Every scam is identical except for the details. That’s what I told myself around lunchtime on February 17, as I rushed to the offices of the Stanford Financial Group after hearing that federal marshals had just staged a raid. Like a lot of people in Houston that day, I’d learned most of what I knew about Robert Allen Stanford in the previous week or so: He was, at 59, a simultaneously flamboyant and secretive Texas billionaire and the owner, founder, and lone shareholder of a global network of financial service companies valued at $50 billion—an empire that stretched from Houston to Miami, Zurich to Mexico, South America to the Caribbean, and beyond. He now stood accused by the Securities and Exchange Commission of masterminding an $8 billion fraud, which was subsequently upgraded to “massive Ponzi scheme.”
The afternoon was cool and rainy, reminding me of grim, chilly December 2001, when Enron collapsed and so many employees were using their pricey Aeron chairs as dollies to carry out their belongings. I thought, momentarily, that Stanford’s fall was going to be déjà vu all over again. Here were the TV cameras, the bewildered shareholders, the shell-shocked workers, the stories of life savings vanishing into thin air—or into some rogue’s very deep pockets. But instead of two gleaming downtown office towers, there was an innocuous brick-and-limestone building sitting on the coveted 5000 block of Westheimer. Instead of folksy Ken Lay and evil genius Jeff Skilling, we had a megalomaniac from Mexia who went by the title “Sir,” even though he hadn’t been knighted by the queen of England but by some government official in the Caribbean.
When I reached my destination, I was reminded less of Enron than of those grainy, sped-up films I’d seen of bank runs during the Great Depression. I fell into line behind something resembling a Drive-through of Doom: People were easing their (mostly nice) cars up to the front of the building or sliding around the corner, leaving their flashers on, and racing to the entrance only to find a sign directing them to a Web site, stanfordfinancialreceivership.com, where they would learn the whereabouts of the college funds, trust funds, and inheritances they had invested with Stanford. Anyone who pounded on the glass doors got helpless shrugs from the uniformed guards inside. The words literally set in stone beside the door offered small comfort: “These companies are dedicated to the glory of God.”
The people who were not reporters wore the kind of blanched, dazed expressions you would expect at the scene of an airplane crash. “I’m in shock,” a small woman with a south-of-the-border accent and frightened eyes told me. “I’m hoping it’s not going to be another Madoff”—referring, of course, to Bernard Madoff, the onetime Wall Street titan who, as of late last year, is the king of the Ponzi schemers. She had pulled up in a pine-green Land Rover with an older man who was wearing a toupee; he sat in the car while she dashed out to get the Web site’s address. On the way back, she was surrounded by a flock of reporters whose dark umbrellas suggested wet, ravenous bats. She told them she had invested an inheritance with Stanford, which probably seemed like a good idea at the time. Until recently his was a quiet business. He didn’t fraternize with society types, and two years back he’d hardly made a blip on the business scene when he debuted at number 239 on the Forbes list of the 400 richest Americans.
This cluelessness meant that a great many people were stunned when the Stanford tsunami hit—when Houstonians discovered that Sir Allen was, until his downfall, the de facto ruler of Antigua and Barbuda; that last year he landed in a gold-leaf-trimmed helicopter at the hallowed Lord’s cricket field, in London, carrying what was purported to be $20 million he hoped to use to revolutionize the stuffiest and slowest of sports; that he claimed to be a relative of Leland Stanford, the founder of Stanford University, though school officials are unaware of any connection between the two; that he had donated more than $2.4 million to political campaigns in the U.S. and spent $4.8 million on lobbying over the past ten years; and that he had become such a close friend of Tom DeLay’s that the defrocked Houston congressman and former U.S. House majority leader flew on Stanford’s jets eleven times. What’s more, Stanford had had a sybaritic, reality- TV-show kind of life, complete with a yacht, mansions, one wife and many girlfriends, one long separation and many splits, children from various unions, and at least one impressive paternity suit. As a former employee put it: “He could be a point guard for the New York Knicks.”
Then the feds butted in. Stanford loyalists—including famed Houston defense attorney Dick DeGuerin, who has emerged as a possible savior—insist that missing the boat on Madoff caused the SEC to turn its guns on Sir Allen. True or not, he looks like a worthy target. There is less money at stake than in Madoff’s $50 billion scheme, but Stanford’s case is more global and more complicated. In pleadings released last February and March, the SEC accused Stanford of lying to investors, a violation of its rules. The agency alleges that Stanford’s companies falsely claimed their investments were safe, liquid, and in no way intertwined with Madoff’s. Mike O’Brien, a Stanford bank investor to the tune of $1 million and, unfortunately for Sir Allen, a successful plaintiff’s lawyer representing two whistle-blowers and a passel of angry investors, explains it this way: “He was investing people’s money but deceiving them about where it was going.”
Moreover, the SEC labeled the rates of return on one of Stanford’s heavily promoted investment vehicles “improbable” and “impossible” and noted that the company’s offshore bank claimed it had a “unique investment strategy” that allowed it to declare that its “diversified portfolio of investments lost only 1.3 percent in 2008, a time during which the S&P 500 lost 39