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Meet Texas Billionaire (And Mini-Madoff?) "Sir" Allen Stanford
We may have found our favorite mini- (or maybe not so mini-!) Madoff yet...
The FBI, SEC, and IRS are all looking into the business activities of the Stanford Financial Group, a Houston-based private investment group run by the "flamboyant Texas billionaire" Allen Stanford, reports the New York Times.
Like Madoff, Stanford's returns may have been too good to be true. A bank he owns, based in Antigua, has been issuing certificates of deposit that pay interest rates at more than twice the national average, says the paper.
Last summer, two former employees alleged in a lawsuit that the firm misled potential investors by overstating the asset value of individuals; failed to file mandatory forms disclosing its clients' offshore accounts; and removed information from its computers in response to an S.E.C. investigation.
The size of the alleged scam is unclear, but a spokesman for Stanford Financial told the Times that it "holds about $8 billion in deposits at its bank and has about $50 billion in assets in its wealth management affiliate."
The firm has denied the allegations.
But what really piqued our interest here was Allen Stanford himself. Here's some of the color the Times offers on the guy:
[A] decade ago, Mr. Stanford told The Associated Press that he had flown a Roman Catholic priest displaying signs of "stigmata," or bleeding wounds on his wrists and ankles, from the tiny Caribbean island of Antigua to New York City on his jet.
And:
Mr. Stanford, who his firm said was unavailable for comment, ranked 205th last year on the Forbes annual list of the richest people in the United States, with an estimated net worth of $2.2 billion. On Antigua, he is akin to royalty, being knighted by the former prime minister, referring to himself as "Sir Allen Stanford" on the company's Web site.
And maybe most interestingly:
Mr. Stanford has claimed ties to Leland Stanford, the former governor of California who started Stanford University in the 1800s. The university, however, has said there is no genealogical relationship between the two.
Indeed, on that one, Stanford put his money where his mouth is. In 2001, he gave $2.5 million to help rehabilitate the Leland Stanford Mansion State Historic Park in downtown Sacramento. A press release sent out by the office of then-California governor Gray Davis noted: "Stanford traces his family heritage to the family of Leland Stanford."
The Times also notes that Stanford and his firm have "emerged in recent years as major contributors to various lawmakers, appearing to focus particularly on legislators considering bills that would change offshore banking rules."
So we took a quick look at online campaign finance records compiled by the Center for Responsive Politics -- and it's fair to say the paper wasn't exaggerating.
Over the last decade or so, Stanford or the Stanford Financial Group have given $128,500 to the RNC, $238,500 to the NRCC, over $80,000 to the NRSC, and $180,000 to the DCCC. They have also given smaller amounts to current or former members of Congress with leadership positions, or positions with oversight over the banking and financial systems. That lists includes Tom DeLay, Phil Gramm, Chuck Schumer, Richard Shelby, Charlie Rangel, Max Baucus, Bob Torricelli, and Paul Sarbanes.
We're guessing this won't be the last post we do on Allen Stanford.
Late Update: It looks like, despite being from Texas, Stanford is a cricket fan. Check out this story from the cricket website cricinfo.com, reporting that today's match between England and the West Indies in Antigua has been suspended because of a waterlogged pitch. Discussing alternative locations, the site adds:
Another option, as yet unvoiced, would be to shift the match to Sir Allen Stanford's private ground near the airport, the venue of the 20/20 for 20 in November.
He is a knight, after all.
Thanks to reader M.G. for the tip.
Josh
Zachary
Stanford Financial is a national market maker under the symbol STFG. This means that monthly volume reports can be downloaded from:
http://www.nasdaqtrader.com/Trader.aspx?id=MPVolume
STFG was ranked between 140-190 in terms of total trade volume (buy-sell combined). total share traded in all issues over the last 20 months is a low 14M (Nov 2008) to a high 27M in Sept 2008.
Assuming an average share price of $20, that represents 280-540M is buy-sell dollars.
The particular issues traded are interesting: 2-10 million shares/ month in Financials. 260K to 1.9 M in Energy.
In September, October, November STFG was active in high volatility Financials: ABK, C, FNM, WB, USB, AIG, UST, NCC, COF. STFG was an active trader in Hedge fund issues: GLG, FIG in the Sept-Oct crash.
Unless STFG was exceptionally lucky in market timing, it was predominantly trading in the issues with the greatest exposure to the market collapse.
February 13, 2009 12:57 PM | Reply | Permalink
Speaking of his interest in cricket. He has been heavily involved with financing West Indies cricket. Last October he financed a one-off $20,000,000 series between a West Indies team and England. It ended up a farce. Some of the details here: http://news.bbc.co.uk/sport2/hi/cricket/england/7787334.stm
February 13, 2009 1:43 PM | Reply | Permalink
I believe Daniel Hopsicker wrote a piece on this guy a while back. Mary Ourisman was the Ambassador at the time.
February 13, 2009 2:01 PM | Reply | Permalink
Antigua regulators are saying they are not investigating Stanford.
"I hope they're wrong. I think they're wrong," he said. "Unless we were duped, I don't think it is (a Madoff-like scenario)."
"They are our biggest bank," he said, "but we can't let that ride over Antigua and Barbuda's name."
King declined to say what his agency would ask Stanford officials, but said regulators would "dig a little deeper" because of the suggestions made in press reports.
"It's not a Friday afternoon cocktail any more," he said. "It's taking off the gloves. We have a job to do to protect our jurisdiction."
http://uk.reuters.com/article/companyNewsMolt/idUKTRE51C52K20090213?sp=true
So it appears their normal way of investigating Stanford is a Friday afternoon cocktail. That appears to be true by this report from Brian Willingham at http://blog.gryphoninvestigations.com/2009/02/stanford-financial-group-being-examined.html
Gryphon conducted due diligence on Stanford in 2004 and warned a prospective client that Stanford was no stranger to controversy:
* Stanford caught the eye of the U.S. State Department in 2001, for his role in tightening Antigua’s secretive banking laws. Stanford was part of a panel that revised Antigua’s banking laws. The State Department said that the changes “undermined the ability of law enforcement to investigate and prosecute financial crimes.” British and French officials voiced similar concerns.
* Stanford has been a major investor in Antigua over the last 15 years and has been a longtime supporter of Prime Minister Bird. Stanford has been alleged of exercising undue influence on the government. Stanford owns the largest daily newspaper in Antigua - the Antigua Sun, Caribbean Star airline, the Bank of Antigua, Stanford International Bank and has also spearheaded construction of the airport, the Mount St. John’s hospital, a hotel and office complex and indoor basketball stadium. Prime Minister Bird has been blamed for bribery, misuse of national health program funds and sexual misconduct. Bird lost the election to the opposition party in March 2004.
* In November 2004 the Mondaq Business Briefing reported "Stanford has 'loaned' funds to the Government and made large financial 'gifts' to its ministers. In return, he has amassed a large amount of real estate, which has been turned over to him after forceful ultimatums in which he threatened withdrawal of further financial support unless his demands were met within 24 hours."
* Prime Minister Bird attempted to seize a large portion of land known as the Half Moon Bay Resort after it had been destroyed by a hurricane. Initially, Prime Minister Bird offered to broker a sale to “a friend of the government.” The “friend” later emerged as Stanford. The deal was part of a $40 million loan package made by Stanford to the government.
February 13, 2009 2:51 PM | Reply | Permalink
Are his CD's FDIC insured?
Will Ben open the Fed window if he needs some cash?
February 13, 2009 3:32 PM | Reply | Permalink
Is it too late to invest? Sounds like a great deal!
February 13, 2009 4:06 PM | Reply | Permalink
Any type of fraud is going to be compared to Madoff! At least Allen is trying to reassure his employees and do what it takes to get things resolved. Look at THIS Bloomberg article
http://www.bloomberg.com/apps/news?pid=20601103&sid=ajyP6jGBwJlA&refer=news
Speaks for itself...
February 13, 2009 4:54 PM | Reply | Permalink
I wonder if this Stanford investigation is the result of the Ponzi scheme Harry Markopolos hinted at that he was going to deliver to the SEC the day after he testified before congress.
February 13, 2009 5:45 PM | Reply | Permalink
First post since I realized Mark Warner wouldn't be the VP and The Hope would be weighed down with Hillary and Biden.
Anyway, moving on.
Check out this character Stanford with the English Cricket WAGS. The is rich.
http://www.youtube.com/watch?v=11xMyxU8e9E
February 13, 2009 6:03 PM | Reply | Permalink
I was reading the dollar amounts for our congresspeople purchase price, and I am downright embarrassed about how cheap they come. This guys has made billions defrauding people, and our congress' cut is measured in the hundreds of thousands. Actually, insulted that congress thinks so little of the American People that the betrayal comes at such a paltry price.
Message to Congress, if you are going to sell us out, do it for some real cash, Let it be a Brinks truck worth, not a luggage cart.
February 14, 2009 12:28 PM | Reply | Permalink
As a former Stanford employee, I have seen a lot of half-truths and some outright lies thrown around regarding Stanford International Bank (SIB). There have been many facts that have not been reported that might interest investors, the public in general, and particularly the media, which seem to rely on bloggers for their sources without doing any fact checking.
Over the last 18 months, there have been unprecedented challenges which have confronted the global financial industry and have led to heightened scrutiny by regulatory bodies, the public and the media. Although Stanford Financial Group has not been the beneficiary of any government bailout money, they are not immune from this crisis; however any comparisons to recently defaulted institutions and scandals are not relevant to the organization and are a disservice to Stanford employees and clients worldwide.
One analyst's opinion regarding Stanford International Bank has been picked up by numerous blogs and reputable news outlets and printed "as fact." These facts need to be known: Stanford International Bank was able to show a positive return for doing what U.S, banks did NOT do: --SIB does not make loans, they have no loan loss reserves, they took no markdowns to capital and had no exposure to subprime. If U.S. Banks had followed this strategy -- chances are they might have shown positive returns.
Has anyone bothered to check out the Analyst -- one Alex Dalmady -- who is he, what is his track record? It is easy to point fingers and make broad statements -- what expertise does this guy have? I would hope the more reputable outlets did this homework, but they seem to have picked his words up verbatim and did no "fact checking" on the source of all of this at all.
The media has a responsibility to report accurately and balanced -- that is not apparent in Stanford's case. He may be flamboyant, but that is not a crime. Misleading and scaring thousands of investors is.
And let's not forget that ALL of this started with two disgruntled employees who owe Stanford a lot of money (Bloomberg link with what they actually owe: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNO2xKLg68_0) running to regulators accusing Stanford when they found out Stanford expected them to pay back what they owed. To date, there has been NO evidence of wrongdoing on the part of Stanford, but evidence of illegal selling practices by the two employees has been uncovered and turned over to regulators. Why has not one reputable media outlet reported this??
Stanford International Bank has NEVER failed to make an interest payment or pay funds at maturity in the nearly 25 years of its history. That is 25 YEARS, not weeks or months. Also, while not obligated to, this Bank has always tried to help the customers who needed early withdrawals. This Bank has suspended THE Privilege of early withdrawals to ensure the protection of its entire depositor base. The media hype and continued repetition of half truths is only causing heightened anxiety, and this step has been taken in light of this barrage of negative and misleading statements.
SIB structures, operations and higher returns are no different than other private international banks except that SIB has narrowed its products to CDs and deposit accounts, as well as ancillary products like credit cards and loans to existing clients. The rates for a 5-year jumbo CD are from 1 1/3% to 6 7/8% and are comparable to other international institutions. This information is verifiable on bankrate.com.
This analyst states that it is near to impossible for SIB to show a positive return -- implying there must be fraud for this to occur. Plenty of financial investment vehicles had positive returns -- including more than 1,600 hedge funds. The characterization that positive must be fraudlent is simply false and sensationalism.
Are we going to launch investigations of all firms who did NOT lose money for their investors last year?
Madoff/ponzi characterization -- Separately, at Stanford Group Company, clients assets are held at Pershing LLC, a subsidiary of Bank of New York Mellon—one of the largest custodian organizations in the world. Clients’ brokerage account assets are insured and segregated to assure return of their assets in the event of any catastrophic events like the ones that have occurred to world class financial institutions in the last two years. Madoff was his own custodian.....more sensationalism. Report the truth...report the Pershing relationship. There has not been one fact proving that Stanford International Bank's custodian relationships are not holding sigificant assets or that their independent money managers are not managing significant amounts for the bank.
Federal Agencies are "investigating" Stanford -- regulators are a reality for any U.S. Broker/Dealer....the SEC and Finra were in Stanford offices as part of a routine examination. No one has confirmed or advised an "investigation is ongoing. There was an article in the New York Times earlier this week with headline "Hundreds of Regulators descend on Citi....." Regulators are feeling the sting from their testimony to Congress, and are responding with more oversight. Stanford has no problem with this and has track record of full cooperation with regulators over the years.
Since the first Stanford Company’s founding during the Great Depression, the Stanford Financial Group has grown into a full-service portfolio of companies servicing individuals and institutions. Stanford Financial Group is a privately held global network of independent, affiliated financial services companies including Stanford Group Company, Stanford International Bank and Stanford Trust.
The Stanford International Bank (SIB) is but one aspect of the overall company portfolio and operates in St. John in the Caribbean Island of Antigua and Barbuda. The Bank has a prudent investment approach that it has followed for over 20 years and has over 30,000 clients in over 90 countries. It has stringent know-your customer/anti-money laundering policies and procedures and terrorist financing tracking. SIB remains a strong institution, and even without the benefit of billions in US taxpayer’s dollars SIB is taking a number of decisive steps to reinforce SIB financial strength to keep the capital base intact to protect SIB depositors.
Stanford International Bank has used the same auditing firm for a number of years. Once the external bank auditors are selected by the Board of Directors they must be expressly approved by regulatory agencies. The regulatory framework follows international standards set forth by Basel I and II. For the record, Basel I and Basel II are the highest standards in the industry.
February 16, 2009 3:07 PM | Reply | Permalink