Some Stanford Properties Handed Over


The government of Antigua & Barbuda has released parcels of lands and properties owned by R Allen Stanford into the hands of joint liquidators.
Attorney General Justin Simon, as a result, vows that eventually, those who have filed financial claims against the investor will receive their just due.

“… the government has released from its acquisition process the three parcels of land, two of them vacant at the Bank of Antigua headquarters at the airport, which are owned by Stanford international Bank and also the Pelican Island property in St Phillip’s North in which Stanford International Bank has a 100 per cent beneficial interest,” Simon told the Lower House on Thursday.

He also further listed the Bank of Antigua building in St John’s among more properties released, and noted that certain assets and liabilities of that bank will be sold to the Eastern Caribbean Amalgamate Bank (ECAB).

“Government has also released from its acquisition process the three parcels of land in St John’s – the two vacant on High Street and the third housing the bank branch of the Bank of Antigua on the corner of High and Thames Streets to the owner, The Bank of Antigua Limited, at the request of the Bank of Antigua, which continues to be managed by the Eastern Caribbean Central Bank,” Simon announced.

He added, “The plan which is envisaged Madame Speaker, is that certain of the assets and liabilities of the Bank of Antigua will be sold to a new corporate entity (ECAB), the Eastern Caribbean Amalgamate Bank, which is made up of the various indigenous banks within the OECS, who then be taking over the Bank of Antigua, so that the depositors, creditors, persons who save would all be protected in the long run.”

According to a new company registration list, the directors of ECAB are Edmund Lawrence, Robert Norstorm, Gladston Joseph, Derry Williams, Gregory Degannes, Craig Walter, and Whitfied Harris.

The AG added that in respect of the legal challenge filed by other Stanford entities against the compulsory acquisition of the parcels of land, the consent order was approved and filed by May 19. Simon said although the government will move to release more land, a hold remain in place for others.

“…the government is to release or revest all of the other lands titled to the various Stanford entities save and except for eight parcels within the airport compound to include the parcels on the airside of the VC Bird Airport, adjoining the disused runway-10, along with the former and current car park,” Simon said.

He explained that the hold on certain property in the vicinity of the airport is for security reasons and future development of the area.

“Government has released a number of those various parcels of land and held on to those at the airport which are necessary in respect to the security of the VC Bird International Airport, and also essential in terms of the future expansion of the airport,” Simon said, “and the car park which we think from a public point of view in an international airport has to be controlled and owned by the government of Antigua and Barbuda.”

Simon, who is responsible for legal affairs, said the issue of compensation for these parcels in accordance with the Land Acquisition Act has to be settled. He indicated that the parties will have to complete an agreement within six months of the date of the order.

The AG said earlier this week, he received communication from the joint liquidators of Stanford International Bank Limited (SIBL), Nigel Hamilton Smith and Peter Wistel of Vantis Business Recovery Services, who were appointed by the High Court of Antigua & Barbuda in April 2009.

He said they have advised that following negotiations, a co-operation agreement between themselves and US receiver Ralph Janvey has been filed with both the High Court of Antigua and Barbuda and the US District Court for the Northern District of Texas.

The agreement, which is subject to approval by both courts, seeks to bring an end to the legal challenges that have been taking place between the joint liquidators and the US receivers in relation to SIBL assets throughout the world.

He pointed out that the agreement proposes that the US receiver will deal with the “realization of assets” in the United States and in Canada, while the joint liquidators will deal with the realization of assets located in Antigua & Barbuda and the United Kingdom. Simon said this should end the legal battle between the two.

Furthermore, he said the agreement will provide a platform for both parties to co-operate and share information to assist in their efforts to claim assets covered by the agreement and also in countries not covered by the agreement.

Simon said he is conscious of the longstanding claims made by trade creditors, ex-employees, and APUA, as well as the allegations made by the Stanford Victims Coalition (SVC) in the United States that their SIBL deposits were used to purchase and develop many Stanford properties.

Moreover, the AG said he was informed by the joint liquidators that based on their investigation, it appears that up to US$1.5 billion was loaned to R Allen Stanford by SIBL through Stanford-owned US companies.

As a result, Simon said that the new co-operation agreement signed by the liquidators and the US receiver will allow them to trace those monies to the real and personal assets in corporate entities both locally, in the US, and elsewhere.

Lands Returned to Stanford

While taken on face value the following statement appears to be good news for Stanford victims, however it required international action to force the government to acquiesce and hand back these properties.

It should also be remembered that properties within the airport complex have been retained by the government and that similar promises were made to Half Moon Bay holdings which still have not been honoured.
Attorney General Justin Simon announced in Parliament yesterday that all “Stanford” lands with the exception of those inside the airport compound have been released from government hands.

Simon said the release comes in conjunction with a co-operation agreement signed between US receivers, Ralph Janvey and the joint liquidators.

“Earlier this week, I received communication from the joint liquidators of the Stanford Bank Limited … (That) a co-operation agreement between themselves and the US receiver has been filed.

“This co-operation agreement … seeks to bring an end to the various legal challenges that have been taking place between the joint liquidators and the US receivers,” Simon said.

The AG said a consent form was signed releasing the lands in response to legal challenges from parties seeking to claim funds they invested in Stanford International Bank Limited (SIBL). He listed the lands that have been released effective May 20 this year.

“The government has released from its acquisition process the three parcels of land, two of them vacant and the Bank of Antigua headquarters at the airport … and also the Pelican Island property … Government has also released from its acquisition process the three parcels of land in St John’s, the two vacant on High Street and the third housing the bank branch of the Bank of Antigua,” Simon added.

The attorney general explained that the plan, as it regards Bank of Antigua, is for an amalgamation of various indigenous banks within the OECS to take charge of the bank.

“Certain of the assets and liabilities of the Bank of Antigua will be sold to a new corporate entity, ECA the Eastern Caribbean Amalgamated Bank, which is made up of the various indigenous banks within the OECS who will then be taking over the Bank of Antigua,” Simon said.

The refusal of the government to release the lands within the airport compound means that the compulsory acquisition process will continue and Simon assured that compensation will be settled for those eight parcels of land.

“The issue for the compensation for these parcels in accordance with the principles laid down in the Land Acquisition Act has to be settled and the parties are to exercise best endeavours to complete agreement within six months of the order,” he said.

In February last year, the government acquired 254 acres of land previously owned by Allen Stanford, after he was accused of US $8 billion fraud.

Then Minister of Finance and the Economy Dr Errol Cort said that they were forced to take action because the Texan appointed receiver for Stanford International Bank, Stanford Group Company, Stanford Capital Management, as well as the investor and other individuals had sought to impose himself in as the receiver-manager of SIB.

How Stanford is worse than Madoff

If I ask you who the worst hedge fund fraudster is in the world, there’s only one name that will spring to mind. The guy who allegedly looted billions of dollars from unwitting victims. The guy who had been accused of fraud for years, though the government failed to properly investigate for years. The guy who is now seemingly showing no remorse while protesting the conditions in prison. The guy who left many of his victims broke and has been beaten while incarcerated.

Madoff, right? Wrong. I’m thinking of Allen Stanford, accused of running an $8 billion Ponzi scheme. So why should the general public care a lot more about the former Sir Allen Stanford (he is no longer a Knight) than Bernard Madoff’s $60 billion crime?

The sheer size of Stanford’s fraud would be the easy answer. $8 billion is nothing to sneeze at. But the money is actually somewhat beside the point.

What about caring about the failures of the SEC, which is under withering scrutiny following the release of its internal investigation regarding its handling of the Stanford matter? The report, released the Friday the commission also charged Goldman Sachs with fraud, shows that SEC examiners identified Stanford as a serious risk back in 1997, only two years after Stanford Group Co. had registered as an investment advisor. The SEC also was twice warned that Mr. Stanford was running a Ponzi scheme, yet failed to act for more than a decade. But the SEC’s (in)actions aren’t the cause, either.

How to (almost) get away with fraud: hide it in plain sight

The Stanford case matters to everyone, not just rich people, not just the government, and not just people who bought Stanford CDs, because the core of the issue lies is the exploitation of that near universal financial instrument, the CD. That’s correct – Certificates of Deposit, available from your local bank, (not CDOs or CDSs, from Wall Street investment banks).

Stanford and his firm are accused of running a scheme that pitched CDs with rates higher than those being offered by anyone else. Bernie Madoff, when describing his investment strategy, called it a “split strike conversion method.” To the ordinary person, those words make most sense when heard in a bowling alley.

It has been argued that sophisticated and even unsophisticated investors probably should have been more skeptical about Madoff’s product, which they clearly didn’t really understand. What’s more, Madoff described his fund as an “alternative” investment, something which should have been a sign that it’s not a place to put your entire fortune.

The same cannot be said about investing in CDs. In fact, the CD is just about the simplest financial product to grasp: Investors pay money for a document they can later cash in for the same amount, plus interest, guaranteed by the U.S. Government. This simplicity is what makes Stanford’s alleged scheme so insidious, and so scary for society.

A short history of the crimes of Allen Stanford

In February 2009, Stanford’s company, Stanford Financial Group, was reported to be under investigation by the SEC, FINRA and the FBI because one entity under its umbrella, the Stanford International Bank (SIB), was consistently providing higher-than-market returns on CDs to its depositors.

The promised rate of return caught the eye of regulators, who deemed it too high for the low-risk investments that SIB advertised (a portfolio of equities, metals, currencies and derivatives, per SIB’s Web site and its CD disclosures); Fortune reported that “according to the SEC complaint . . . The returns on the so-called CDs ranged from 16.5% in 1993 to 11.5% in 2005.”

At one point, CD rates offered by SIB were in the double-digits; more recently, the firm was offering 4.5% (while most other bank rates hovered around 1.5% (for a one-year, $100,000 CD). That June, Stanford was indicted for “massive ongoing fraud.”

Having investigated Stanford Financial and Mr. Stanford in early 2007 for a client considering a potential business transaction with the firm, the government’s allegations were hardly surprising to me. Among other things, our firm’s investigation revealed his complex and somewhat sordid history with Antiguan government:

A June 1999 news item reported that U.S. officials were “most alarmed” that Mr. Stanford was selected to sit on a “six-member board created to oversee [Antigua’s banking] industry,” leading to reforms with “…loopholes … that made it harder than ever to get at bank records.”
In early 2002, Mr. Stanford failed to appear before an Antiguan commission investigating fraud; he was to testify about a $31 million bank loan the government was repaying at rates it believed were exorbitant.
An allegedly “improper” land swap deal where Mr. Stanford reportedly made $37,000 payments to two Antiguan government officials negotiating with him.
Stateside, Stanford also made headlines for something he was not. In 2001, Stanford University stated that despite Mr. Stanford’s claims, they did not think that he was related to Leland Stanford Jr.

Stanford was sued for his Ponzi scheme in 2006

The most devastating information, though, was public three years before Stanford was busted. In a 2006 Florida whistleblower suit, a former employee charged that he was fired after he “began asking probing questions about Stanford Financial’s business model and, more specifically, how Stanford Financial earned its revenue.” The employee claimed in court documents that Stanford Financial was “operating a ‘Ponzi’ or pyramid scheme” in which money was “laundered” in its offshore bank and then used to “finance its growing brokerage business, which did not have any profits of its own.” A subsequent suit was filed in Texas by other Stanford executives making similar allegations.

Many will argue that the lawsuit and Stanford’s Antiguan government issues should have been known by federal regulators tasked with protecting individual investors. That said, it would be very difficult for individual investors to easily and inexpensively find this type of information, and even if they did, to know what to do with it.

That fact, combined with the straightforward appeal of the Stanford scheme, is a terrifying thought to individual investors. While there will always be criminals preying on the unsuspecting, it has been a little hard for most people to muster tons of sympathy for super rich individuals who put their savings — and some folks who even borrowed money to invest — in Madoff’s opaque alternative investment. Let alone for the investment firms that placed money from thousands of their customers into Madoff’s funds without making sure his methods were sound.

But having sympathy for the people who bought Stanford CDs — 28,000 of them — is a different story. Their loss is a warning that no investment – even ones that sound completely humdrum, like a CD – can ever be 100% safe

"Savagely beaten" Stanford asks to be freed

Allen Stanford, the Texas financier charged with running a $7 billion Ponzi scheme, asked the federal judge overseeing his case to release him pending the start of his criminal trial, saying that his detention violated his constitutional rights.

U.S.

Stanford has also fired one of his lawyers, setting up a potential showdown with U.S. District Judge David Hittner, who said last month he would not allow a fifth change to the defense team.

In a filing on Tuesday with the federal court in Houston, lawyers for Stanford said their client had been “subjected to substantial and undeniable punishment,” including nearly a year of incarceration and both physical and psychological damage.

This and the prospect of more than a year of further custody until and during his trial, which is scheduled to start in January 2011, violates his constitutional rights to due process, effective assistance of counsel, a speedy trial, and an absence of excessive bail, the lawyers said.

“When Mr. Stanford surrendered to authorities, he was a healthy 59-year-old man,” Stanford’s Houston-based lawyer, Robert Bennett, wrote in a brief on which Harvard Law Professor Alan Dershowitz consulted.

“Mr. Stanford’s pretrial incarceration has reduced him to a wreck of a man: he has suffered potentially life-impairing illnesses; he has been so savagely beaten that he has lost all feeling in the right side of his face and has lost near-field vision in his right eye,” Bennett said.

Saying their client had neither the motive to flee nor the means, having been declared “indigent” by court, Stanford’s lawyers urged that he be placed under house arrest at the home of his fiancee’s sister, with an ankle bracelet and other travel restrictions.

The office of U.S. Attorney Jose Angel Moreno in Houston did not immediately return a call seeking comment.

A federal appeals court has twice rejected Stanford’s attempts to be freed from jail pending trial, and Hittner has called Stanford a flight risk.

Stanford has been held in a Texas jail since his June 2009 arrest. In a 21-count indictment, prosecutors accused him of selling fraudulent certificates of deposit issued by his bank in Antigua.

IRRECONCILABLE DIFFERENCES

Separately, one of Stanford’s lawyers, Michael Essmyer, has asked the court for permission to withdraw from the case.

Essmyer, the managing partner at Essmyer, Tritico & Rainey LLP, cited Stanford’s decision to fire him on May 14, and “irreconcilable differences” with Bennett over litigation strategy and other matters.

“The nature of the irreconcilable differences is also the fact that Mr. Bennett acts independently without lead counsel’s knowledge or consent, and often in a manner that, in lead counsel’s opinion, is detrimental to the best interests of the client,” Essmyer wrote. He said he and his law firm “do not want to be held responsible for the actions of Mr. Bennett.”

Essmyer declined to make additional comments. Bennett did not immediately return a call seeking comment.

At a hearing on April 6, Hittner raised his voice several times as Stanford refused to directly answer questions about his legal representation. The judge nonetheless agreed to let Stanford to replace his latest two lead lawyers.

“You’ve had 10 attorneys attempt to enter this case on your behalf,” Hittner said. “I will not entertain any further substitutions.”

A case manager for Hittner said the judge would consider Essmyer’s request at a hearing to be scheduled.

The case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No 09-cr-00342.

(Reporting by Jonathan Stempel; Additional reporting by Anna Driver in Houston; Editing by Ted Kerr)

Stanford "Pirate of the Caribbean"

In 1985, when Stanford first became interested in the Caribbean, the hottest new home for offshore banks was the tiny island of Montserrat, a British colony with a smoking volcano (that, in 1995, obliterated half the island) and barely 12,000 jittery residents. A notorious Beverly Hills broker named Jerome Schneider later convicted of fraud had discovered the colony’s porous financial regulations and begun selling banking licenses; of Montserrat’s 350 so-called instabanks, at least 200 arrived via Schneider.

By most accounts, it was a stunningly sleazy climate in which to operate. The vast majority of the Montserrat instabanks existed only on paper; their owners scarcely if ever visited the island. Scores of these banks would later be probed by British and U.S. authorities. One, Zurich Overseas Bank, whose owners would be indicted for fraud in Detroit, operated out of the Chez Nous tavern in the Montserrat town of Plymouth. Almost every bank in Montserrat was operated illegally, says David Marchant, editor of OffshoreAlert, a newsletter that covers offshore banking. They were all shell banks, and they were all pretty much involved in fraud. They were all the same: certificate-of-deposit frauds, money-laundering. The fact that Stanford had a banking license in Montserrat is all you needed to know about his credibility. It wasn’t like most of the banks were good and you had a few bad eggs. The only reason you opened a bank in Montserrat was to commit fraud.

Stanford’s new Guardian International Bank, however, was sharply different from other Montserrat banks. Rather than avoid the island itself, Stanford actually opened a bank building and hired local women to staff it. (The building and all its contents, alas, were destroyed by Hurricane Hugo in 1989.) The island facilities were augmented by a sales office in Miami and another in Houston, where Stanford worked with a small group including his college roommate James Davis, who would go on to become Stanford Financial’s C.F.O. But what also distinguished Guardian from other Montserrat banks was how Stanford constructed a mythos to establish his credibility. He began telling customers the company had been founded by his grandfather Lodis B. Stanford (a barber turned insurance agent) in Mexia in 1932 and, once he renamed the bank Stanford International, he hung a photo of the gray-haired old man in the lobby.

From the beginning, little about Stanford International was what it seemed. A rare glimpse of its early years comes from one of the bank’s first employees, a person I’ll call Maria, whose job in Houston included assembling its first marketing brochures. I remember the bank in Montserrat, Maria says. It had two stories, with three or four African-American ladies and one white lady, this really pretty girl, maybe 17 or 18. They had all these computers, but the power was not even switched on. The computers didn’t even work.

In those early days on Montserrat, Stanford attracted depositors, as he would throughout his career, by placing advertisements, some featuring attractive young women, in Latin-American newspapers. Far more alluring than the women, however, were the interest rates Stanford promised: two percentage points above American bank rates. That was what Allen always said, Two points more, Maria says. He told me, It is unbelievable. People are so stupid, they will risk all their money, give it to someone they don’t even know, for two points. One day he grabbed the calculator on my desk, ran the numbers for two points on a million dollars: it was $20,000 a year. He said it was just unbelievable what people would do for just two points more.

By 1988, Stanford had acquired his first three run-down Houston apartment complexes possibly using depositors’ money as the bank’s deposits began to skyrocket. By the end of 1989, Stanford claimed an astounding $55.5 million in accounts. By November 1990 the number hit $100 million. Even inside the bank, this kind of growth raised eyebrows. Nobody knew if the numbers were true, Maria says. If you asked Allen how he [managed to pay higher interest rates], he always said exactly the same thing he says now: It’s only two points; our organization is very lean. We don’t pay taxes in Montserrat. Nobody believed that. But he paid very well. So the questions stopped.

I was suspicious when we did the first annual report, Maria continues. We used to do the work at night, when everybody was already gone. It was weird. You could see they were playing with the numbers and changing them right there in front of me. Jim [Davis] would come back to my office and look at the numbers, then go back to Allen, who would come in and say, Fine, let’s just put this number down. They were just making things up. Personally, I was hoping we could make enough money to cover up everything. But it just got worse and worse. Stanford, however, seemed without a care. He and his wife moved into a pink hacienda-style house in the northern suburb of Kingwood.

Then came trouble. According to David Marchant, it all began when an American computer programmer, hired to update another Montserrat bank’s systems, complained to local authorities that his boss appeared to be transferring deposits into his personal account. A Scotland Yard man named Dick Marston was summoned to investigate; Marston brought in the F.B.I. A probe Marston expected to take a few weeks turned into a massive investigation that lasted years. By 1989 more than a hundred banks were under scrutiny by British and American agents for every conceivable financial crime.

Stanford’s operation, by then one of the larger Montserrat banks, quickly became a target. Where, Marston wondered, were all those deposits coming from? Colombian drug money was flooding into banks across the region, and there were persistent rumors that this was the source of Stanford’s growth. Marston called in an expert from the Office of the Comptroller of the Currency. As a onetime F.B.I. agent involved in the Montserrat probe recalls, The O.C.C. guy went down there, stood across from the Stanford office for maybe several hours, came back and said, Yep, that’s a money-laundering operation. Marston goes, How can you tell from just standing across the street? The guy goes, I’m telling you, it is. Then, a little later, we got fairly detailed intelligence that they were indeed laundering for major Colombian drug traffickers. I remember very clearly that, when the governor [of Montserrat] heard this, we had to literally peel the guy off the ceiling. The Montserrat authorities were already tossing dozens of shady banks out of the colony when the government revoked Stanford’s license, in May 1991.

It was a crushing blow. Allen disappeared for six or eight months after that, Maria says. For a long period nobody saw him. He would call in at one in the morning, and he always said he was working on this big deal, it would save everything. For once, Stanford was true to his word. In time he found a new home for Stanford Financial, one where fungible banking regulations would prove ideal for his ambitions:
Antigua.

Island Hopping

An American vacationer who wants only to sip rum punches on its legendary pink-sand beaches may not realize or care that Antigua was long host to one of the Caribbean’s most corrupt governments, under the two Bird administrations. A militant trade unionist with little formal education, Vere Bird led Antigua to independence in 1981 and for years ran the two-island country officially named Antigua and Barbuda as a personal fiefdom amid constant allegations of criminal activities. One of his sons was behind a scheme to sell Israeli weapons to Colombian drug traffickers. Another was arrested at V. C. Bird International Airport with 25 pounds of cocaine in his luggage. Another son, Lester Bird, eventually took control of the government, in 1994, as the U.S. began voicing concerns that the island was becoming not only a money-laundering center but also a haven for Russian organized crime.

Such was the Antiguan milieu when Allen Stanford introduced himself to the Birds, around 1990. He wanted to buy the local Bank of Antigua, on the verge of bankruptcy, and the Birds were happy to broker its sale to him. Soon after, Stanford opened a second Antiguan bank, a new incarnation of Stanford Financial, which he operated much as before, opening a bank building, hiring locals to staff it, and advertising high interest rates in Latin-American newspapers. From the outset Stanford worked diligently to forge a partnership with the Birds. He provided the money to build cricket fields and a hospital, a vast multicolored complex overlooking the capital of Saint John’s. In 1995, Stanford went a step further, loaning the government several million dollars to cover salaries and pension contributions. The loans grew over the years. By the late 1990s, Stanford owned the Antigua Sun, one of the island’s two daily newspapers, and when two editors protested Stanford’s suppression of an article criticizing Lester Bird during the 1999 elections, he fired them. (Both sued successfully.)

Stanford became Lester’s go-to guy, says Winston Derrick, publisher of the competing Daily Observer. When Lester needed a hospital, he turned to Stanford. When Lester needed anything, he turned to Stanford.

Stanford Financial boomed in its new home. By 1994 it claimed $350 million in assets, enough for Stanford, in the following years, to buy a Venezuelan bank and start a conventional broker-dealer operation in Houston; he eventually opened a corporate headquarters near Houston’s Galleria mall. Later, branches were added in Panama, Peru, Ecuador, and Mexico.

From the outset, U.S. authorities kept tabs on Stanford. The Internal Revenue Service sued Stanford and his wife for failing to file their 1990 return, and sought more than $420,000 in back taxes; 19 years later, the I.R.S. is claiming they owe over $226 million for returns from 1999 to 2003. After the money-laundering allegations on Montserrat, the F.B.I. too has kept a keen eye on Stanford, more or less nonstop, for more than 20 years.

In terms of his notoriety, once that kind of information started coming in, he was known to a lot of folks in law enforcement, says a former F.B.I. agent who investigated Stanford. He stayed very prominently on the radar for years still is. There was a series of investigations. Obviously none of them ever ended in indictments. But we’re talking various F.B.I. field divisions, with multiple agents, then multiple agencies, over 10 to 12 years.

Throughout Stanford’s first decade on Antigua, the focus of U.S. investigators remained largely, perhaps exclusively, money-laundering. Questions of whether the bank was swindling investors wouldn’t arise for years. If you were in the metaphoric bushes outside Stanford anytime in the last 20 years, notes one U.S. security consultant, you would literally have been bumping into team after team of U.S. government agencies, shouting at each other to get out of the way, you know, Be quiet, Stanford will hear you. Those agencies would include the F.B.I., [U.S.] Customs, and the S.E.C. From everything I hear, there was endless interagency conflict over what to do and how serious this guy was.

The authorities’ inability to mount a criminal case against Stanford not to mention everyone’s inability to sniff out fraud has left many, inside and outside the government, outraged. Clients would come to us and go, Oh, this guy is offering such great rates, he’s never been in trouble, should we go with him? says the C.E.O. of one private-security firm. And then you reach into your sources and they say, Stop, run, avoid this guy like the plague. He’s hot hot with the government. Well Jesus, we’re just private investigators, and we knew the guy was bad. Where was the government? Why didn’t anyone hang a sign on this guy?

Catch Me If You Can

One reason was Stanford’s defenses. He became known for suing anyone, even journalists, who suggested Stanford Financial was anything but legitimate. In 1996, when a writer for Caribbean Week portrayed the company as a money-launderer, Stanford sued and won a front-page retraction. No critic was too small to ignore. He once sued a Catholic-school principal in New York after the man, active in Antiguan politics, termed him a neo-colonialist.

Behind the scenes, Stanford was even more aggressive. As the company grew, he became renowned within law-enforcement circles for aggressive counter-intelligence. Stanford’s security chief was a former head of the F.B.I.’s Miami office. But his greatest asset may have been a top security firm, Kroll Associates, whose Miami office worked with Stanford for years. Stanford was spending millions of dollars a year trying to figure out who was looking at him, and aggressively combating whoever it was, recalls the former F.B.I. agent. Kroll was essentially running a propaganda campaign in defense of Stanford’s good name. They beat on me many times: Hey, you got this all wrong, he’s not a money-launderer, he’s a great guy, leave him alone.

Kroll’s role in defending Stanford’s reputation, in both law-enforcement circles and the wider banking community, was an example of a controversial practice known within the private-security world as reputational self due diligence, that is, vouching for a client’s good name. It is, by all accounts, an exceedingly lucrative business. What Kroll would do, says a former Kroll executive, was put together a very detailed description of the bank, what it does, look over its balance sheet, the origin of the deposits, and produce this really thick report that says, This bank complies with the [U.S.] guidelines for combating money-laundering, and you, Bank A, should feel free to work with them. It is controversial, even inside the firm. Kroll is considered how to say this nicely well, they’re willing to take more controversial clients for this type of service.

Kroll can confirm that it has provided routine professional services to various businesses related to Allen Stanford, the company said in a statement issued to VANITY FAIR. All such work was provided consistent with Kroll’s reputation, internal controls, and its history of working with law enforcement. Suggestions to the contrary are incorrect. Confidentiality restrictions prevent any further comment on those assignments.

Kroll’s work for Stanford dates back at least a decade, to the moment when U.S. concerns about the company finally burst into the open. That happened in 1999, when a Drug Enforcement Administration probe revealed that members of Mexico’s vicious Jurez cartel had deposited more than $3 million in accounts at Stanford. The bank froze the accounts, while the Bird government announced formation of a committee to rewrite its anti-money-laundering laws. To the U.S. government’s dismay, Stanford himself was named to the committee. Another member was Thomas Cash, a former D.E.A. chief for Florida and the Caribbean who headed Kroll’s Miami office and, former associates say, was long Kroll’s liaison with Stanford. The committee produced a set of new regulations that appeared to weaken Antigua’s banking laws rather than strengthen them.

The State Department howled, complaining that the Antiguan government has effectively ceded oversight of its offshore section to an offshore banker and his minions. When the Bird government shrugged, the U.S. Treasury officially designated Antigua a money-laundering risk, just the second such warning ever issued against a sovereign country.

Under intense pressure, the Bird administration backed off and, after negotiations with U.S. authorities, tightened the island’s laws. At the same time, according to a State Department cable obtained by The Philadelphia Inquirer, unnamed Stanford allies seized a sheaf of Antiguan banking records. It appears that the U.S. offshore banker [Stanford] is taking advantage of loopholes & to seize the initiative and protect himself from any future inquiries or investigations, noted the cable, which labeled the incident Filegate, Antiguan style. The high-powered legal and investigative guns from the U.S. are likely being tasked with cleansing the files to make sure there is nothing in them that could damage or implicate the American offshore banker.

Having survived his first dustup with U.S. authorities, Stanford apparently realized he could use friends in Washington. Some of these new friends may have been inside the D.E.A.; a BBC broadcast in May claimed that Stanford became a D.E.A. informant. But his best friends were in politics. His political giving began about the time that a sweeping anti-money-laundering bill was introduced to Congress, around 2000. Stanford began donating large sums to a number of senators, including Minority Leader Tom Daschle, in an apparent effort to block it; in a later study, the public-interest group Public Citizen judged that Stanford’s donations were probably crucial to the bill’s eventual defeat in the Senate. Stanford’s giving grew from there.

In 2002, his company gave $800,000 to the Democratic Senatorial Campaign Committee, the vice-chairman of which was Florida senator Bill Nelson, who received $45,900. In all, Stanford spent nearly $5 million lobbying Congress between 1999 and 2008 and dished out $2.4 million to federal candidates. He also sponsored dozens of free fact-finding trips to Antigua and other Caribbean islands for politicians and their staffs on his fleet of jets. Former Republican House majority leader Tom DeLay, of Texas, among the largest recipients of Stanford’s largesse, flew 11 times on Stanford’s jets, according to The Dallas Morning News.

Empire Building

What remains of Stanford’s Antiguan empire today is a series of mostly empty buildings that line the periphery of the island’s airport; in fact, the first half-dozen structures a visitor encounters, even the airport parking lot, are Stanford’s.

Turn right at the airport traffic circle and you see the offices of his newspaper, the Antigua Sun. To the left is the Stanford Cricket Ground, an expanse of grass lined with grandstands, video screens, and Stanford’s restaurant, the Sticky Wicket, guarded by a statue of a cricket player. Looming over the traffic circle is Stanford International Bank itself, an immense building, engulfed in colorful tropical gardens; people working for a court-appointed receiver can be seen wandering in and out of its great mahogany front doors. Next door is another Stanford restaurant, the Pavilion, which features an 8,000-bottle wine cellar. Just up the street, past the observation tower and the botanical gardens, is a long, low plantation-style building, Stanford Trust. Across the way is the Bank of Antigua. The entire development has the just-built look and feel of a middle-class Miami subdivision.

By the early 2000s, Stanford’s wealth, power, and visibility were all on the rise. As his company grew, Stanford became a distant, sometimes mercurial executive, a figure most employees saw only at official functions. You would wait for hours to see him, recalls an executive, one of 15 who reported directly to the boss. If you got called for a 10-o’clock-in-the-morning meeting, it might be 1 o’clock in the morning by the time you got to see him. Time didn’t matter. He demanded respect too. [Every meeting was] basically a table of yes-men. His wish was our command.

In Antigua, Stanford had become a polarizing figure. Many on the island, citing the gifts and money he had given the government, adored him. But others viewed him as a sharp-elbowed Yankee imperialist, a view propagated by opposition politicians during the hard-fought 2004 election in which Lester Bird was tossed out of office; Bird’s replacement, Baldwin Spencer, termed Stanford haughty, arrogant, and obnoxious.

Yet Stanford’s power endured, in large part because of the financial hammerlock he held on the government. By 2004 its debt to Stanford had grown to $87 million nearly half its annual tax revenues. And in return for being allowed to put up the new buildings of an airport complex and purchase 19-acre Maiden Island (where he planned to build a new home), plus another islet, he supplied money to build a new national library and an education complex.

As his fortune grew, however, he began spending more time in South Florida he seldom visited the Houston headquarters, former employees say where in October 2003 he paid $10.5 million for a 57-room mansion, called Tyecliffe Castle, on the Coral Gables waterfront. It was there that, according to the Daily Mail investigation and various court filings, Stanford secreted one of the women some inside his company began calling the outside wives.

By most accounts, there were at least three of them. The first was apparently a woman with the same name as his wife, Susan, whom he had dated in Houston. She lives today in a Dallas suburb with her and Stanford’s 17-year-old son. A second woman, Beki Reeves-Stanford, lives in South Florida with their two teenage children. The third is Louise Sage, who lives in Kent, England. Stanford has two younger children with her. Their relationship became public when she sued for financial support.

With his wife, Stanford has a daughter, now in her 20s. According to reports, he and his wife separated in 1999; Susan filed for divorce in 2007. The case is pending. Stanford’s current girlfriend is a former cocktail waitress, at one of his Antiguan restaurants.

Stanford Financial, meanwhile, remained nearly as productive as its founder, topping $3 billion in deposits in 2004. Over time the company grew into a high-pressure marketing powerhouse in which employees worked in groups with colorful names such as Money Machine, Superstars, and the Deal Hunters. Stanford offered several financial products, but its mainstay remained the high-rate C.D.’s sold out of its Antiguan bank. According to The Wall Street Journal, Stanford salesmen earned commissions of 1 percent for every dollar they brought in, a rate so rich some brokers called it bank crack it was that addictive. Top producers might also win a luxury BMW sedan.

He sort of burned through countries, notes an investigator working for Stanford’s court-appointed receiver. If you look at the internals, early on the money was coming from Brazil and Venezuela. Billions from Venezuela. Then Peru, Ecuador. You know, you can only get so many investors in one country to put in so much money before people start asking questions. So from there he moved to trying to capture money in Panama, then the U.S., which was difficult, and then Mexico. That’s where he was at the very end.

Stanford Financial’s drive to capture American depositors shifted into high gear in 2004. Between 2004 and 2007, the bank expanded its U.S. branches from 6 to more than 25, opening offices in Denver, San Francisco, and Boston, as well as in southern cities, such as Little Rock and Baton Rouge; a second headquarters of sorts was established, in Memphis, close to the northern-Mississippi home of Stanford’s chief financial officer, Jim Davis. Prospective investors were often ushered through the hushed mahogany-and-marble corridors at the Houston headquarters, where they were led into the Lodis Room named for Stanford’s barber grandfather for a promotional film, then plied with champagne and cigars in the executive dining room. The wealthiest prospects might be flown to Antigua aboard one of Stanford’s six private jets, put up for a few nights at the luxurious Jumby Bay resort, and, if they were lucky, get to meet Stanford himself.

Bit by bit, Stanford Financial emerged from its shadowy Caribbean origins. To popularize the brand, Stanford began throwing money into the usual kinds of corporate philanthropy and naming opportunities. He sponsored the pro golfer Vijay Singh, along with two tournaments. There were Stanford banners in the Miami Heat’s arena, a Stanford Field at the International Polo Club Palm Beach, plus millions given to hospitals, theaters, and museums, mostly in Memphis, Miami, and Houston. When it came to sports marketing, though, Stanford’s passion was cricket, especially a fast-moving new version of the game called Twenty20 that can be played in hours instead of days.

In 2005, after completing his Antiguan cricket ground, Stanford announced a pan-Caribbean tournament. The hidebound cricket world, centered in England and India, snickered, but Stanford would not be deterred. He unveiled his own team, the Superstars, and, in a 2008 media event whose Texas-style audacity stunned the cricket community, challenged the English team to a match by landing a black Stanford Financial helicopter on London’s most hallowed field, Lord’s. He jumped out, promptly chest-bumped a British official, and thrust forward a Plexiglas box containing the match’s prize: $20 million in cash. Stanford’s Superstars won the big match, but the affair did little to ingratiate the Texan with the cricket establishment.

What kept attracting depositors, though, wasn’t Stanford’s publicity stunts. It was his profits. The first serious questions about Stanford’s performance came as it began to hire dozens of veteran American brokers to staff its new American offices. One of those with suspicions was Lawrence DeMaria, a former New York Times reporter who, after enduring a six-hour grilling by an investigator from Kroll Associates, had been hired to supervise internal publications and write speeches for Stanford himself. DeMaria’s bullshit antennae, as he terms it, rose not long after he joined the company.

I kept getting vibes throughout the company that nobody knew where the money was coming from or where it was going, he says today. When I would ask about how the company made its money, not just the principals but the investment-banking divisions, the research department, I would get no answers. [Everyone] said they didn’t know…. When I asked the investment people, they said, We can’t tell you, but believe us we have computers. & Eventually DeMaria was fired. He sued and settled.

DeMaria’s concerns were hardly unique. The executive who reported directly to Stanford recalls a talk with another executive in charge of the Antiguan bank: I remember once having a conversation about how they make such great money. He said, You know, good investments, things like that. He told me right away it was not drug money. That it once had been drug money. But, you know, Oh they found out about it, paid a penalty, they would never do that again, right? [And he] told me it was not a Ponzi scheme. Everything was legit.

Still, the rumors persisted, especially among the new American hires. In Miami, a broker named Charles Hazlett asked too many pointed questions, including several of Stanford’s 31-year-old chief investment officer, Laura Pendergest-Holt, and found himself dismissed; he too sued and won a settlement. In Houston, a pair of new Stanford brokers, Charles Rawl and Mark Tidwell, asked still more questions, and resigned just as they were dismissed. They eventually sued; their complaint reportedly triggered interest within the S.E.C.’s Fort Worth office, but for some reason the investigation went nowhere.

But it wasn’t just U.S. brokers who raised questions. The most senior whistle-blower may have been Gonzalo Tirado, the longtime head of Stanford’s Venezuelan bank, the company’s largest outpost. After Tirado resigned, in 2005, he and the bank engaged in a hail of litigation, much of it centered on compensation matters. An investigator in Miami told me Tirado came to believe Stanford was engaged in criminal acts and alerted regulators in Venezuela and the U.S. In an e-mail exchange, Tirado confirms this, but declines to elaborate, noting, I had more than three years telling the authorities in Venezuela and USA about his lack of loyalty and ethics.

Stanford Financial, however, easily weathered what few financial investigations it confronted. The S.E.C. and another agency began probes in 2005 and identified several technical infractions, but the probes neither received much attention in the press nor did anything to slow Stanford’s growth. Buoyed by the U.S. economic boom, its assets roughly doubled between 2004 and 2008, to $8 billion.

In 2008 a magazine called World Finance named Stanford its Man of the Year. He was added to the University of Houston business school’s Circle of Honor and spoke to a commencement class on the importance of ethics. So, CNBC correspondent Carl Quintanilla asked Stanford in May 2008, is it fun being a billionaire?

Well, uh, yes, he replied. Yes, I have to say it is fun.

The fun, alas, was almost over.

Overdue Diligence

One day last October, a 48-year-old independent financial analyst, Alex Dalmady, sitting in his office in South Florida, took a call from a friend. The friend, whom Dalmady refers to as Roberto, had much of his savings invested in Stanford C.D.’s, and in the wake of the financial meltdown, he asked Dalmady, as a favor, to examine the bank’s financials and see if his money was safe. So when I went over to the bank’s Web site, I was stunned, Dalmady recalls in a blog item. First, it looked so simple, so unsophisticated. The language used wasn’t quite right. The explanation Stanford offered for its returns, Dalmady felt, made no sense; no one could achieve market returns like that year after year, and no reputable commercial bank would try. It was far too risky. As he later described it on his blog, Dalmady immediately called his friend and said, Roberto, take your money out YESTERDAY!

Once his friend was safe, Dalmady found himself returning to the Stanford Web site. In the interim, the Madoff scandal had hit, and his curiosity soon turned to suspicion. It became obvious, Dalmady wrote. No one was looking at stuff like this. The S.E.C. had its head up its butt. So I dug deeper and put some numbers on a spreadsheet took me about 30 minutes. It just got worse. Where was the portfolio? What were they invested in? [Twenty percent plus] returns on their hedge funds? No way. Outperforming the S&P in stocks? No way. With 30 percent deposit growth [i.e., money constantly coming in]? No way.

Stanford Financial, Dalmady judged, had to be a fraud. He decided to write up his conclusions in an article and offered it to an old friend who edited a Venezuelan financial magazine called Veneconomy, which published it at the end of January. At first, the piece caused little stir. Titled Duck Tales, it was front-loaded with complex financial analysis; Stanford Financial wasn’t even mentioned until page 4. But on February 9, a financial blog called the Devil’s Excrement republished it, at which point it was picked up by a popular Latin-American blog, the snarky Inca Kola News. The Inca Kola item, in turn, immediately became the focus of intense interest.

So far today, a post on the blog read, this humble blog has had several visits from major newswires, three visits from the US Federal Reserve and one from the SEC, all using [the terms] Alex Dalmady, Stanford, Madoff etc as keyword entries. Not to mention all those people from an island called Antigua and plenty from a company called Stanford Eagle in Houston. Hi guys, having a nice day?

Subpoenas were already on the way. As an e-mail from a Stanford lawyer, included in court materials, explained, the agency wanted to confirm that the bank is real, the CDs are real, that the money is actually invested as described in our documents, and that client funds in the CDs are safe and secure. Both Stanford andJim Davis declined to be interviewed by the S.E.C. Instead, they sent in their chief investment officer, tall, willowy Pendergest-Holt, a Davis protge he had met at his rural Mississippi church. She would testify together with a team from Stanford International Bank.

At a prep meeting of Stanford executives, on February 4, according to materials filed in a Dallas federal court, Pendergest-Holt sat down in a Miami conference room to explain to one of the firm’s outside attorneys just how Stanford operated. Its assets, she said, were divided into three tiers. Tier I, about 10 percent of assets, was held in cash. Tier II, another 10 percent, was invested in mutual funds managed by outside firms; these holdings, Pendergest-Holt said, had fallen to $350 million from $850 million since just last June.

But it was the super-secret Tier III that most interested the S.E.C. Tier III held about 80 percent of Stanford Financial’s assets, roughly $7 billion; its contents and day-to-day management appear to have been handled only by Stanford, Davis, and Pendergest-Holt. At the Miami meeting, Davis, who was also present, handed Pendergest-Holt a data drive that broke down Tier III’s contents in detail. She showed it to the group. According to these numbers, Tier III at that moment was composed of $3 billion in real estate, a $1.6 billion loan to shareholder Allen Stanford and nothing else.

The shortfall came to nearly $2.5 billion. The bank executives in the room, who had never peered inside Tier III, were aghast. When the meeting reconvened the next day, Stanford appeared. Two of the bank executives said they had no choice but to report this new information to the S.E.C. According to court materials, Stanford flew into a rage and pounded on the conference table.

The assets are there! he shouted.

On the third day things got stranger yet. Before Pendergest-Holt could even begin talking, another executive started to cry. If you are going to go through more information I didn’t know, he sniffed, I don’t want to be here, and I’m going to the authorities. One of the lawyers suggested they pray. Stanford, however, was unmoved. He insisted the bank still had $850 million more in assets than liabilities. For the first time, though, the group in the room could see their emperor had no clothes. A few hours later, the outside attorney walked into a Stanford man’s office and said, The party is over.

On February 10, Pendergest-Holt began giving sworn testimony to attorneys in the S.E.C.’s Fort Worth office. She played dumb. Asked whom she consulted with to prepare, she failed to mention either Davis or Stanford. I have been to Antigua, she said. I have reviewed statements and looked through, gosh, other issues. Time and again she insisted she knew nothing about Tier III. I can state it as many ways as you would like me to, she said. I don’t know about Tier III, other than what I’ve already shared with you in about 20 different ways. There was a second interview a week later. If I knew anything about Tier III, I’d tell you, she said. God’s honest truth.

Within hours there were runs on the Stanford branches in Antigua and Venezuela, and throughout Latin America long lines of worried people sweated in the tropical heat. Most will probably never see their money again; one investigator told me he believes maybe $1 billion out of Stanford’s $8 billion in assets might eventually be recovered.

If Stanford Financial was in fact a Ponzi scheme, it is strikingly similar to Bernie Madoff’s. As with Madoff’s operation, only a handful of people appear to have known what was going on. Stanford’s auditor, like Madoff’s, was tiny, in this case a 14-person accounting firm in Antigua; its owner has recently died. Stanford’s seven-member board was composed entirely of insiders, including Stanford’s father and one of his elderly chums, disabled by a stroke. That such a scheme could grow so enormous, and last for so many years, is a devastating indictment of worldwide banking regulation. It took Alex Dalmady maybe two hours on the Internet to glean the amazing truth. It’s not clear anyone in Washington ever seriously tried.

Allen Stanford declined to be interviewed for this article. But in an April publicity blitz clearly designed to head off his looming indictment, he told a number of interviewers, including ABC’s Brian Ross, that his company was never a Ponzi scheme. If any money was missing, Stanford insisted, it was all Jim Davis’s fault. (Davis is cooperating with the S.E.C. investigation and plans to enter in plea talks with government officials.) When Ross asked about comparisons to Madoff, Stanford began to tear up.

Bullshit, that’s bullshit, he said. It makes me madder than hell and touches the core of my soul.

Stanford, who remains in seclusion in Houston, didn’t display the first bit of guilt or remorse. Instead, he said he felt persecuted. I’m the maverick rich Texan that they can put the moose head on the wall and that’s the only reason they went after me, Stanford told Ross. I’m fighting for my survival and for my integrity. It’s a fight, one suspects, that Allen Stanford should, and almost certainly will, lose.