Stanford: a little help from his friends

June 19, 2009

stanford3You can officially called R. Allen Stanford the alleged criminal mastermind of a giant multi-year Ponzi scheme.

Stanford’s name, of course, is all over the 21-count indictment. But the big shocker in the investigation into the $7 billion fraud involving those bogus certificates of deposit is an allegation that a top regulator in Antigua–where Stanford’s offshore bank was based–was on the take.

OK. Maybe that’s not such a shocker, given the fact that the former prime minister of Antigua basically gave Stanford a blank check to do whatever he wanted on the tiny island nation–including a chance to help write the country’s banking laws.

But in filing criminal charges against Leroy King, the former administrator and chief executive officer for the Antigua financial services regulatory commission, US prosecutors have a shed a lot more light on the years of deception that was at the core of Stanford’s sprawling financial empire. Prosecutors are charging King took bribes in excess of $100,000 from Stanford to help conceal the allegedly fraudulent activites at Stanford’s bank from the Securities and Exchange Commission.

Like Stanford, King is both a US citizen and a citizen of the double island nation of Antigua and Barbuda. Stanford was knighted by the former ruling party in Antigua.

Stanford also got some friendly help after the Securities and Exchange Commission filed civil fraud charges and effectively shutdown his high-pressured CD machine in February. Prosecutors seperately charged Bruce Perraud, a Stanford security specialist, with allegedly ordering the shredding of documents at a Stanford Financial Group office in Ft. Lauderdale.

 The shredding party took place on Feb. 23, six days after the SEC stepped in and the a court-appointed receiver ordered all of the company’s 4,000 employees to preserve documents.

It always seems these fraud cases involve some evidence of shredding, don’t they?

Oh and one other thing—we have to stop calling it an $8 billion fraud. The magic number in the 57-page indictment is $7 billion.

The upshot of the criminal case, which also includes charges against two Stanford bank accountants, is that nothing was real with Stanford’s financial empire. The money taken in from investors who bought CDs never went where it was supposed to. Most of it either went into Stanford’s pockets to feed his lavish lifestyle. Other investor money went to finance Stanford deals that were then widely inflated.

For the estimated 30,000 investors who purchased Stanford CDs–about 5,000 of whom live in the US–the indictment today may give them some solace. But it is not going to get them their money back.

The Stanford affair is a harsh lesson about the danger of investing money in tiny offshore locations with questionable regulatory track records. Then again, I guess someone could say many US financial firms could fit that description too.

Update: Here’s a statement from Stanford’s readily quotable defense lawyer Dick DeGuerin, who says his client “will continue to fight these allegations.”

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