Allen Stanford Ponzi Scheme

[scion]

Allen Stanford: the Antigua Triangle

From The Sunday Times
February 22, 2009
Marie Colvin in St John's and Dominic Rushe in New York
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5780606.ece

On a northeast corner of Antigua called Crab Bay lies the private dock of Sir Allen Stanford, a bolthole for a billionaire seeking secrecy and seclusion. Unlike other Antiguan marinas, where colourful cafes line the piers and people wander freely, visitors to Crab Bay are greeted by a steel gate, private security guards and CCTV.

The marina is for the exclusive use of Stanford's 112ft motor yacht Sea Eagle Bikini, where he liked to spend much of his time, attended by his personal chef and housekeeper. "He lived almost permanently on board at times," said a source who knew Stanford, who now stands accused of massive fraud. "It was the perfect place. He could slip in and out as he wished."

Across the bay lies a villa and another private jetty owned by Stanford. Not far away are the hangars for his private jets. No queuing at the often chaotic VC Bird International airport for him and his visitors: Stanford could slip through his own terminal without hindrance.

It was the ideal set-up for a billionaire and his associates who wanted to travel untroubled by formalities. Nipping in by sea or air, they could be in the heart of his fiefdom within minutes.

Next to the airport are the Sticky Wicket and the Pavilion, two restaurants Stanford owns. Nearby is the cricket ground that bears his name and the office of the Antigua Sun, his newspaper. And most important of all, up a paved road lined with groomed gardens, is the Stanford International Bank (SIB), a palatial white building with an eagle crest on the front. The air-conditioned lobby has the feel of a gentleman's club - green marble floors and dark wood panelling. This was the headquarters of a bank supposed to have $8 billion in assets, a hub of an empire that Stanford boasted managed $50 billion.

Late on Friday a British lawyer in a pinstripe suit emerged after studying the books. The bank, he told The Sunday Times, had "nothing like $8 billion here". He added: "It appears to be a Ponzi scheme. The $8 billion you hear about in the media isn't there."

Nor was there any sign of where the money has gone. The lawyer, one of the court-appointed receivers, said investigators were hunting for the billions overseas. It was like the Madoff scandal, he said, referring to an alleged fraud in the US where $50 billion may have been lost.

As the lawyer left, a heavily made-up Venezuelan woman arrived. She had dyed blonde hair, Dior sunglasses and a leopard skin top with gold chains bouncing on her chest. What she didn't have was the $3m she had entrusted to Stanford's bank.

Hyperventilating she said: "Did anyone get any money? Why can't I go in? They know me, they know me." An Antiguan policeman blocked her way. She had just flown in from Caracas, she protested, and was "ruined". The officer stood his ground.

At least five British investors also have "millions" at risk in SIB, according to David Greene, a London lawyer. Offshoots of the Stanford empire across South America were either closed or besieged by depositors wanting to take their money out. In the confusion some unconfirmed reports claimed that investigators were looking into links with money laundering.

There was even speculation over the fate of the bank's auditor, an elderly man from a tiny firm who died last month the day after signing off the books. Although the funeral company in Antigua said Charlesworth Hewlett, 73, had passed away peacefully, family lawyers in England were unable to say exactly what had happened.

Vigilance and scrutiny were lacking both from outside and within the bank. One board member, Oliver Goswick, was a car dealer who had a serious stroke in 2000. According to the firm's latest annual report, Goswick oversaw investments for SIB. Yet his son Richard said last week Goswick "can't string seven words together".

What is clear from interviews in Antigua and America is that Stanford was a maverick who amassed and spent a fortune, while the authorities failed to act despite numerous warning signs about his allegedly fraudulent activities. STANFORD always had his eye on the big time and in recent years lived lavishly. Quite apart from his properties on Antigua, he owns an estate on St Croix, in the Virgin Islands, and other property in the US.

According to a paternity claim filed in Florida by one of the mothers of his six children, at one time Stanford also lived at the "Wackenhut Castle", a $10m extravaganza in Miami complete with a 57-room castle, a moat and a man-made cliff. When the couple separated, Stanford paid the woman $850,000 a year for housing, food and private school costs and provided $75,000 for Christmas gifts. On one occasion he gave $50,000 to buy eight Hermès handbags. With another girlfriend, Andrea Stoelker, Stanford took to spending a lot of his time on Sea Eagle Bikini, whose engines are so powerful it is capable of 35 knots - and costs more than $2,000 an hour to run.

Stanford did not socialise much, said one of his staff, preferring the seclusion of his yacht when he was not playing the showman for public consumption. Nevertheless, he did not stint on anything. When Stoelker was dissatisfied with the standard of dry-cleaning in Antigua, he sent it by jet to be done in St Croix 170 miles away.

How did he make the money to fund such a lifestyle? Stanford is said to have made his first millions from property speculation in Houston, Texas, after which he set up a bank called Guardian in Montserrat in the late 1980s.

At the time the island was, according to Jack Blum, an American lawyer expert in money laundering, "probably the most egregious jurisdiction in the world for bogus banks and funny money".

According to Blum, the British authorities became interested in Stanford's activities. The American tax authorities also reportedly began looking at Guardian, and in the 1980s Stanford moved his offshore banking operations to Antigua.

Renamed Stanford International Bank, the firm became Antigua's largest bank serving offshore customers and Stanford became a confidant of the then prime minister, VC Bird, who was later succeeded by his son, Lester.

Interviewed last week, Lester recalled: "Stanford had some problem with the Montserrat government. He was checked out and we agreed there was no reason to stop him, so he was allowed to buy the Bank of Antigua. I was not in a close personal relationship with Mr Stanford. I've spoken to him maybe four times since 2004."

However, rival politicians in Antigua have accused Bird's party of allowing Stanford too much leeway. Baldwin Spencer, the present prime minister, has said of Stanford: "This man has a lien on our whole country."

Last week Colin O'Neal, a local journalist, put it more bluntly: "Stanford's history on our island has been one big land grab."

By the late 1990s the country had a reputation for dodgy offshore banking and American authorities discovered that $3m deposited in Stanford's bank had come from Amado Carrillo Fuentes, a Mexican drug runner known as "the lord of the heavens" for transporting drugs by air.

Fuentes died while having extensive plastic surgery that went wrong; the bodies of the surgeons were later found cemented into oil drums.

Stanford's bank handed the $3m to US authorities, with Stanford observing: "It was the right thing to do morally, and it's the legal thing to do."

In an effort to clean up the country's reputation, Bird asked Stanford to spearhead reform of the banking system. A delegation put together by Stanford met Jonathan Winer, then head of the US State Department's Bureau for International Narcotics and Law Enforcement Affairs.

Winer was not impressed. "Antigua needed to clean up its act," he recalled.

One problem, he said, was that Stanford was directing reform while he was also being regulated.

Some improvements were made and Stanford stepped down from the committee. At the same time, however, new laws increased the secrecy of Antigua's banking. It became an offence punishable by prison for anyone to release information about a bank customer without a court order.

Stanford's bank appeared to boom, with assets and funds under management soaring as he offered high returns and secrecy. His empire grew to encompass banks and wealth management firms in the US, Latin America and Europe. In the past two years Stanford Group Suisse has targeted British investors with between $5m and $10m to invest.

As the money flowed in, Stanford built a pink villa at one of Antigua's beautiful bays; bought an 18-acre island; and acquired a $9m mansion at Jumby Bay, a resort island two miles off Antigua. Stanford promptly knocked the house down and applied to build one costing $27m.

After funding cricket in the Caribbean, he shot to prominence in Britain when he agreed to sponsor a match between England and the "Stanford Superstars" with prize money of $1m a man for the winning team. To announce the deal he arrived at Lord's, cricket's hallowed citadel, in vulgar style, in a helicopter apparently with $20m in cash. WHILE Stanford was building his empire and amassing millions, concerns about his activities surfaced.

In the US, there were complaints that his firms gave $90,000 to help a senator who sat on committees dealing with money-laundering. In Antigua, Spencer accused Stanford of bribing ministers. The billionaire denied the accusation, but admitted giving the ministers $100,000 each so that they could help the people of Antigua.

From 2007 US regulators were actively monitoring Stanford after his firms were fined small amounts for several failings, including providing "misleading, unfair and unbalanced information" about their investments. Two former employees also came forward, alleging malpractice in the firm - charges Stanford firmly rejected.

Mark Tidwell and Charles Rawl were sued by Stanford for "stirring up a hornets' nest" after they questioned the high returns the firm was promising. The pair sued back and are now talking to the SEC. In their lawsuit they allege Stanford was destroying internal documents and prohibiting financial advisers from filing proper paperwork with the US Treasury.

According to Tidwell and Rawl, even as regulators were doubting Stanford's "certificates of deposit", the firm was offering bonuses and incentives to salesmen for pushing those same investments to customers. Employees who sold the most certificates won BMWs and all-expenses-paid trips to Geneva, New York and Mexico.

Stanford claimed the pair were disgruntled former employees who owed the firm $500,000 and were making false allegations.

As Stanford tried to pull in more money, the credit crunch was taking its toll. When the $50 billion financial empire of Bernard Madoff collapsed in December, Pershing, a US firm that processed money transfers for Stanford, grew worried and stopped acting for him.

Then in January, Alex Dalmady, an independent financial analyst, published a report in a Venezuelan economics magazine questioning Stanford's figures. Investors began to withdraw money. Stanford's firms began shifting tens of millions of dollars out of the US. The SEC finally acted.

After two days missing, Stanford was found last week in a modest $200,000 home, believed to be owned by a relative of Stoelker, in Fredericksburg, Virginia. He was said to be depressed but seeking legal advice to fight accusations of fraud. In an earlier e-mail to staff he said he was cooperating with the inquiries and would "fight to uphold" the firm's good name.

Where has the money gone? In court documents, the SEC said that only Stanford and one of his associates had knowledge of how the vast majority of SIB's "deposits" were deployed. Most of the money, said the SEC, "resides in a ' black box' shielded from any independent oversight".

Investigators suspect much of it, far from being held in liquid assets, went into real estate, private equity deals and other ventures where it may not be recouped.

They are pinning their hopes on Laura Prendergest-Holt, SIB's chief investment officer. She has also been accused of fraud - but investigators hope she may cooperate, in return for leniency, in unlocking the secrets of the missing Stanford billions.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5780606.ece