Read our article in the Cayman Financial Review Magazine, eversion
The court-appointed lawyers defending R Allen Stanford in January 2012 in a federal trial in Houston chose to take, somewhat naively, the legal tack of blaming others for what prosecutors charge Stanford himself orchestrated.
They might have done so at the behest of the defendant, or they might have thought that the jury would buy the argument, but it struck me as a strategy that woefully misread the character and history of the man they were trying to rescue from a prison sentence. Predictably, the gambit failed.
I worked for Stanford for nearly two years on the island-nation of Antigua and Barbuda, where his now infamous Stanford International Bank was headquartered. Stanford brought me and my wife from California to Antigua in the fall of 1996 to start up a newspaper, the Antigua Sun.
At the time, the existing press on the island comprised two newspapers, the ‘Daily Observer’ and the ‘Outlet’, both of which were vehement enemies of the reigning government under the Bird family, led by Lester Bird, the son of the revered (and late) labour leader and folk hero Vere Cornwall Bird.
The family had presided over a corrupt autocracy in Antigua for nearly half a century, with only one brief hiatus of four years, and had been snuggled up in bed with Allen Stanford since the late 1980s.
It was then that Stanford had been persuaded by the British government to abandon his offshore Guardian International Bank on the nearby crown colony of Montserrat¸ the Brits having objected to what appeared to be unabashed appeals to potential money-launderers in advertisements in South and Central America. While Whitehall was happy to see the Texan go, Prime Minister VC Bird was even happier to see him come to Antigua.
At the time, of course, Stanford and his budding worldwide financial reach were fairly small potatoes, but over the next decade or so the American entrepreneur, as he liked to refer to himself, would become the chief benefactor of the island’s fortunes, its largest private landowner and have the Bird regime tucked safely in his vest pocket.
After years of temporising and bureaucratic sluggishness, the Securities and Exchange Commission decided it had seen enough and filed a civil action against Stanford in early 2009, followed by a criminal complaint issued by the US Department of Justice after a grand jury indicted him and a handful of his executives on 18 June. Stanford was arrested and charged with 21 counts of fraud.
Deemed a flight risk by a federal judge, the man whom Forbes Magazine had identified in 2008 as among the wealthiest Americans with a stash of more than $2 billion, was in a federal lockup outside of Houston, broke. There he was beaten nearly to death by fellow inmates (who, it was reported, were displeased with Stanford’s hogging the jail’s payphone).
Then, after having become addicted to pain relievers prescribed by jailhouse doctors, and later claiming to have fallen prey to a doubtful case of selective amnesia, his trial began in January of 2012. He was convicted on 13 of 14 counts of fraud and other misdeeds.
On 20 April 2009, Stanford had submitted to an interview on CNBC conducted by reporter Scott Cohn. It was then that Sir Allen (knighted by the government of Antigua, since revoked) broached the notion that he was not really responsible for what was going on in his companies. To assert that, on the one hand, nothing illegal or even shady had occurred and on the other assuring Cohn that he had nothing to do with anything going wrong, was absurd on its face.
“You asked earlier on what my job was,” Stanford said.
“Myself as chairman and [sole] shareholder of 42 operating entities around the world employing five thousand people managing billions and billions of dollars, it’s impossible for me to macro- much less micro-manage this. I depend on people to do their jobs, which has always been my philosophy as an entrepreneur and the reason I’ve been successful is to allow people to do their jobs. I set the vision and the goal and certain parameters and let them run their own shops.”
My jaw landed on my chest. Not one person who ever worked for or with Stanford would have reacted with anything but astonishment at the sheer chutzpah of that statement.
To be sure, Allen Stanford is a remarkable man. And one of his abilities, at least during my tenure, was his tireless monitoring of, and detailed direction of, every one of his ventures, from his Stanford Financial Group in Houston to his Stanford Development Company and Stanford International Bank and myriad other Antiguan operations to his multi-nation financial activities – he was on top of it all.
He hired, fired, managed, probed, ordered, decided and tailored everything from soup to nuts. His phone was attached to his ear, and his business jet dashed to and fro constantly from the Caribbean to Texas and New York and California. He phoned me almost every day the entire time I was editor and general manager of the Antigua Sun. Every company manager was required to file what were known as “Friday reports” by email to Stanford, and if you failed to do so you were duly upbraided and sometimes severely warned.
It was not unusual for Stanford to call impromptu meetings of company managers and other executives in his posh offices at the bank, during which he often rather crudely chastised even his top lieutenants, like (the trial’s star witness and 20-year chief financial officer) James Davis, threatening them in front of their colleagues and sometimes their subordinates. No one had any doubts about who was in charge of the Stanford Experience (his words). To tell CNBC’s Scott Cohn that these men and women were running “their own shops” was risible in the extreme.
Stanford’s notorious heavy-handed management tactics were bound to emerge as an antidote to his defence attorneys’ ploy that he was duped by his underlings, who were committing acts of fraud and deceit unbeknownst to the boss. The buck, obviously, stops with the CEO of any company or group thereof. People like Kenneth Lay and Jon Corzine and Bernie Madoff would be at pains to lay the blame at the feet of others, fully aware that the ultimate responsibility rests with the top gun. Nonetheless, Stanford is also noted for doing just that, even when the grounds are fully lacking.
When the Antigua Sun failed to show a profit, he blamed the staff – reporters, graphic artists, editors, the print shop – who had nothing whatsoever to do with profits or losses, charging into the newsroom and hurling wads of cash on the floor.
“That’s how much I’m losing every day on this paper,” he shouted, “and if you can’t make a profit, I’ll find someone who can.” He blamed the government of Antigua, by that time under the control of the long-time opposition-to-the-Bird-family party of Baldwin Spencer for dashing his ambitious plans to further develop “Stanford World” around the island’s airport.
He blamed his hand-picked executives for the spectacular failure of his airlines, Caribbean Star and Caribbean Sun, and fired them all in one day, replacing them with a battery of new executives even as the airlines were in their death throes.
Then he blamed the “increased overflying” of San Juan by American Airlines and other carriers for wrecking the businesses by denying his airlines inter-island connections. He blamed the SEC and the grand jury for destroying his “life’s work”. When a couple of Mexican drug dealers were discovered to have stashed about $3 million in Stanford International Bank, he accused one of his brokers in Houston of corporate treason for handling the deal. It goes on.
Trying to pin the tail on CFO Jim Davis would turn out to be more difficult. Davis, despite some serious personal peccadilloes, is at bottom a kind and temperate person – at least he was in my dealings with him – with the good looks of an ageing matinee idol and the genteel manner of a southern lad.
He could not have hidden any nefarious schemes to defraud Stanford investors from his boss, as the defence attorneys tried to imply. On several occasions when I sought permission or approval from Stanford on a question and went through Davis, the latter made it clear to me that Allen was utterly in charge but Jim would argue my case.
In truth, Jim Davis was terrified of Stanford, as were many of Stanford’s employees. “Cross Mr. Stanford,” the young captain of Allen’s 125-foot Sea Ray yacht once told me, “and you will be gone, and it won’t be pretty.”
At the end of the day, one must conclude that Stanford’s sorrows are entirely of his own authorship. His access to billions of dollars of other people’s money was his exclusively, and he wielded that cash as a weapon of force and a source of power over all others, including his workers, his family, his many mistresses, the government of Antigua and a score of US and foreign politicians.
And it was that money that fed the often bizarre and hopeless “investments” that finally overwhelmed the Stanford Experience. The ways that the assets were plundered bordered on insanity. He bought, for example, the Wackenhut estate in Coral Gables, Florida, for more than $10 million and had the entire complex razed to the ground.
He similarly bought the sprawling Henry J Kaiser estate in the Virgin Islands for $9.3 million – and bulldozed it into oblivion. Why? No one has ever explained the motive, other than he wanted to rebuild on the sites in his own “vision”. He lost upwards of $300 million in the ill-fated airlines venture, and he blew at least $30 million in a weird attempt to popularise cricket in North America and resurrect the game in the West Indies.
He gave millions to professional golfers and a couple of universities, with a return of zero. He poured more millions into the coffers of Washington politicians, and he allegedly bribed at least one Antiguan official with hush money to keep the feds out of his affairs.
He “borrowed” $2 billion from his own bank, illegally, and suddenly popped up in Forbes as a fabulously wealthy plutocrat.
I do not think R Allen Stanford ever intended to run a Ponzi scheme, as the SEC and DOJ charged. I believe that he simply dug a financial hole so deep that he inadvertently backed into what amounted to a Ponzi scheme. When the world economy retracted in 2008, the party, in the words of one of his minions, was over.
Stanford’s oft-cited lavish personal lifestyle was not so much an indulgence as it was a calculated persona. Convicted Ponzi-meister Marc Dreir ($380 million down the tubes) once observed, “In order to get people to give you money, you have to make it look like you don’t need any”.
Stanford and many others who got wealthy (or appeared to get wealthy) through swindles and confidence jobs know full well the truth of Dreir’s maxim. Nothing succeeds like success. But in the end, the mighty Sir Allen Stanford was as helpless as a fish out of water.
The days of wine and roses had come to a bitter and ignoble conclusion, and by then there was nobody left to blame.