Sunday Stanford

Stanford International Bank is finally being characterized in the mainstream media as a Ponzi scheme. The Sunday Times (of London) reports from Antigua:

Investigators examining Sir Allen Stanford's offshore bank say that $8 billion (£5.6 billion) of investors' money has disappeared.
Official receivers for Stanford International Bank appointed by the Antigua government have told customers that they suspect the bank was a "Ponzi scheme", where depositors' returns are paid from money obtained from new investors.
"The $8 billion you hear about in the media isn't there," one of the receivers told customers gathered outside the bank's Antigua offices this weekend.
"We will be tracking the money in overseas banks, find a million in one, track another million to another bank. But there is nothing like $8 billion here. It appears to be a Ponzi scheme."

The UK press does seem to have taken the lead on the Stanford story at this point. There's lots more new juice in a related story:

Vigilance and scrutiny were lacking both from outside and within the bank. One board member, Oliver Goswick, was a car dealer who had a serious stroke in 2000. According to the firm's latest annual report, Goswick oversaw investments for SIB. Yet his son Richard said last week Goswick "can't string seven words together"...
By the late 1990s the country had a reputation for dodgy offshore banking and American authorities discovered that $3m deposited in Stanford's bank had come from Amado Carrillo Fuentes, a Mexican drug runner known as "the lord of the heavens" for transporting drugs by air.
Fuentes died while having extensive plastic surgery that went wrong; the bodies of the surgeons were later found cemented into oil drums.

The Telegraph has the news that Stanford was a bankrupt in the 1980s, although details are scarce.

Elsewhere, Matthew Goldstein reveals that old-fashioned regulatory infighting might have been part of the reason why it took so long for the SEC to move on Stanford:

A person familiar with the Stanford investigation says for months Antiguan authorities were thumbing their noses at the SEC and rebuffing attempts by US regulators to get information on Stanford's offshore operation.

Zach Goldfarb has more details:

The SEC's investigation, dating back at least three years, faced challenges because customers' assets were held in accounts in Antigua. Antiguan authorities did not fully cooperate with the investigation... The SEC brought in the help of the FBI, which has enforcement tools unavailable to the SEC including the ability to wiretap and send in agents undercover, according to people familiar with the matter. It wasn't clear how those tools were used in the Stanford investigation.

My feeling is, from following the coverage to date, that the minute the SEC brought in the FBI it allowed its own investigation to be placed on the back burner; the FBI is still investigating Stanford, and might yet pull him up on serious criminal charges. The Observer reports:

The FBI is probing possible money laundering linked to Mexico's infamous narco-trafficking Gulf Cartel in its investigation of Texan billionaire Sir Allen Stanford, US law enforcement sources have told the Observer...
Sources in the US Drug Enforcement Administration also confirmed that while the investigations into Stanford's affairs were "with the FBI and Securities Exchange Commission... I think we'll find that any possible drug-related trail and SEC priorities are not all in the same frame."

I'm also fascinated by the fact that former Federal Reserve governor Lyle Gramley is, as far as I can tell, still happily ensconced as senior economic adviser to the Stanford Group. As recently as February 10 he was giving quotes to Luke Mullins about how "he would have liked to have seen more detail" in the Geithner bailout plan: maybe he should have been asking to see a bit more detail in his own employer's financial statements first.

The Houston Chronicle has more on the drug-money front:

Antigua and other Caribbean islands have long been seen as places where international bankers are willing to take in big money from foreigners and not ask a lot of questions. In 2007, the nation of Antigua and Barbuda had 17 offshore banks, three offshore trusts, two offshore insurance companies and 3,255 international business corporations, according to the U.S. government produced International Narcotics Control Strategy report.
That would equate to nearly one corporation for every 20 people living on this island.
Mike Vigil, who retired from the DEA but was the agency's chief of international operations and ran its Caribbean office, said island banks "have always been a focal point for laundering illicit drug proceeds and Antigua has always been a primary center of money laundering operations for many significant drug traffickers."

The Chronicle has also launched a dedicated Stanford blog, which is doing a good job in trying to keep on top of the story.

At Reuters, Jason Szep has details of Stanford's Caribbean island project, identifying the island as Guiana Island and saying that the price tag for the whole project was $1 billion; he's also bylined on a story saying that Stanford definitively has "surrendered his passport to U.S. authorities", but not going into any details about how many passports he's surrendered. (Stanford has dual citizenship.) Newsweek has found a "close associate" of Stanford's, who says he is "distraught and 'drowning his sorrows'".

Finally, Clifford Krauss is also in Antigua, quoting people who seem to be getting ahead of themselves a little:

Jonathan Winer, a former U.S. deputy assistant secretary of state who worked diplomatically to strengthen banking regulations in Antigua, said the Stanford scandal and the American and Antiguan response to it were part of a new direction for offshore banking.
"We are on the verge of an emerging new global regime to demand financial transparency across all sectors and across all jurisdictions as the price of access to the international financial system," Winer said. "One outcome will be that finally everyone will have to be under the same level of regulatory and enforcement controls if their activities touch financial markets."

I'll believe it when I see it.