The Dark Knight
At $8 billion, Sir Allen Stanford’s alleged fraud wouldn’t even be the biggest Ponzi scheme uncovered in the past few months. But his wretched excess and jaw-dropping gumption have no equal.
sirgeraldbirkin says: Allen Stanford’s school of serial swindlers use name dropping, stamped passports, falsified tax returns, and donations to St. Jude’s to gain trust and power over private companies with aspirations to go public. According to SEC files, Sydney "Trip" Camper botched a deal with the Ahkoy family’s Datec and was fired from Elandia Inc. by Allen Stanford. With help from his new partner in crime, Sydney Camper went on to his next victim in Los Angeles and ruined this private company by forming a shell holding company, opening secret bank accounts, and using all THEIR assets to get OTHER people to loan HIM money = PONZI SCHEME!!!! In true Stanford form, Sydney Camper moved on to his next fraud scheme at InZon and Wealth Management Committee. Ed Berkhof is orchestrating a new scam with FMC Telecom. Frank Cassidy, owner of FMC Telecom, is either his new fellow fraudster or Mr. Cassidy has fallen victim to Ed Berkhof’s new Ponzi scheme. Meanwhile, The Ahkoy family is now suing Elandia in the Pacific and Florida courts. The FBI and SEC are investigating Allen Stanford, James M. Davis and their den of thieves including Sidney D. Trip Camper III and Ed Berkhof. (August 10th, 2009 at 7:57pm)
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But trouble was brewing elsewhere in the empire. That same month, a respected Venezuelan-born blogger named Alex Dalmady published an article about Stanford in the journal Veneconomy. He stated, essentially, that Stanford’s bank was a sham, its returns “on the limit of the credible universe.” Within weeks, BusinessWeek and Bloomberg were on the story, just about the same time the SEC was closing in.
Financial collapses, as no one needs to be reminded, happen very quickly, and the weaker the entity, the quicker the collapse. When the SEC came calling with subpoenas in January—around the same time as that cheery meeting—Stanford and Davis refused to cooperate. The SEC, after all, couldn’t prosecute criminally; it could just haul them into civil court. They chose to send their chief investment officer, the charming Pendergest-Holt, and another bank executive who had also been subpoenaed to provide sworn testimony about Stanford Financial Group and the Stanford International Bank. A lawyer for the businesses told the SEC that Stanford and Davis were not micromanagers but delegators. Their appearances, at this point, weren’t necessary.
Still, this was very complicated stuff, even for a chief investment officer. The SEC suspected the company had fabricated the performance of the bank’s investment portfolio in its annual reports, that its financial statements were “fictional” and “reverse engineered” to reflect more income than it had earned, that it had falsely claimed a $541 million infusion of capital the previous November. (Sir Allen suggested the money had come from investors in Libya.) The SEC was also looking hard at the bank’s claim that its portfolio was highly diversified and overseen by a team of well-trained research analysts. As a Stanford lawyer explained in an e-mail to the executives, the agency wanted to be reassured 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.”
During the first week of February, the prep sessions for Pendergest-Holt began at Stanford Financial’s Miami office. Present were the Stanford attorney and five other still-unnamed executives from the Stanford International Bank, including the president. The latter gave a very detailed presentation about Antiguan banking regulations, which was probably interesting enough, but he never quite got around to explaining where the Stanford International Bank was parking its assets.
On February 4 one of the bank executives who had been present at the meeting e-mailed Davis. “I am confused,” he began. Supposedly the bank had received that $541 million shot in the arm the past November. But the only capital infusion he could find was a transfer of real estate, valued at only $88.5 million, from one Stanford company to another.
Later that day Pendergest-Holt met with Davis, the attorney, the bank president, and three other executives back in Miami. The bank’s assets were contained in three tiers, she explained; her presentation focused on Tier II, which was valued at $350 million, down from $850 million in June. This news was shocking to many in the room. Davis, according to an FBI affidavit, did not look surprised at all.
Then, with Davis’s help, Pendergest-Holt moved on to explain just what kinds of assets were contained in Tier III, the one the SEC would allege held 80 percent of the bank’s vaunted $8 billion. Instead of anything close to that, Pendergest-Holt could show only $3 billion in real estate and $1.6 billion labeled as a “loan to shareholder.” That shareholder, it soon became apparent, was Sir Allen Stanford. Viewing the slide, one of the men in the room felt as if he had been kicked.
So, the bank president asked—slowly, I would assume—if the presentation was accurate, then Stanford International Bank was . . . insolvent? Flush with this insight, he told the group he couldn’t testify before the SEC because the information he had previously given out was very different from the information he was now getting. That is, he had unwittingly misled his investors.
Not surprisingly, another meeting followed the next day. This time Sir Allen showed up at the Miami office, along with Davis, the lawyer, the bank president, and the three other executives. Two of those executives announced their intention to report the company’s problems to the SEC. In a fury, Stanford began pounding on the table. “The assets are there!” he screamed. The meeting was adjourned.
They met the day after that, but the general mood was no better. The president of Stanford Financial started weeping before Pendergest-Holt could even begin her presentation. “If you are going to go through more information I didn’t know,” he cried, “I don’t want to be there, and I’m going to the authorities.” The attorney walked over to him and suggested they begin to pray. Sir Allen remained resolute: The Stanford Financial Group, he insisted, had at least $850 million more in investments than liabilities. A few hours later the attorney walked into one of the executive’s offices and announced, “The party is over.”
Not quite. On February 10 Pendergest-Holt arrived at the SEC’s offices in Fort Worth to give sworn testimony. She was asked whom she met with to prepare for her appearance. She did not mention the attorney, Sir Allen, Jim Davis, or the others who had attended the Miami meetings. Instead she said, “I have been to Antigua. I have reviewed statements and looked through, gosh, other issues . . .” Asked about the assets contained in Tier III, well, she didn’t know where they were—when she needed to know about Tier III, she would ask either Davis or Stanford. Asked whether the Stanford International Bank ever gave out any loans, she replied that it did but that she didn’t know the details. Pressed on Tier III again, she started losing patience. “I do not know,” she said. “I can state it as many ways as you would like me to. I don’t know about Tier III, other than what I’ve already shared with you in about twenty different ways.”
The SEC questioned her one more time, on February 17. Asked again by an agency attorney whether she knew about the assets contained in Tier III, she said, “If I knew anything about Tier III, I’d tell you. God’s honest truth.”
If you were a Stanford investor while all this was going down, here’s what might have happened to you. A woman I know named Sascha Jordan opened an account with Stanford Financial about three years ago, putting about $50,000 into a CD. On February 14 she called the company’s Houston office and asked the operator to connect her with a broker who could sell her another CD.
“We aren’t taking any deposits,” a broker’s assistant told her. Something in the assistant’s voice made Jordan anxious.
“Well, is my CD okay?” she asked.
“I’ll have a broker call you on that,” the assistant responded.
A few days later, on February 17, Jordan got the news that the SEC had accused Stanford of perpetrating “a massive, ongoing fraud” and that her money was frozen for who knew how long. The SEC claimed that the money that was supposed to be going to liquid investments was tied up in real estate and private equity, that there were links to Madoff investments, that most of the financial figures were made up. In other words, Stanford executives had allegedly lied and lied and lied again, all in service to the Ponzi scheme. Employees of Stanford Financial were herded by marshals into the Lodis room and told to leave without taking one thing with them.
Most of the rest you likely know, thanks to the business press, the British tabloids—the Mail on Sunday was relentless—and everything in between. Investors remain paralyzed because the Dallas receiver is, at this writing, showing little inclination to release Stanford’s personal assets or those of his companies. Pendergest-Holt earned the distinction, on February 26, of being the first Stanford associate charged criminally, for obstruction of justice. Davis lawyered up in March and agreed to cooperate with the authorities. According to his attorney, he was “devastated, because he knows a lot of good people got hurt.” Davis further claimed, through his attorney, to be the one who “blew the whistle and brought the whole house of cards down.” (“Jim Davis never ought to meet Allen Stanford face-to-face,” said James Stanford.)
As for Sir Allen, his crazy situation has become even crazier. CNN reported in February that he attempted to flee the U.S. from the hangar in Houston, but the pilot he tried to hire wouldn’t take his credit card. Instead Stanford went with his current girlfriend to Virginia, turned himself in to the FBI, and surrendered his passport. The IRS wants more than $220 million in back taxes. He has spent the past few months in a desperate search for an attorney who will agree to represent him, even though he has no access to his money—assuming, of course, he has any. (Dick DeGuerin has pointed out to the press that he doesn’t work for free.)
Stanford has become a punch line—the clip of him telling a CNBC reporter that it was fun to be a billionaire aired on The Daily Show and then went viral—and a source of ever more paranoid theories. Deep into the Internet, you can find stories that link him to the Russian-Israeli mafia and plots to overthrow the leaders of Venezuela, Bolivia, Ecuador, Argentina, and Nicaragua. He is even said to be a CIA agent whose planes might or might not have been used for extraordinary rendition.
When Stanford finally broke his silence, it was to plead for a release of some funds and, more important, to declare his innocence. That news broke on April Fools’ Day.
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