Antigua, a tiny nation in the Eastern Caribbean with fewer than 90,000 people, bears all the hallmarks you would expect of a tropical island largely reliant upon tourism: fantastic weather and white-sand beaches (license plates bear the text "Land of Sea and Sun"); vendors whose profits ebb and flow with the tides that bring in the cruise ships; a population whose national religion is cricket.
Less typical is the abundance of both domestic and international financial institutions; at the end of 2008, eighteen international banks were licensed to operate in the country, according to the website of the Financial Services Regulatory Commission, the Antiguan regulator. These institutions range from small credit unions to discreet offshore branches of Swiss private banks. And then there is the Stanford financial empire, the crown jewel of which is the Stanford International Bank (SIB).
Located in a palatial building atop a hill and against a backdrop of impeccable tropical landscaping, SIB is a monument to the attractiveness of small islands with less-than-onerous fiscal regimes to wealthy individuals with a dislike of the tax man.
The building is a less-than five-minute walk from the VC Bird international airport, although visitors tend to opt for a two-minute cab ride there instead, according to airport taxi drivers. Two towering coconut trees, their trunks painted white, stand on either side of the entrance to the front of the building, which is emblazoned with the Stanford crest - an eagle. That eagle also appears on the brass handles of the two heavy wooden doors that open smoothly and silently onto the marble-tiled lobby, and on the tiny golden pins worn by the perfectly turned-out receptionists. The interior is designed to evoke an air of wealth and power; the lobby is decorated with dark green marble tiles, heavy wooden furniture, dark wood paneling and restrained white walls.
That image - of wealth and power - is one that is also associated with SIB's owner, Sir Allen Stanford.
Sir Allen is a flamboyant Texan billionaire whose financial investments in Antigua, of which he is a citizen, include two major banks, a trust company and a real estate development company. He also owns a newspaper, a world-class (and eponymous) cricket ground, two restaurants - one of which is run by Andrew Knoll, formerly the chef de cuisine at Emeril's Delmonico in New Orleans - and large tracts of land across the island. He is the title sponsor of Antigua Sailing Week, the biggest regatta in the Caribbean and one of the top five worldwide, and has drawn plaudits for his multi-million dollar investment in Caribbean cricket through the Stanford Twenty20 tournament. He lives in St Croix.
His command of the upper echelons of the economy and his close ties to the Antigua Labour Party (ALP), which held the reigns of government for more than forty years, have sparked concerns that he has too much influence on the island.
Some Antiguans little appreciate that they rely so heavily on a ‘foreigner' - albeit one with an Antiguan passport - for their livelihood.
Leroy Luke, who for 20 years has run a barber shop in St John's, the capital, described Sir Allen as "a man who likes to throw his weight around."
"He has a lot of power in Antigua, and he's not used to taking no for an answer," Mr Luke, who is an ardent supporter of the ruling United Progressive Party, said.
Sir Allen has not enjoyed harmonious relations with the UPP government, which trounced the incumbent ALP in the general election in March 2004. Prime Minister Baldwin Spencer has described Sir Allen, whose honorific was bestowed under the previous administration, as a "modern-day colonialist", in part because of his extensive land ownership.
Sir Allen is known for working his employees hard, but paying them well. He is also said to be opposed to unions in any form, according to several employees who asked not to be identified.Mr Luke, the barber, said Sir Allen's contributions to the island's economy and to sport, while valuable, did not give entitle him to free reign. "Yes, he employs a lot of people and he's done a lot for the island," he said. "But we were surviving before he came to town and we will continue to survive even if they take his passport away."
Recently, Sir Allen's operations in the country, where he is the largest private sector employer, have attracted a different kind of attention. He is facing increasingly intense scrutiny from US financial regulators and of late, their Antiguan counterparts.
The Stanford Financial Group, which is based in Houston and claims to have $50bn in assets, is being jointly probed by the SEC, Financial Industry Regulatory Authority (Finra), the Florida Office of Financial Regulation and most recently, the FBI.
In one of the more recent developments, investigators from Finra visited six broker-dealer branch offices of the firm in the US last month, according to people familiar with the situation. They downloaded information from computer and reviewed files, other people familiar with the events said.
Finra is the securities body which oversees broker-dealers in the US, and often works with the SEC on investigations
The SEC and Finra declined to comment on the precise nature of the examinations - which an spokesman for the Group described as "routine" - but people familiar with the situation say the company's apparently ability to guarantee and consistently deliver above-market returns on certificates of deposit (CDs) has raised red flags.
The bank's assets have burgeoned from $1bn in 2000 to more than $8bn at the end of last year, according to company statements.
The examinations into the group, headed by billionaire Allen Stanford, have been ongoing for several months, according to people briefed on the situation. The inquiries pre-date the emergence of Bernard Madoff's alleged $50bn"Ponzi" scheme in December, these people said.
US regulators have also contacted regulatory officials about making inquiries into Stanford International Bank (SIB), according to Leroy King, head of Antigua's Financial Services Regulatory Commission (FSRC). The FSRC has not opened a formal investigation because it had not received any specific complaints about the bank, but said it would be speaking to bank officials.
Mr King described Sir Allen as "a good corporate citizen" who was actively involved in all aspects of philanthropy in the country. "In addition to business, he supports football and cricket, and he's given to the Catholic church," Mr King said.
"I have never in my eight years here seen a letter from a customer of the bank complaining they had not been paid," he added. "We are not turning a blind eye, but at the same time we cannot allow the blogosphere and press articles to distract us. We have to make sure that when you have a good client that we have never found wanting, we have to stay the course."
Mr King was referring to a highly critical analyst note penned by Alex Dalmady, an independent financial analyst based in Florida. The note has been widely discussed on financial blogs and belatedly, by the mainstream media. The report, which Mr Dalmady first submitted to a Venezuelan magazine in January, contends that the bank's persistently and significantly market-beating returns on its $8.5bn investment portfolio "are on the limit of the credible universe."
"They have done what few (or no) others can," Mr Dalmady said in the report, titled "Duck Tales".
THE QUESTION OF THE AUDITORS Mr Dalmady also questioned SIB's use of a single, local auditing firm - CAS Hewlett - instead of a one of the more established players, a concern that was echoed by David Marchant, publisher of Offshore Alert.
"Any bona fide financial institution that wants to be taken seriously would have a proper auditor," Mr Marchant said. "People in the know have been highly skeptical of the Stanford Group for many years," he added.
Both PricewaterhouseCoopers and KPMG maintain a presence in Antigua, but while these are large, fully-staffed operations with a range of clients, CAS Hewlett is a tiny firm, the chief executive of which, Charlesworth "Shelly" Hewlett, died in January.
Since then, the business has been in limbo. Employees of the firm say the day to day operations are being handled by Mr Hewlett's daughter, Celia Hewlett, who is based in Enfield in London, but the overarching impression is one of confusion over who is really in charge and what the future - and indeed the present - holds.
The firm operates out of Hewlett House, a bright-green two-storey building on St John's street. The lower floor is fully furnished, totally unoccupied and dark;even the reception desk at the main entrance on the lower floor is unstaffed. The furniture in these offices, which includes about a dozen desks adorned with flat-screen Dell monitors, appears to be brand new and barely - if at all - used; a strong ‘new furniture' smells hangs in the air.
CAS Hewlett's main operations appear to be based in a couple of rooms on the top floor, the lobby of which contains a new - if dusty - desk adorned with an Olivetti 900X typewriter covered in yellowing plastic, and an old phone atop an eight-year-old edition of the Antigua and Barbuda telephone directory.
Winston Hewlett, a brother of the deceased chief executive and who joined the company last year, said he had never received a firm answer as to the status of the empty offices and conference room. "I've been inquiring since I got here about eight months ago, but I never got a definitive answer from Shelly," he said. "At one point [Shelly] said the offices would not be rented out, but sometimes he would say something different."
But Eugene Parry, who described himself as the office manager and "certainly not the biggest shot here", said everything in the building had been there "for at least ten years", and that all the office space was "currently in use."
"We are in a transition period," Mr Parry said. "Everything is being handled out of London. I'm not too sure what is happening with existing clients."
Mr Parry could not comment on how many qualified accountants other than Mr Hewlett the firm employed: "I'm not too sure. Some are here, some are in England. There are accountants here, and the work is always done at the very highest standard."
CAS Hewlett is also listed as the auditor of the Bank of Antigua, which is also owned by Sir Allen and caters primarily to retail clients. Celia Hewlett did not respond to requests for comment.
Auditors are not currently regulated in Antigua, but regulators expect this to change in the near future. "Our plan is to include them in our purview," Trevor Mathurin, deputy administrator of the FSRC, said. "There is already a concentrated effort to bring auditors and chartered accountants under our regulatory oversight."
Regulators already have to approve a company's choice of auditor, and this selection is reviewed annually, he added.
Mr King, the FSRC head, said international financial institutions in Antigua usually employed the more established auditors on the island. "[They] tend to use the big firms that they are accustomed to," he said. "We would like them to use our local firms, but the choice is theirs."
Neither Sir Allen nor Juan Tolentino, president of SIB, responded to requests for comment.
PREVIOUS INVESTIGATIONS This is not the first time Sir Allen has faced regulatory scrutiny. In 2007, Finra fined Stanford Group $20,000 for failing to adequately state the risks involved in the CD investments and to disclose that an affiliation between the broker-dealer and the bank could pose a conflict of interest. Stanford consented to the sanctions without admitting or denying wrongdoing, according to a file on the Finra web site.
Mr King of the FSRC said he was aware of the fine. "To us, a $20,000 fine after five or seven years [of not having any issues] is not a major problem."
And last year, two then-employees of the Group, Mark Tidwell and Charles Rawl, filed an employment-discrimination suit in Texas state court alleging Stanford Financial was engaging in "various unethical and illegal business practices, including overstating the asset value of individuals in a manner designed to mislead potential investors and purging electronic data from its computers in response to an investigation by the Securities & Exchange Commission," according to court documents.
Then, in July, the SEC issued subpoenas to Mr Rawl and Mr Tidwell requiring them to produce, among other things, "all documents and communications evidencing, memorializing, or relating to complaints by SGC customers relating to SGC and/or any SGC affiliate, including SIB."
Lawyers representing Mr Tidwell and Mr Rawls declined to comment.
JUST NOT CRICKET Over a leisurely lunch at Russell's Bar & Seafood Restaurant* in St James the cricket correspondents of several of the UK's leading newspapers discussed the embarrassing postponement of the Test match between England and the West Indies and attempted to avoid overhearing any details of the rugby match between England and Wales.
Eventually, the discussion turned to Sir Allen Stanford, the sponsor of the Twenty/20 series and best known in the UK for landing at Lord's cricket ground in a helicopter with $20m in tow.
"Before the helicopter stunt, he was pretty much unknown in the City of London," Mike Selvey, chief cricket commentator at the Guardian and former professional cricketer, said. "Now, he's suddenly acquired a profile."
Stanford was already known outside the UK for his sponsorship of the PGA Golf Tournament, Antigua Sailing Week, the Stanford US Open Polo Championship, and the Miami Heat basketball team. In the Caribbean, he made his sporting name with the high-profile (and now defunct) Twenty/20 challenge, which offered an annual prize of $20m.
"It's all about profile," Mr Selvey said. "These are all sports his clients are into."
(*highly recommended, though beware the rum punch!) Additional reporting by Joanna Chung in New York and the FT Alphaville team in London
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