Stanford scandal Investigators were on Thursday struggling to unravel Sir Allen Stanford’s vast pan-American business network.
It was an empire long on big claims about its performance, but short on hard public data to support them.
The Stanford Financial Group claims assets of more than $50bn and outposts across the US, Latin American and the Caribbean – yet information on what its investment activities are and where they are is scant.
Sir Allen – with high-rolling interests ranging from island property to multi-million dollar sponsorships in sports such as golf and cricket – is now facing allegations that his apparent business wealth was partly an artifice created to mislead investors.
Stanford Financial Group – the collective name used by Sir Allen to describe his businesses – is not the key controlling company in the conglomerate, but rather the concept that binds it together. It describes itself as “not a legal entity, but a registered trademark that encompasses the global network of independent, but affiliated, privately held and wholly owned entities”.
Sleepless nights for savers as reality dawns
Brett Zagone still did not know what had happened to her money on Thursday morning, writes Sheila McNulty in Houston.
On Tuesday, when authorities raided the Houston offices of Stanford Financial, the technology worker was one of the few investors who went to the company’s offices in search of answers.
Even though a US marshall unlocked the door and told the smartly dressed Ms Zagone that someone would come out and speak to her, nobody ever did.
She stood in Westheimer Road – one of Houston’s busiest – and waited. The door did not open again. “There is nothing we can do, Vince,’’ Ms Zagone said into her mobile phone. “There is nothing we can do. We’ll just have to take one day at a time.’’
Two days later, she knows no more than anyone else who has gone to the SEC website.
She got the address off a sign posted on Stanford’s front door: “We are temporarily closed. The company is still in operation but under the management of a receiver.’’
Ms Zagone said on Thursday that she had spent the time since then trying to reach other investors, but had had no luck. She said she did not have a background in finance – that was why she had hired Stanford Financial to manage her money. She trusted it because her brother had worked there years ago and her mother had invested with the group and done well. The office was smartly decorated – not opulent – just like any law office or financial institution in Houston.
When her mother died in October, the estate was transferred over to Stanford Financial, while Ms Zagone became executor of the estate. She herself has been investing with them for about a year and a half.
“This isn’t just my money but my brother’s and sister’s as well,’’ said a clearly distraught Ms Zagone.
She first tried on Friday to get the money out, but was told it was frozen. “It was a sleepless weekend,” she said
In other words, in marketing terms, the group looks like a kind of McDonald’s of finance, selling the Stanford brand to investors from Quito to St Croix in the US Virgin Islands.
Attention – and the US Securities and Exchange Commission’s allegations of a “fraud of shocking magnitude” against investors – has focused on Antigua-based Stanford International Bank, although its claimed $8bn of assets account for less than a fifth of the group’s total purported wealth.
One of the main conduits for other Stanford business – and the only company registered with the US Financial Industry Regulatory Authority – appears to be Stanford Group Company, which is based in Houston, Texas, and has about two dozen offices in the US. Last year’s edition of Stanford Eagle, the group’s investment magazine, claimed Stanford Group Company had continued “its growth in all areas” in 2007. However, it gave only a couple of piecemeal statistics in support, such as an 85 per cent jump in private client revenues.
Many billions of dollars of Stanford group money are said to be held in Central and South America, where Stanford Financial claims to have operations in 20 cities in half a dozen countries.
The Venezuelan financial regulator says about $2.5bn of depositors’ money is invested in Stanford International Bank in the country, which accounts for almost half the Stanford Financial locations in Latin America.
Sir Allen has other Latin American businesses that claim to be involved in vaguely defined areas from “financial planning” to “international investment”, in cities ranging from Monterrey in Mexico to Medellín in Colombia.
Details in the Stanford Eagle on the group’s activities are again sparse. The magazine says Latin American revenues grew 81 per cent during 2007 and assets 30 per cent, although it gives no totals in either category.
The magazine dwells on Sir Allen’s sporting largesse, which covers sailing, tennis, polo, cricket and golf, including sponsorship of a $2m purse event for top women golfers and backing for the annual AT&T National tour event hosted by Tiger Woods.
Last night, Stanford Financial’s website was still advertising the group’s sponsorship of next month’s Sony Ericsson Open in Florida, where Rafael Nadal and Serena Williams are due to appear after their Australian Open triumphs.
Sir Allen was also splashing out on a suitable setting for the nerve centre of his international businesses, announcing plans for a “global management complex” for Stanford Financial on St Croix in the US Virgin Islands.
The main building was to be decorated in the territory’s “distinctive Danish West Indian” style, with the larger development also slated to include a conference centre, food pavilion and 45,000 sq ft aviation hangar.
