Allen Stanford Ponzi Scheme

[scion]

Sir Allen Stanford

Published: February 17 2009 22:26 | Last updated: February 17 2009 23:38
http://www.ft.com/cms/s/1/9e5b8b80-fd40-11dd-a103-000077b07658.html

The gumshoes from the Securities and Exchange Commission are none too impressed by Allen Stanford's knighthood. They ignored it altogether in a complaint filed on Tuesday alleging that the cricket-loving Texan billionaire was perpetrating a "fraud of shocking magnitude" on investors.

Even if the title bestowed by Antigua and Barbuda is pukka, that may be about all that is. The consistent double-digit returns Sir Allen claimed for his "unique investment strategy" were grossly exaggerated, the SEC reckons. It must now act urgently to address investor panic about how many more multi-billion dollar frauds have yet to be unmasked.

If Stanford International Bank, which boasts 30,000 clients and $7.2bn in assets under management, turns out to be the piratical Caribbean enterprise described in SEC complaint, it will be a severe blow to a fund management industry still reeling from Madoff.

The SEC has not revealed a smoking gun but has unearthed enough anomalies to suggest investors should brace for the worst. Why did Stanford achieve identical returns in 1995 and 1996 of exactly 15.71 per cent, for example? And how did SIB's "diversified portfolio of investments" lose only 1.3 per cent in 2008, a year in which the S&P500 lost 39 per cent and the Dow Jones STOXX Europe 500 Fund fell by 41 per cent.

Investigators also want to know why he seemingly overstated the liquidity of his investments, why he allegedly misled investors by claiming his investment portfolio was regulated by the Antiguan authorities and why he denied his exposure to Madoff.

Sir Allen may have good answers to all these questions. But he is not giving them to the SEC. Contrary to his companies' recent public statements, his operation has "wholly failed to co-operate with the commission's efforts to account for the $8bn of investor funds purportedly held by SIB". That is not cricket, even in Antigua.

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http://www.ft.com/cms/s/1/9e5b8b80-fd40-11dd-a103-000077b07658.html