An Interesting takeaway from the latest Wikileaks’ embassy cables is the not so surprising revelation that billionaire fraudster, Allen Stanford, had a questionable reputation long before federal regulators acted to put him out of business. A May 3, 2006 cable revealed that Ambassador Mary E. Kramer was introduced to Allen Stanford at a social function, the Legends of Cricket breakfast in Barbados, but managed to avoid being photographed with the controversial Texan billionaire, “rumored to engage in bribery, money laundering, and political manipulation”.
The rumors are not unfounded, Stanford was taken to court for a Ponzi scheme in 2006 in a whistleblower suit before being busted in 2009.
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.
What is also interesting is the impact Stanford’s eventual arrest had on elections in Antigua where Stanford had a significant economic presence.
Steadroy Benjamin speculated that the PM called for elections immediately after the Stanford indictment due to the potential fallout should things go very badly for Stanford. Benjamin sought to link the announcement to the government’s “undisclosed dealings with the Stanford group,” though the current opposition was in power when Stanford first established himself in Antigua, so his ability to point fingers will be limited. Benjamin’s claim was disputed by former Minister of State Aziz Hadeed, who said he was aware of the proposed election date several days prior to the announcement…
…9. (C) The United Progressive Party (UPP), once the clear favorite to return to power, now has a real fight on its hands, which few predicted just two months ago. Rapidly falling numbers for tourism throughout the region coupled with increasing stories of murdered tourists, the indictment of the second largest employer on the island for fraud, and a failed cricket match finds Antigua in perhaps the perfect storm. Many worry that these issues could not only spell disaster for the UPP, but for the country’s economy as a whole, leading to a severe economic depression and intolerable unemployment creating more violence and a cycle of less tourism, more unemployment and more crime. It is unclear if either party will try hard to use the Stanford indictment as an election issue — Stanford amassed his fortune under an ALP government, and was knighted by a UPP government, so all hands are likely equally dirty. Of more concern for Antigua is when the run of “bad luck” will stop, and whether either party is positioned to turn things around on crime and the economy. HARDT
Arresting Stanford two years earlier would still have had an impact one way or another, but with US federal regulators apparently not paying attention and US diplomats doing little more than staying out of photographs while knowing the country they are engaging with is being defrauded by a US citizen, one has to ask, why are we there?
This is not the first time the SEC has failed the investment public they are supposed to be protecting. The Bernie Madoff Ponzi scheme was laid out for regulators in great detail by quant and whistleblower, Harry Markopolos. His account of his efforts to stop the $50B rip off is documented in his book ‘No One Would Listen’.
