Texas-Sized Fraud

by John M. Curtis
(310) 204-8700

Copyright February 19, 2009
All Rights Reserved.                    

       Rocked by Bernard Madoff’s $50 billion fraud on Wall Street, billionaire financier 58-year-old Texan Sir. R. Allen Stanford went incognito after the Security and Exchange Commission accused him of an $8 billion investment and banking scam.  FBI agents tracked Stanford down and served the flamboyant jetsetter in Fredericksburg, Va, serving him with a civil lawsuit alleging banking and investment fraud.  Stanford was accused of enticing investors with unrealistically high returns on certificates of deposits.  Stanford owns banks in Antigua, Venezuela, Panama, U.S. Virgin Islands, etc., sowing panic among depositors seeking urgent withdrawals.  Though reassured by authorities in Antigua and Venezuela, no one knows for sure how much Stanford has left on deposit.  Presented by FBI agents with the complaint while riding shotgun in his girlfriend’s car, Stanford seemed nonplused.

             Two days before Stanford was served with a civil complaint, he tried to hire a private jet to fly him to Antigua.  Holding dual citizenship with Antigua and Barbuda, Stanford was knighted by British Commonwealth governor Sir. James Carlisle for his business and philanthropic work.  U.S. tax records indicate he has tax liens totaling $212 million for 2007-08.  Federal agents charged Stanford with bilking billions from investors, calling the investigation a “massive ongoing fraud.”  Despite the SEC’s civil filing, Stanford has not been criminally indicted and remains free.  Though not charged criminally yet, he has been asked to surrender his passport by a federal judge.  Stanford Financial Group, started by his grandfather in 1932, solicited wealthy investors from 136 countries, with an estimated $50 billion under management.  He represents a serious flight risk.

            Like Bernie Madoff, Stanford’s banks offered investors higher-than-usual returns on certificates of deposits.  SEC regulators turned a blind eye, while Stanford rewarded depositors with phony yields.  SEC investigators finally woke up when Stanford International Bank attorney Thomaqs Sjoblom wanted to withdraw all evidence of wrongdoing.  “The attorney’s withdrawal is a massive red flag that screams fraud,” said Peter Henning, professor of criminal and securities law at Wayne State University in Detroit, Mich.  Stanford’s SIB was not audited by respectable Big 5 accounting firm PricewaterhouseCooopers or KPMG but instead by little known CAS Hewlett, whose chief executive Charlesworth Shelly Hewlett died last month.  Since his death,  Stanford’s holdings were handled by Hewlett’s daughter Celia, who was based out of Enfield, North London.

            Word of Stanford’s fraud added insult to injury to Wall Street, already racked by Madoff’s $50 billion Ponzi scheme, watching the Dow Jones Industrial Average hit a 10-year low. “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, director of the SEC’s Fort Worth, Tx. office.  Standford sponsored cricket tournaments in the West Indies and England and was a key sponsor to England Cricket Club.  “The image of the England cricket team—dare I use the wholesome image of England cricket team and the spot generally—is absolutely vital for participation and interest in the game,” said Leicestershire Chairman Neil Davidson, blaming England and Wales Cricket Board Chairman Giles Clarke for entering into a five-year, $100 million sponsorship with Stanford.  Money talks but hindsight is always 20/20.

            SEC authorities seek millions in illicit profits, including back interest and fines, and an injunction from further trading.  Sounding defiant, Stanford e-mailed employees last week, insisting he would “fight with ever breath to continue to uphold our good name and continue the legacy we have built together.”  Standford’s cosmic sense of entitlement, lack or remorse and pretentious lifestyle smacks of a deft sociopath, unwilling to come to grips with his scam.  A federal judge ordered Stanford’s known assets frozen, including $8 billion managed by Stanford International Bank with offices in Mexico, Panama, Colombia, Ecuador, Peru and Venezuela.  It’s wishful thinking to believe Stanford hasn’t hidden his assets in Swiss banks, beyond the scope of the SEC and U.S. District Court.  No one knows what’s left in deposits at all of Stanford’s investments and deposits.

            Stanford’s latest scam gives Wall Street, the SEC and U.S. government another black eye, proving, if nothing else, that regulatory system needs a major overhaul.  Using a Podunk accountant should have alerted the SEC to the very real possibility of another Madoff-like scandal where anything goes with hapless investors.  With Uncle Sam bailing out the nation’s most “legitimate” financial institutions, it’s another blow to financial system riddled with manipulation and fraud.  Revelations of piracy at the nation’s most respected financial institutions by the most venerable CEOs has stripped the world’s financial capital of its credibility.  Before Stanford escapes, the FBI and Justice Dept. better complete their indictment and bring the latest scam artist to justice.  Con artists like Madoff and Stanford have no right to live in their Manhattan penthouse or Caribbean paradise.

John M. Curtis writes politically neutral commentary analysing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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