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Monday, 06/11/2012 12:34:43 PM

Monday, June 11, 2012 12:34:43 PM

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Allen Stanford: From king of the Caribbean to penniless in prison

Allen Stanford, one of the richest men in the world, will appear before a court in Houston, Texas, on Thursday to be sentenced to up to 230 years in jail.

By Rosa Prince, New York
7:00PM BST 09 Jun 2012
http://www.telegraph.co.uk/finance/financetopics/sir-allen-stanford/9321282/Allen-Stanford-From-king-of-the-Caribbean-to-penniless-in-prison.html

As he bounced the attractive wife of England wicket keeper Matt Prior on his knee and waved to the crowds watching the cricket match he had bankrolled, financier Sir Allen Stanford must have thought he had it all.

Roll forward four years, and that happy day on the Caribbean island of Antigua will seem far away when Stanford – now stripped of his title – appears before a court in Houston, Texas, on Thursday to be sentenced to up to 230 years in jail.

Just a few months after embarrassing the England cricket team by brazenly flirting with their WAGs, the womanising 6'4 Texan banker was arrested on suspicion of running an $7 billion (£4.5 billion) Ponzi scheme, one of the biggest frauds in history.

Following his conviction in March on 13 charges of conspiracy, wire and mail fraud, obstruction and money laundering, prosecutors last week requested he serve the maximum jail term possible under the law, which could see him leave detention in a coffin.

In contrast, Stanford's lawyers are seeking a prison term of between 31 and 44 months, which, if granted, would likely mean his immediate release given he has already been in custody for more than three years.

They are expected to argue that he has suffered considerably in prison already, at one point receiving a severe beating when his cellmates – 14 of them in a room designed for eight – attacked him, apparently irritated by his habit of chatting on his mobile telephone.

Stanford later tried to claim that his injuries - which included fractures to his cheekbones and eye socket - meant he was unfit to stand trial, but the prosecution went ahead.

At his sentencing, it will be the investors he swindled rather than enthusiastic cricket fans who will form his audience. As much as they relish seeing Stanford behind bars, it is only the recovery of their money which will bring them closure.

The man once named by Forbes Magazine as the 605th richest person in the world now claims to be impoverished. The US Justice department recently dropped an attempt to issue him with a restitution order forcing him to hand over any earnings he made to his victims, saying his financial affairs were so complicated it would be impossible.

So far, it is estimated that victims will receive only 5 cents for every dollar they invested.

Lisa Teti, from Florida, who lost $1.3 million along with her husband. said: "It will be nice to see Stanford behind bars for the rest of his life but to be honest, restitution would be even nicer.

"I blame the authorities for failing to warn us – for whatever reason they turned a blind eye to what he was up to, and if they hadn't, 90 per cent of his victims would not have lost money.

"My husband and I checked Stanford out thoroughly with all of the authorities and nothing came up to show that there was a problem. We did not learn anything was wrong until we heard it on the news – that was the worst day of our lives, a terrible sinking feeling. So many people have been left destitute – some don't even know where their next loaf of bread is coming from."

So many victims applied to address the Federal Courthouse in Houston that a special lottery was held to decide which of his more than 20,000 victims will get to look Stanford in the eye and tell him exactly what the fraud he used to fund an extravagant playboy lifestyle has cost them.

And what a lifestyle it was, for the man born to a lower middle-class family in the small Texan town of Mexia in 1950.

As well as the $100 million fleet of private jets, the yacht off the coast of his adopted home of Antigua and the $10 million faux castle in Florida, Stanford also had expensive family commitments, paying hundreds of thousands of dollars a year to fund the four children he had by four secret "outside wives," including Kent-born Louise Sage.

He also has a legitimate daughter, Randi, by wife Susan, who he married age 25. She began divorce proceedings in 2007, but extensive wrangling over her financial settlement meant they had not been completed when he was arrested and it is unclear whether it ever went through.

By then, Antigua had become known as Stanford-land – he had a private terminal at the airport, had built a much-needed hospital, was so well-connected politically he was said to attend cabinet meetings and, with a fortune exceeding the island's GDP, was one of its biggest employers.

Knighted by Antigua's governor general in 2006, the popular joke that new "Sir Allen" saw himself as a colonial gentleman seemed confirmed as fact when he began to take an interest in cricket.

But if his ambition was to be seen as landed gentry, his method of wooing the English Cricket Board was pure Texas.

Announcing he would underwrite the Twenty20 game, Stanford flew into Lords by helicopter, wheeling a glass Perspex box filled with $20 million in prize money on to the pristine outfield.

Many felt that the ECB had been blinded by the ostentatious display of wealth to the whispers about his financial dealings which had led other cricketing authorities, in South Africa and Australia, to shun him.

Indeed, by 2008, when Stanford performed his Lords stunt, the warning signs should have been clear.

Stanford had originally located his businesses in Montserrat, only moving to Antigua in 1990 after authorities on the British colony began to ask questions, leading him to voluntarily resign his banking licence.

Free and easy Antigua was a safer bet; when reports began to circulate about possible financial misconduct, he pulled off the extraordinary feat of having himself named as the island's regulator. Stanford and his company had by now come to the attention of both the US and British financial authorities, who wrote several reports warning of irregularity and protested about Antigua's failure to follow up on them.

Added to this, a steady flow of Stanford employees began bringing law suits against his company, alleging that they had been fired for refusing to carry out acts they considered illegal or improper.

Unaware of this, investors continued to pour money into the Stanford Group Company and Stanford Investment Bank, which promised them high yields on investments in safe, heavily-audited financial instruments.

Instead, it would later emerge, the "vast majority" of the portfolio was personally handled by Stanford and his best friend of 40 years James Davis (who would later testify against him) who invested it in far riskier private equity and real estate, the proceeds of which the financier used to fund his extravagant lifestyle.

It took the unraveling of another Ponzi scheme, run by Bernie Madoff, for federal investigators to focus on Stanford.

He was finally arrested at the Virginia home of his latest live-in girlfriend, Andrea Stoelker, a 33-year-old former cocktail waitress, in June 2009.

Madoff would go on to be found guilty of running the largest fraud in history and sentenced to 150 years in jail – ironically, 80 years less than Sanford's prosecutors are seeking.

However, any pleas by Stanford's defence lawyers that his sentence is unduly harsh is likely to get little sympathy from his victims.

"The only appropriate sentence is life," said Mrs Teti. "I would not want him to get out and be in a position to hurt anyone else. That is the nature of the man. If he is not in prison he will keep doing this."

http://www.telegraph.co.uk/finance/financetopics/sir-allen-stanford/9321282/Allen-Stanford-From-king-of-the-Caribbean-to-penniless-in-prison.html

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