R. Allen Stanford exiting his private helicopter. Photo: CNBC.
On June 14th, 2012, R. Allen Stanford was sentenced by US District Judge David Wittner to 110 years in federal prison for his role in a $7 billion fraud scheme. On pronouncing the sentence, Judge Wittner said that Stanford treated his victims like “economic roadkill.” Here is the story of his rise and fall.
This is the story of a deadbeat banker. His name is Allen Stanford and he was once known as the $7 billion man. Now, he faces federal indictments that charge him with running a vast Ponzi scheme that bilked depositors out of billions.
Born in Mexia, Texas, the mysterious arc of Stanford’s career sees him rise from burger-flipping gym rat in Waco to globe-trotting banker, a lord of cricket, a friend (and travel agent) of politicians. His robust resume also includes strangely intimate histories with numerous female acquaintances (known in his circle as the “Outside Wives”), as well as the Drug Enforcement Agency.
Blinking stridently on the radar of federal investigators at various agencies for more than 20 years, Stanford’s banking empire was finally shut down in February by the Securities Exchange Commission, which claims, in self-congratulatory language, that Stanford’s fraudulent operations put the “integrity of the of the markets” at risk. Stanford and six of his partners now face an imposing list of charges, ranging from banking fraud to bribery of regulatory officials in Antigua to personal enrichment from the vaults of depositors.
Stanford, who was taken into federal custody by the FBI, denies all. He claims that the sudden insolvency of his banking operations stemmed not from embezzlement or fraud but from, in the words of his lawyer Dick DeGuerin, “the SEC’s heavy-handed actions.” Now there’s a first.
Left to sort their way through the rubble of Stanford International are more than 30,000 angry depositors, many from Latin America, who bought certificates of deposit, and other glittering financial instruments from Stanford-owned banks, only to discover, according to federal investigators, that Stanford had diverted large chunks of those deposits into his own accounts to support the familiar playthings of today’s high roller: personal jets, yachts, sports teams, restaurants, women and gaudy mansions, including a 57-room palazzo in Coral Gables that is ringed by a moat.
Still, connoisseurs of financial crimes—and perhaps even the princi pals, themselves—are scratching their heads as to why the Stanford case, with its rich veins of scandal, sex and villainy, has yet to generate the same kind of media and governmental outrage sparked by the crimes of that other master Ponzi-schemer, Bernie Madoff. Some speculate that Madoff picked the pockets of a finer class of clientele: movie stars, writers, socialites, charitable foundations Holocaust survivors. Stanford’s victims, on the other hand, were either Latin American or obscure residents of the Sun Belt with more new money than they knew how to handle. Others hint at an even darker narrative involving the fruitful and symbiotic relationship many off-shore banks in the Caribbean have enjoyed over the decades with certain secretive federal agencies.
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R. Allen Stanford is a large man. Some might call him imposing. He stands six-foot four and is, in parlance of the meatlocker, pumped, whether by hours at the gym or through the targeted administration of certain muscle-enhancing elixirs is unknown. He wears his hair clipped and sports a moustache favored by street cops and certain stars of seventies porn flicks. He once claimed to be descended from Leland Stanford, the former governor of California after whom Stanford University is named—a claim urgently debunked by officials at the university. He has a voice like a leafblower. It tends to steamroll people. He is a Texan and proud of it—though unlike many Lone Star tycoons he doesn’t affect the persona of a rancher or oil baron. In fact, he is something of an Anglophile. The England of the Empire, which became the world’s biggest booster of cricket, the game that Britain imposed on its colonies and which the colonials learned to play better, with far greater elan.
Stanford likes the colonial style. His notorious bank in Antigua resembles a colonial plantation house out of a late Victorian photograph. He is so sensitive on the subject that he once sued a principal at a Catholic school in New York for calling him a “neo-colonialist.” Touchy, in other words.
As a business man, Stanford got his start in the late 1970s in sun-scorched and wind-blasted Waco, Texas, where he set up a network of swank—for the high plains of Texas, anyway—fitness clubs, called Mr. & Mrs. Health. He later changed the name to Total Fitness Center. From these humble beginnings a first-rate hustler was born. This pedigree is scarcely unique in the ranks of global swindlers. Recall that the infamous arbitrageur Ivan Boesky got his start in high finance after bankrupting the family business: a chain of Detroit strip clubs.
A profligate loudmouth, Stanford would buzz around Waco in his Jaguar and make surprise landings at the local football stadium in his private helicopter. “If you looked up narcissist in the dictionary,” former employee Tim Gardner told Vanity Fair writer Bryan Burrough, “you’d probably see a photo of Allen.”
By 1982, it had all gone bust. Stanford’s fitness empire crumbled during the Texas oil recession. The bruised bigwig filed for Chapter 11 bankruptcy protection, claiming $13.6 million in debts and only $200,000 in assets. The creditors and investors got shafted and Stanford, after a brief stint flipping meat pies at a place called Junior’s Hamburgers, disappeared.
A year later, though, Stanford resurfaced, running his own bank on the tiny Caribbean island of Monserrat, the kind of indulgent locale 
favored as a financial safe-haven by swindlers, tax cheats, drug runners and intelligence agencies. Stanford has variously claimed that the six million in cash to start up the bank came from shrewd real estate swaps in recession-battered Houston and a heaven-sent investment by oil refinery workers in Aruba.
Why smoky Monserrat, the volcanic island with fewer than 12,000 inhabitants? Stanford supposedly fell in love with the island while he was there supporting himself by giving lessons to novice scuba divers. It’s really anyone’s guess.
But this sanctuary was not to be a mere postage-stamp operation, not one of the so-called Instabanks for which Monserrat had become famous in the twilit world of money circulation. Stanford, unlike the vast majority of Monserrat’s 350 off-shore banking houses, actually put a sign on a two-story building and hired local women to work there, even giving them computers for their desks, but apparently never actually turning the power on. He dubbed his new operation the Guardian International Bank.
Stanford busied himself concocting a Dickensian fable about the origins of the bank—claiming that it had been opened during the depression in 1932 by his barber grandfather Lodis. Meanwhile, his associates in Houston and Miami begin marketing the bank, largely to Latin American clients and Cuban exiles in south Florida, by using sultry young women to hawk the bank’s enticingly high interest rates on certificates of deposit, guaranteed by Stanford to levitate at least two percentage points above the rates of the best American banks. It was called the two-point-more promise, a come-on often paired in ads with a shot of the cleavage of one of the bank’s models.
Silly as it sounds, the scheme worked. In 1989, the year the bank’s tiny office was flattened by Hurricane Hugo, Stanford’s Monserrat institution claimed $55 million in deposits. Ten months later, this figure had more than doubled.
Of course, who knows how closely those eye-popping numbers paralleled the reality in the vaults. The bank’s annual reports were objects of mystification. These crudely designed documents were hastily written after hours at the bank, presenting streams of numbers as opaque as an Oregon fog.
The money was coming in fast and, by most accounts, going out even faster—much of it into Stanford’s personal account and thence into sports cars, jets and a lawn-flamenco-pink hacienda near Houston.
In a mere six years, Allen Stanford had matriculated from the failed owner of a chain of Waco gyms to a global banker with hundreds of millions in assets, on paper at least.
So how did he did he do it? Stanford told friends that he was able to pay such gravity-defying interest rates because of shrewd investments and because of the delightful circumstance that his bank didn’t have to pay taxes in the libertarian paradise of Monserrat. Few swallowed the facile explanation, but even fewer really cared, as long as the money kept rolling in and the authorities, wherever they were, didn’t intrude on the festivities.
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As it happened, the FBI was at that very moment beginning to sniff around the periphery of Stanford’s fishy enterprise, starting a game of approach-and-avoidance that lasted nearly twenty years. In 1989, while pursuing a wide-ranging, though typically shallow, probe into a panoply of financial crimes being committed by off-shore banks, the feds began to follow the rising tide of Colombian drug cartel money then washing through Caribbean banks. Some of that money led them right to the steps of Guardian International and the Stanford Financial Bank.
When word reached the governor of Monserrat in 1991 that both Scotland Yard and the FBI were probing Stanford and his bank for laundering cocaine money, the government precipitously yanked the bank’s license to do business on the island.
Once again Stanford, expert scuba diver that he is, submerged from public view, only to resurface on the balmy, pink-sand shores of Antigua, another Caribbean island that was virgin ground in terms of nettlesome banking regulations. In the Antiguan capital of St. Johns, Stanford swiftly made an alliance with the fabulously corrupt Bird family, which had run the island as a kind of private holding company since Antigua gained its independence in 1991. The Birds soon unloaded the troubled Bank of Antigua on Stanford. In the steps of this initial foothold, Stanford opened a second version of the Stanford Financial Bank, in a white colonnaded plantation house-style building—a gleaming, Disneyfied caricature of colonial potency.
Not wanting a repeat of his ungracious eviction from Monserrat, Stanford set about showering Antigua with charitable contributions. The financier soon inveigled his way into admired status as the island’s financial patron saint: he built a hospital, libraries, cricket fields, bought the island’s leading newspaper and made multiple loans to the cash-strapped government. Those loans—eventually totaling nearly $90 million—tightly shackled the government of Antigua to Stanford’s fortunes, even after the Bird dynasty’s power came to an end in the elections of 2004.
The largesse paid off smashingly. By marketing the bank’s atmospheric interest rates to Latin American millionaires and businesses, Stanford Financial’s holdings began to soar, hitting $400 million by 1995. This windfall sparked an expansion of Stanford’s operations, as he opened new banks in Venezuela, Mexico, Panama, Peru and Ecuador. To market his operations, Stanford recruited young greedheads fresh from American’s finest business schools. These miscreants with MBAs, working in teams with nicknames like “Money Machine” and “Superstars,” were lavishly rewarded with what some called “banker’s crack,” an unprecedented one percent commission for every dollar they brought into the bank and out-of-the-blue bonuses that included pricey sports cars. The message: sell the product and keep your mouth shut.
On the flip side, employees who asked too many troubling questions about the enigmatic ways the company claimed to be making money tended to get 86’d from the bank, and fast. Many of these hyper-curious former employees, including Gonzalo Tirado, head of Stanford’s operations in Venezuela, conveyed their concerns to federal investigators— usually to no avail.
Meanwhile, back in Washington, a raft of federal agencies, including the SEC, US Customs, the FBI and the DEA, continued to regularly monitor Stanford’s affairs. Curiously, however, these probes did not seem to pick up on the fact that Stanford was engaged in a high-finance hustle, a con which promised a kind of cold fusion of the banking world, offering bottomless aquifers of cash with little or no risk. Instead of busting up this transparent Ponzi scheme, the feds spent their time trying to determine if the bank was serving as a money-washing station for the drug cartels. Lots of trace evidence, no indictments.
For nearly twenty years, the only federal agency that caused Stanford any real irritation was the Internal Revenue Service, which pounced on some disagreeable irregularities in his tax returns. The IRS sued Stanford for failing to file income tax returns in 1990. The IRS alleged that Stanford and his wife Susan, a former dental hygienist, owed the government more than $420,000 in unpaid taxes. Two decades later, the IRS was still hounding Stanford, claiming that he owed more than $26 million in back taxes for the years 1999 to 2003 alone.
The staggering increase in taxes imposed by the IRS roughly charts the meteoric rise in income claimed by Stanford to have flowed into his Antiguan banks. By 2001, Stanford Financial boasted of having more than $1.2 billion in assets. By 2008, this figure had ballooned to $8.5 billion. Of course, when the vaults were opened, $7 billion of that figure ended up missing, filched, according to federal prosecutors, by Stanford and his inner circle.
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As billions began to multiply and the investigators circle closer to the heart of the scam, Stanford bought himself some protection. For one thing, he had deeply penetrated the very law enforcement agencies that were snooping into the seamier reaches of his business empire. As head of his corporate security division, Stanford hired the former chief of the Miami office of the FBI. He also retained Kroll Security Group, the global private investigations company that functions like Blackwater for the corporate world. Kroll’s offices are thickly stocked with former spooks and FBI agents. These investments paid dividends for many years.
In the summer of 2006, the SEC appeared to be closing in on Stanford for running his bank as a Ponzi scheme. Then, in the winter of that year, the agency’s investigation was suddenly ordered to a skidding halt by the Bush Justice Department, which told the SEC to back off because another, unidentified federal outfit was involved with Stanford.
Which agency would that be? Speculation has focused on the Drug Enforcement Agency, whose relationship with Stanford stretches back to the late 1990s. In that year, Stanford turned over a $3.1 million check to the DEA. The money had been originally deposited in Stanford’s bank by a notorious Mexican drug kingpin Amado Carrillo Fuentes, known as the Lord of the Heavens.
The circumstances of this transaction remain murky, but the check served as evidence that Stanford’s bank had been a resting place on the migratory path of Mexican drug money. According to an investigative report by the BBC news program Panorama, at the time he turned over the check, Stanford was already working as a paid informant for the DEA, snitching for the agency on the flow of narco-dollars by bank clients from Venezuela, Colombia and Mexico. Sources interviewed by the BBC assert that this cozy relationship bought Stanford a decade’s worth of protection from criminal inquiries by other federal agencies, including the SEC. That was, of course, the same period of time which saw bank deposits and CD purchases soar from $1 billion to $8 billion. Thousands of depositors lost their savings, in part it seems, as a consequence of the federal government’s strange bargain with the brash banker.
Around this same period, Stanford putting high-ranking politicians in his pocket, notably the two Toms: Daschle and DeLay. Stanford’s prime concern at the time was an anti-money laundering bill introduced by Bill Clinton before he left office. Stanford sank $40,000 into Daschle’s “527” senate leadership fund and Daschle promptly helped to kill the legislation in the senate. During the same period, Tom DeLay collected $20,100 fromStanford. The ever-pliant DeLay also racked up beaucoup frequent flier mileage from his eleven trips on Stanford jets. The toilet seats on those jets are emblazoned with Stanford’s logo, a gold eagle.
Up in Miami, Stanford cultivated a relationship with Florida regulators almost as cordial as the ones he enjoyed down in Antigua. In a one-of- a-kind deal, Florida regulators granted Stanford the right to operate in the state as a foreign trust company. As detailed by Lucy Komisar in the Miami Herald, this unique arrangement allowed Stanford’s operation to channel tens of millions of dollars from deals in Florida to accounts in Antigua without reporting any of it to Florida regulators.
In addition, Stanford’s brokers in the resplendent office tower on Biscayne Bay were permitted to sell nearly a billion dollars in bank notes without opening their records to state inspectors cruising for fraudulent sales. Indeed, the transaction receipts from the sales of Stanford CDs were routinely shredded by the firm, loaded into 95-gallon barrels and trucked to the landfill. Florida regulators knew about the document destruction and did nothing to stop it. And those documents—so-called Single-Purpose Trust Agreements—were, of course, the hard evidence of a massive swindle.
Why the mad rush to transfer the money to Antigua? Because down on the island, as detailed in the federal indictment, government regulators were being lavishly bribed to turn a blind eye or two to the looting of deposits and the giant bank’s supposedly independent auditors were a tiny firm of locals under the sway of the company. Pity the depositors. For down in Antigua, those CDs did not enjoy the protection of the FDIC insurance. Once the money was gone, there was no getting it back.
“Nobody was even asking questions about it,” said Mark Raymond, a Miami lawyer. “All you had to do was examine those certificates; you would have known they were fraudulent. It was more like Monopoly money.”
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As the clock began to tick on Stanford’s scam, his behavior became more and more audacious. In 2008, Stanford landed his private helicopter at Lord’s, the Valhalla of cricket in London. Stanford hauled out a glass case containing $20 million, the winner-take-all reward for a challenge match between his Caribbean “Superstar” team and the English all-stars. The Caribbeans routed the English in the match, but the real scandal played itself out up in Stanford’s box seats, where he was caught on camera pawing the wives and girlfriends of the English players, including the pregnant wife of wicketkeeper Matt Prior. “If that was my missus,” one player told the Daily Mail, “I’d have punched him.”
Stanford’s marriage to Susan had broken up in 1999, though she delayed filing for divorce until 2007. Sir Allen (for by now he’d been knighted by Antiqua) had not been a faithful husband. Indeed since the mid-1990s Stanford had entered into long-term relationships with what bank insiders referred to as “the outside wives.” These included another woman named Susan, who lives outside Dallas with Stanford’s 17-year-old son; Beki Reeves-Stanford, who resides in Florida, with her two children by Stanford; and Louise Sage, an English woman who also gave birth to two of Stanford’s six (known) children, Ross and R. Allena.
To this list we can add Stanford’s current girlfriend, 31-year-old Andrea Stoekler, a former Stanford employee. When a federal order froze Stanford’s assets this spring, Sir Allen went into hiding in Stoekler’s mother’s basement in Fredericksburg, Virginia, where he ultimately surrendered himself for arrest by the FBI on June 18 of this year.
For Stanford it ended not with a bang, but with a blogger. His name is Alex Dalmady, a financial analyst in south Florida, who had been asked to investigate the soundness of the bank by a friend who had sunk his life-savings into Stanford CDs. It took the inquisitive Dalmady only a few hours of digging through the bank’s corporate filings posted on its own website to reach the conclusion that there were serious financial shenanigans going on inside the company. He picked up the phone, called his friend and told him to “take your money out as soon as possible.”
What did Dalmady see that so many others had missed? “There were a number of things that struck me, from the lack of detail to the simplicity of the business model to the lack of sophistication in the language they used,” Dalmady said.
Then he wrote up his suspicions in an article titled “Duck Tails” for the January edition of a Venezuelan financial paper called Venecononmia. Even with the Madoff scandal unfolding in New York, the exposé attracted scant attention until it was reposted on an economic blog called The Devil’s Excrement, where the story went global. A few days later Business Week’s Matthew Goldstein published a long piece on Stanford that followed up on many irregularities exposed by Dalmady.
By the end of February, Stanford’s offices were aswarm with SEC investigators and FBI agents, showing up, as usual, about a decade too late for most investors and depositors.
Then suddenly Stanford disappeared from public view for months, into the basement of that house in Virginia, perhaps hoping that this storm too would blow over and he could resurface once again on some island paradise. But it wasn’t to be.
During a perp walk to a pre-trial hearing in Houston, Stanford, with his hands shackled at his waist and dressed in an orange jumpsuit, mugged for the cameras one more time, flashing a louche grin that seemed to say: “Who? Me?”
This is excerpted from An Orgy of Thieves: Neoliberalism and Its Discontents.
This content originally appeared on CounterPunch.org and was authored by Jeffrey St. Clair.
Jeffrey St. Clair | Radio Free (2022-12-23T06:59:01+00:00) The Fall of the House of Stanford. Retrieved from https://www.radiofree.org/2022/12/23/the-fall-of-the-house-of-stanford/
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