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Allen Stanford's dealings long raised red flags, offshore banking analysts say

Bank of Antigua’s customers line up outside the St. John’s branch in the Caribbean island on Wednesday despite the prime minister urging people not to panic. The SEC accuses Allen Stanford, who owns the bank, of an $8 billion fraud.

Associated Press

Bank of Antigua’s customers line up outside the St. John’s branch in the Caribbean island on Wednesday despite the prime minister urging people not to panic. The SEC accuses Allen Stanford, who owns the bank, of an $8 billion fraud.

Allen Stanford, the Texan banker at the center of the latest alleged financial fraud, this one for $8 billion, had long attracted suspicion about his flamboyant financial dealings and exaggerated biographical claims.

"People in the offshore world have known that Allen Stanford was perpetrating a fraud for at least 10 years," said David Marchant, publisher of OffshoreAlert, a Miami-based bulletin. "It was an open secret."

The whereabouts of Stanford were unknown Wednesday, after reports that he tried to hire a private jet to fly from Houston, the site of his U.S. headquarters, to the Caribbean island of Antigua. In an abrupt reversal of fortune for the 58-year-old billionaire, his credit card was apparently rejected.

Stanford was accused Tuesday by the U.S. Securities and Exchange Commission of "fraud of a shocking magnitude" involving the sale of high-yield certificates of deposit in his Antigua-based Stanford International Bank.

SEC officials say Stanford's fraud spread its tentacles throughout the world. In all, the Stanford Group claims to oversee $50 billion in assets, with offices in Miami, Boca Raton, Vero Beach and Longboat Key, among other locations around the country in addition to offices in Latin America and Europe. His bank caters primarily to wealthy Latin Americans, although it claims to have more than 30,000 clients in 131 countries.

The grandson of a Texas barber, he made his early money from buying cheap properties in Texas in the 1980s and selling them for big profits. His initial entry into banking was aborted after the British government closed his operation on the tiny island of Montserrat during a crackdown on tax havens in the late 1980s.

But Stanford soon reopened a few miles across the water in the twin-island nation of Antigua & Barbuda, where he gave generously to the government and helped rewrite the offshore banking tax laws.

Though Stanford became a citizen of Antigua, his business headquarters remained in Houston, where he owns a 14-bedroom mansion. He also has a $10 million home in Miami, and other residences in the U.S. Virgin Islands.

He offset suspicions about his financial background through generous political donations, as well as cultural and sporting events. He and his top executives have contributed at least $2 million to candidates, among them Florida Sen. Bill Nelson, who received $45,900. (Nelson's office said the senator will give his Stanford contributions to charity.)

His sponsorship of the English and West Indian cricket teams caused howls of protest from fans of the game who protested the "tacky" involvement of a "cricket-hating Texan."

Last year he announced a new $20 million tournament by landing at London's most-hallowed cricket ground in what the British press described as a "gold-plated" helicopter. In November he sponsored a winner-take-all game between England and an all-star Stanford invitational team in which he paid $1 million to each member of the winning team.

Offshore banking analysts say Stanford's questionable past should have raised plenty of red flags. Among his most colorful claims, Stanford professed to be related to the prestigious founder of Stanford University, former California Gov. Leland Stanford. Stanford University filed a trademark infringement case against Allen Stanford last year accusing him of deliberately misusing the school's name to cause confusion.

Stanford was also forced to change his Web site last year after wrongly claiming he had received a knighthood from Prince Edward, third in line to the British crown. In fact, "Sir Allen" had his title bestowed in less than transparent circumstances by Antigua's government.

But Stanford shook off all controversy until the Bernard Madoff scandal late last year. "The SEC obviously got lambasted after Madoff," said Marchant, "and have become more aggressive."

David Adams can be reached at [email protected]

Allen Stanford's dealings long raised red flags, offshore banking analysts say 02/18/09 [Last modified: Wednesday, February 18, 2009 10:56pm]
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