, of which he is a citizen. He is the island's largest private employer.

Sir Allen has lived in the Caribbean since the 1980s, spending fewer than 90 days in the US per year for tax reasons, according to previous reports. His business interests and philanthropic activities earned him a knighthood from the Commonwealth in 2006, but also accusations of undue influence on Antiguan government policy.

In early 2007, Baldwin Spencer, Antigua's prime minister, deplored Sir Allen's "threats, innuendos and now, downright political interference in our nation's affairs", according to the regional press.

The businessman's first foray in the Caribbean was to establish an off-shore banking centre in Montserrat in 1985.

That adventure ended in 1990 with a court case against the British government, of which Montserrat is a protectorate, which had opened an investigation into Sir Allen's operations as part of a broad clampdown on offshore banks.

Mr Stanford voluntarily relinquished his Montserrat banking licence as a result of the case.

http://www.ft.com/cms/s/0/854cdce8-f971-11dd-90c1-000077b07658.html?nclick_check=1