Our Very Own Bernie Madoff
Maybe the collapse of the Stanford Group isn’t Enron, but Houston wasn’t about to be left out of the financial scandals.
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UPDATE: The global Where′s Waldo search for Sir Allen Stanford has come to an abrupt end when he was served with papers in Fredericksburg, Virginia, outside a very modest townhouse, a far cry from his swankiendas in other more exotic locales. The most interesting news? His longtime lobbyist is the silvertongued Ben Barnes. Big question, With his money frozen along with everyone else’s, how’s he going to pay a lawyer? Those guys don’t work for free. Also, what’s in the water in Mexia? Anna Nicole Smith and now Stanford?
Need proof that the more things change, the more they remain the same? There I was on my beloved Westheimer Boulevard, having a very bad case of déjà vu. No, it wasn’t cold and rainy—it was warm and rainy—but there were the cameramen standing out in front of a Houston office building, along with white-faced employees and red-faced investors. This time the whistleblowers are two former male employees, instead of the blond Sherron Watkins. Maybe the collapse of the Stanford Group isn’t Enron, but still, if you were around for the latter, you couldn’t help but think that Houston wasn’t about to be left out of the financial scandals attached to the current financial crisis. In this case, the SEC is alleging that “a massive, ongoing fraud” was orchestrated by R. Allen Stanford—that’s Sir Allen Stanford if you’re from Antigua—and a few associates, involving $8 billion worth of phony CDs, promising rates of return that were too good to be true. (A long time ago, Enron’s Jeff Skilling warned his brethren that if something looked too good to be true, it probably was. Guess no one, including Skilling, was very interested in that advice.)
What’s most striking about the Stanford scandal (so far) seems to be how little is known about the famous Sir Allen Stanford himself. Yes, Stanford had one building across from the Galleria and another twelve stories in a Galleria tower—you’d think more people would have noticed—but Allen himself wasn’t a fixture on the society pages or interested in running the city, like, say, Ken Lay was, despite owning a gold plated helicopter. Currently, Allen has taken a powder—maybe back to Antigua, where he is the island’s largest property owner. “Much smarter than the Enron guys,” someone told me.
On Wednesday, the scene outside the Stanford HQ looked like a mourner’s drive-thru, as rattled investors drove up and raced to the front door, only to be refused entry and, of course, access to their money. All they could do was copy down the Web site address of stanfordfinancialreceivership.com, which didn’t really go live until this morning. “I’m in shock,” one frightened investor told me, a pretty woman with a foreign accent whose much older husband waited, motor running, in their Land Rover. “I’m hoping it’s not going to be another Madoff.” Asked what she would like to say to Sir Allen, she responded, “I hope you will do the right thing.” She then added, “I hope nobody assassinates you.”
At least, not until the investors can get hold of their money. By late afternoon, the whistleblowers started singing to the Houston Chronicle, and a class action suit had been filed. Maybe, in the end, there won’t be so many parallels to Enron, but so far we have 1) a government agency that was, for awhile at least, asleep at the wheel; 2) an arrogant, overpaid CEO with Louis XIV tastes; 3) no transparency in the reporting of company profits, along with; 4) incomprehensible financial statements; 5) the scapegoating of whistleblowers and so on . . .
Didn’t anybody learn anything the last time around?