Did Allen Stanford “Forget” State Secrets?

Larry Doyle
updated | Author's Website


Remember Allen Stanford?

Yes, we have waited close to three years for the once but now dethroned Sir Allen Stanford to come to trial for the charges brought against him in his management of a supposed Ponzi-scheme centered within his bank in Antigua.

While I would imagine that most readers of this blog certainly remember Sir Allen quite well, the key question to be addressed in this trial is just how much does Allen Stanford himself remember what truly transpired within his operation.

Scratching your head? Let’s navigate.  

Reports have it that Stanford himself is claiming amnesia due to a beating he took while incarcerated without bail. Is this to be believed? Bloomberg reports, Allen Stanford Trial Begins as Indigent Ex-Billionaire Claims Memory Loss,

The R. Allen Stanford who arrived at the Houston federal courthouse in shackles to start his $7 billion investment fraud trial today is far different from the Texas billionaire prosecutors indicted 2 1/2 years ago.

Weeks before his June 2009 indictment, Stanford strode into the same courthouse with a high-profile defense lawyer and volunteered to surrender. U.S. marshals declined at the time to arrest the Stanford Group Co. founder, then estimated by Forbes to be worth $2.2 billion.

“I’m not a damn swindler,” Stanford said weeks before he was charged. He vowed to clear his name, take back assets seized by securities regulators, and repay more than 20,000 investors he’s accused of defrauding through allegedly bogus certificates of deposit at Antigua-based Stanford International Bank Ltd.

Now 61 and visibly thinner, Stanford has endured a string of setbacks since he was indicted and jailed because prosecutors said he might try to flee. In September 2009, he suffered broken facial bones in a beating by another inmate and became addicted to anti-anxiety medications prescribed by prison doctors after the attack. After eight months in a prison rehabilitation unit, Stanford claims he still can’t remember much of his life or details of his once far-flung business empire, according to his lawyers.

“In a complex financial fraud case, it’s almost impossible for defense counsel with even substantial resources to put on a good defense without the active participation of their client,” said Barry Pollack, a white-collar defense attorney with Miller & Chevalier in Washington who isn’t involved in the case. “His attorneys are hamstrung without his help.”

Does this seem somewhat surreal to you? It does to me.

Is Stanford’s memory loss a convenient development? Let’s navigate back in time and revisit a commentary I wrote in May 2009 which references a story emanating from the United Kingdom which may shed further light on this situation and help Sir Allen recall what really happened. I wrote, Allen Stanford and Whitey Bulger: Two Peas in a Pod?,

We all know the SEC totally dropped the ball in the oversight of the Bernie Madoff Ponzi scheme. On the heels of that and to alleviate massive pressure on the commission, the SEC quickly moved on Allen Stanford.

MAJOR hat tip to MC in sharing with me a story broken by the BBC, Stanford Drug Informer Role Claim:

Evidence has emerged that the Texan who bankrolled English cricket may have been a US government informer.

Sir Allen Stanford, who is accused of bank fraud, is the subject of an investigation by the BBC’s Panorama.

Sources told Panorama that if he was a paid anti-drug agency informer, that could explain why a 2006 probe into his financial dealings was quietly dropped.

Sir Allen vigorously denies allegations of financial wrongdoing, despite a massive shortfall in his bank’s assets.

But the British receiver of his failed Stanford International Bank – based in Antigua – told Panorama that the books clearly show the deficit.

If in fact this development is accurate, has the U.S. government, via the DEA, facilitated a Ponzi scheme?  I am not so naive as to think that there aren’t massive undercover operations ongoing regularly to infiltrate and expose illicit activities. However, if in fact that were the case, how did the DEA lose control of Stanford’s investment activities? Is there a massive in-house brawl currently ongoing between the DEA and the SEC?

The BBC reports:

Secret documents seen by Panorama show both governments knew in 1990 that the Texan was a former bankrupt and his first bank was suspected of involvement with Latin American money-launderers.

In 1999, both the British and the Americans were aware of the facts surrounding a cheque for $3.1m (£2.05m) that Sir Allen paid to the Drug Enforcement Administration (DEA).

It was drug money originally paid in to Stanford International Bank by agents acting for a feared Mexican drug lord known as the ‘Lord of the Heavens’.

The cheque was proof that Stanford International Bank had been used to launder Mexican drug money – whether or not Sir Allen knew it at the time.

On 17 February of this year, the US Securities and Exchange Commission (SEC) accused Sir Allen of running a multi-billion dollar Ponzi fraud – when cash from new depositors is used to pay dividends to old depositors – civil charges he has denied.

Two and a half months after the SEC filing, the Texan has not yet faced criminal charges.

He was initially investigated by the SEC for running a possible Ponzi fraud in the summer of 2006, but by the winter of that year the inquiry was stopped.

Do you think that if there is a shred of truth and evidence to this story highlighted by the BBC that Allen Stanford et al might be better off if he were to “forget” it? Even if innocent American investors were to suffer in the process? You think?

Infiltrating illicit international drug trades is one thing and obviously a good thing. Potentially providing cover—knowingly or unknowingly—to a financier who developed and managed a Ponzi-style operation in the process is an entirely different thing.

Is that something akin to ‘state secrets’ which people involved in the operation would just as soon have Allen Stanford “forget”?

Will we ever know what really happened?

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

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