A Full-Service Bank: R. Allen Stanford and the CIA

Recently by Beyond Orwell: The Electronic PoliceState, 2010

In a scandal-plagued era such as ours, scarred by murderous wars, occupations and corruption that would make a Roman emperor blush, accused crooks have names; even juiced ones like R. Allen Stanford.

Last year, when a federal court in Texas handed down indictments charging Stanford International Bank (SIB) and its officers with "orchestrating a fraudulent, multibillion dollar investment scheme," I wondered: was there more to the story?

Indeed there was.

Once described by fawning media as a "flamboyant Texan" and "philanthropist," Stanford was founder and sole shareholder of a global banking empire once conservatively valued at $50 billion.

According to the federal indictment, "Sir Allen," as he was dubbed by a corrupt former minister of Antigua, ran a massive Ponzi scheme camouflaged as a bank that sold some $7 billion in self-styled "certificates of deposit" and $1.2 billion in mutual funds.

Operated from behind a façade of well-appointed offices and with a jet-set lifestyle to match, the Stanford grift may have been impressive but it was a scam from the get-go. Lured by "high rates that exceed those available through true certificates of deposits offered by traditional banks," thousands lost their shirts.

Those high rates were a lie and the bank’s "unique investment strategy" about as legitimate as a penny-stock fraud or advance fee scam on the internet. Of the $8 billion hoovered up by the banker and his cronies, only about $500 million have been recovered.

Facing the prospect of years in prison, The Miami Herald reported that SIB’s chief financial officer James Davis, once Stanford’s college roommate and originally charged in the indictment, copped a plea to save his own neck.

Davis told the Justice Department that "his boss had been stealing from investors for decades while paying bribes to regulators and even performing blood oaths never to reveal his secrets."

Talk about a wise guy!

And with connections and generous pay-outs to U.S. politicians going back more than a decade, 65% of which went to Democrats including our "change" president, Allen Stanford was plugged-in.

Evidence also suggests he may have gotten an assist covering his tracks from regulators and U.S. secret state agencies, including the CIA.

SEC Stand Down

Allen Stanford did business the American way; he swindled depositors and then siphoned-off the proceeds into a spider’s web of offshore accounts.

The indictment charges "it was part of the conspiracy that Stanford … and others would cause the movement of millions of dollars of fraudulently obtained investors’ funds from and among bank accounts located in the Southern District of Texas and elsewhere in the United States to various bank accounts located outside of the United States … in order to exercise exclusive control over the investors’ funds."

Auditors learned that funds were moved through Stanford-controlled accounts to offshore banks, including HSBC in London, Bank Julius Baer in Zurich and eight others; banks which have figured in past money laundering or tax-avoidance scandals. None have been charged with an offense in connection with the affair.

In all, 28 numbered accounts were listed by prosecutors, veritable black holes that escaped scrutiny; that is if regulators in Washington were minding the store, which they weren’t.

Years earlier, SEC investigators at the commission’s Ft. Worth office uncovered evidence of wrongdoing. According to an explosive report by the SEC’s Office of the Inspector General, Ft. Worth examiners launched a series of probes in 1997, 1998, 2002 and 2004 exploring SIB practices but their diligence was sabotaged by high-level officials.

That report, Investigation of the SEC’s Response to Concerns Regarding Robert Allen Stanford’s Alleged Ponzi Scheme, Case No. OIG-526, March 31, 2010, paints a damning picture of the regulatory process.

The inspector general states: "While the Fort Worth Examination group made multiple efforts after each examination to convince the Fort Worth Enforcement program (‘Enforcement’) to open and conduct an investigation of Stanford, no meaningful effort was made by Enforcement to investigate the potential fraud or to bring an action to attempt to stop it until late 2005."

Last month, the Fort Worth Star-Telegram reported that staff members, who spoke on condition of anonymity because they feared management retaliation, told the newspaper that higher-ups wanted "tools to do away with people who have a dissenting opinion."

Senior managers called the probes a "goat screw" and ordered them killed.

The OIG investigation "found that the former head of Enforcement in Fort Worth, who played a significant role in multiple decisions over the years to quash investigations of Stanford, sought to represent Stanford on three separate occasions after he left the Commission, and in fact represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so." (emphasis added)

In Florida, The Miami Herald revealed that state regulators did the SEC one better and gave the bank carte blanche to operate secretly, moving "vast amounts of money offshore–without reporting a penny to regulators."

The arrangement between the bank and the Florida Office of Financial Regulation was so brazen, that Stanford’s company "was allowed to sell hundreds of millions in bank notes without allowing regulators to check for fraud."

And once those suspect instruments were sold, the Herald reported that "employees shredded records of the trust agreements and CD purchases once the original documents were sent to Antigua, state records show."

A sweet deal if you can get it, or have powerful friends who might wish to avoid messy inquiries touching upon sensitive matters.

The New York Times reported last year that current charges "stem from an inquiry opened in October 2006," that is, nearly a decade "after a routine exam of Stanford Group, according to Stephen J. Korotash, an associate regional director of enforcement with the agency’s Fort Worth office."

Korotash told the Times that the SEC "stood down" its investigation "at the request of another federal agency, which he declined to name."

According to BusinessWeek, in 2006 the Bush administration "bestowed on his intelligence czar … broad authority, in the name of national security" to excuse companies from "their normal accounting and securities-disclosure obligations" if such disclosures revealed "certain top-secret defense projects."

At the time, William McLucas, the Securities and Exchange Commission’s former enforcement chief told the publication that the ability to conceal financial information from regulators under the rubric of "national security" could lead some companies "to play fast and loose with their numbers."

The former official said, "it could be that you have a bunch of books and records out there that no one knows about."

In response to media reports, congressman Dennis Kucinich (D-OH), wrote a letter to SEC Chair Mary Schapiro last year, demanding documents, and answers, why the SEC suspended investigations of the "Stanford Group under pressure from another unidentified federal agency."

The Ohio congressman said, "if this is true … our subcommittee will demand that the SEC reveal the name of that agency which told it not to enforce federal laws which protect investors."

Neither documents nor answers were forthcoming.

Cynics might see something untoward here, but I think it’s all just a coincidence, like drug planes bought with bundles of cash laundered through American banks.

Drug Probes Killed

In 1986 during the Iran-Contra period, Allen Stanford’s Guardian International Bank set up shop on the sleepy Caribbean isle of Montserrat (pop. 5,870).

It didn’t take long before the bank came under scrutiny. Guardian was the subject of a joint Scotland Yard-FBI investigation "into so-called ‘brass-plate’ banks," The Independent disclosed.

Read the rest of the article

August 11, 2010

Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly and Global Research, an independent research and media group of writers, scholars, journalists and activists based in Montreal, his articles can be read on Dissident Voice, The Intelligence Daily, Pacific Free Press and the whistleblowing website Wikileaks. He is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press.