Allen Stanford Charged with Fraud, Test Cricket Fans Celebrate with Weak Cordial

Allen Stanford, Texan billionaire, offshore banker, and perhaps the only American to have heard of (let alone enjoy) cricket, has been charged with an $8bn fraud by the Securities and Exchange Commission.

Stanford was chief of Stanford International Bank, whose website tells of “value investing combined with a thoroughly understood and well-managed alternative strategy” – turns out that alternative strategy was lying about performance data to attract new business, alongside false interest rate claims. Instead of putting investors’ cash into liquid assets like stocks and bonds as it claimed to, it was actually putting it into real estate and private equity deals. Stanford claimed to have $50bn in assets invested; the FT suggests that there’s as little as $147m.

As any fraudster knows, you need a fantastic shop front to attract people if there’s nothing in your warehouse. Madoff and recent Japanese fraudster Kazutsugi Nami both used celebs to make them appear legit; Stanford used cricket. You may remember a Twenty20 game in Antigua last year where the winners (not us, predictably) got $20m – that was Stanford’s money, as he attempted to raise the profile of the game to the point where it might take off in the States. He also pumped money into Caribbean cricket, and was trying to create an English Premier League similar to the bombastic, cheerleader-fringed Indian Premier League. Unfortunately, he didn’t realise that if you turn up at Lords in a gold-lined helicopter, the Boycotts of this world aren’t going to like it; nor will the players enjoy you making their WAGs sit on your lap during matches. His ten-gallon-hat showboating would have had to modulate into something much more tea-drinking if he was going to try and shape English cricket, not that it really matters anymore.

Stanford, America’s 205th richest man, also has a range of other businesses – two regular banks, a real estate company, restaurants, a cricket ground and a whole bunch of Antigua, where he lives. He also had a fleet of private jets that he loaned out to politicians like Tom DeLay, and bankrolled Caribbean trips for Texan politicians to sweeten them up. But like Madoff and that other recent fraud-muncher Nicholas Cosmo, he had a tiny, private auditing firm that could be made to not question those dodgy investments – CAS Hewlett, originally based in Antigua, but now running from the rather less tropical Enfield.

As well as getting scrutiny from financial analyst Alex Dalmady, who published an article questioning the credibility of Stanford’s investment portfolio, Stanford appears to have slipped up by hiring a couple of people with a conscience. Charles Rawl and Mark Tidwell sued Stanford for forcing them to resign, after they refused to make these sketchy investments on behalf of their clients. They told of the false data being provided to new potential investors, and accused Stanford of getting rid of data ahead of checks by the SEC, who were already beginning to investigate Stanford. The SEC stepped up its scrutiny after these accusations, and here we are – way to fight the power, Chaz and Mark!

So it looks like English Twenty20 will go back to its status as an imperceptibly rowdier alternative to Test cricket, America will continue to find misplaced romanticism in baseball, and the SEC will carry on catching today’s fraudsters in a couple of years from now. The world spins on its axis.

Posted by Ben Beaumont-Thomas in Hot Money | February 18, 2009 12:07PM |