Feb. 19, 2009
Texas-Sized Fraud Spreads To 131 Countries
R. Allen Stanford Is Missing, And Thousands Of Investors Around The World Wonder If They'll Ever See Their $8 Billion Again
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Play CBS Video Video FBI Finds Missing Billionaire Texas financier R. Allen Stanford was located in Virginia, and served with civil papers related to possible bilking of investors out of billions of dollars. Bob Orr reports.
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Video Stanford Scandal Victims Speak Harry Smith spoke with a whistleblower and victims of the Stanford Financial scandal. The company's owner, R. Allen Stanford, is accused of swindling investors out of billions.
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Video Alleged Fraudster Missing Officials are now investigating R. Allen Stanford, a prominent Texas financier now missing, who is accused of swindling investors, politicians and organizations out of billions. Bob Orr reports.
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R. Allen Stanford waves at Lords Cricket Ground in London in this June 2008 file photo. The U.S. Securities and Exchange Commission filed civil fraud charges against the billionaire on Tuesday with a "massive fraud." (AP Photo/Lefteris Pitarakis)
As federal agents pressed their fraud investigation, nervous customers swarmed Stanford-related banks in Venezuela and Antigua demanding their money. The flamboyant 58-year-old Texas billionaire is accused of bilking 50,000 investors spread through 131 countries, reports CBS News correspondent Bob Orr.
Federal law enforcement officials raided Stanford's Houston offices Tuesday, seizing assets and shutting down operations. The action followed civil charges that Stanford had promised clients unrealistic returns on $8 billion in certificates of deposit and committed other financial fraud.
Stanford has not yet been charged with a crime, and while his whereabouts is unknown, he is not technically a fugitive. But his lavish lifestyle - his sprawling financial empire includes six airplanes, offices around the world, and homes in Antigua and the Virgin Islands - has officials worried he may try to hide.
Officials say Stanford's high-profile lifestyle has been part of his appeal. He's hobnobbed with politicians, funneling $1.7 million dollars to various campaigns since 2000.
He's shelled out big money to sponsor sporting events, athletes and charities. Last November Stanford flaunted his wealth (and his brand name) when he posed with the $20 million prize he posted for a Caribbean cricket tournament.
Now, he's in hiding, leaving his customers worried they'll never see their money - and his own father wondering what went wrong.
"It's very saddening and heartbreaking at my age, it hurts," said James Stanford.
Sources tell CBS News that criminal charges are not imminent. But with this case coming on the heels of the Bernard Madoff scandal, there's strong pressure on Justice Department to make Stanford pay.
The Securities and Exchange Commission's investigation of Stanford had been in the works before the New York financier Madoff gave himself up in December, said a U.S. official with knowledge of the probe who spoke to the Associated Press on condition of anonymity because he was not authorized to provide information about it.
But the agency stepped up enforcement efforts after embarrassing revelations that the SEC had cleared Madoff despite specific tips and multiple investigations, current and former SEC employees said. They said regional offices appeared to be fast-tracking the Stanford case and others with the potential to give the agency another black eye.
One former employee said enforcement officials had told him they were trying to recover from the negative publicity surrounding the Madoff case. The sources spoke on condition of anonymity to preserve their relationships with the agency.
SEC officials did not return calls seeking comment.
Stanford's companies also had been under investigation by the Financial Industry Regulatory Authority, a self-regulatory body. FINRA spokeswoman Nancy Condon said the two investigations were operating in parallel "and at some point, both of us became aware of each other."
Equal Parts Glamour And Flattery
Stanford's pitch to potential investors was, it turned out, built on lies.
By serving a select and wealthy clientele, employing top-flight talent and being "a privately held institution free to focus on our No. 1 priority, which is our clients," Stanford was able to earn "premium returns," his bank documents claimed.
But those profits may never have existed. Despite claiming to have made double-digit returns between 1993 and 2005, the company's annual returns hadn't reached 10 percent since 1994, according to court papers.
Stanford also lied about his bank and its history - not just its finances - to gain investors' trust, public records show. Company documents referred to a 70-year tradition of client relationships. Yet there is no record of his bank having existed before the 1980s.
And while he told clients their money was guarded by a team of "20-plus analysts," court papers said he and James Davis, a college roommate, were the only ones familiar with the investment strategy.
The bank had been misrepresenting its performance since at least 2004, according to court papers.
The claims of inflated returns allowed the bank to plow more money into other parts of
Even in 2008, a year when many stock market indexes lost around 40 percent, the company claimed losses of only 1.3 percent.
That's when Stanford's lies seem to have caught up with him - thanks in part to news about an alleged $50 billion pyramid scheme by Madoff.
With SEC investigators and Florida regulators closing in, Stanford desperately sought to reassure employees, investors and the press that nothing was wrong. He told clients these were "routine examinations," court records show.
A Feb. 12 company e-mail told workers that "former disgruntled employees" had made complaints that could complicate an "otherwise routine examination."
And a Stanford spokesman denied there was anything unusual about a January visit to Stanford's Miami offices, telling The Associated Press, "We were informed by the three agencies that this was a routine examination."
But when one client tried to cash out a multimillion dollar deposit on Feb. 9, the bank told him the SEC had frozen the account.
Another client was told that Stanford personally had ordered a two-month moratorium on payouts, court records show.
Even after Tuesday's raid made international headlines and provoked bank runs in Antigua, some investors were still looking for answers.
At the Stanford Fiduciary Investor Services' office in a downtown Miami high-rise late Wednesday afternoon, a 64-year-old retired investor arrived in a motorcycle jacket and helmet.
The man said he had been told his account, totaling over $1 million, was being transferred to another bank. He spoke on condition of anonymity to maintain the privacy of his investments.
He said he had called for more information Wednesday, but there was no one there to pick up.
Whistleblower Saw Warning Signs Years Ago
Mark Tidwell, a former senior vice president at Stanford Financial, said he saw warning signs three years ago. Appearing on CBS' The Early Show, Tidwell said that as far back as 2005, "There was a pattern developing" of published returns not matching what his clients were receiving. "It began in May of '05, and Summer of '06 there were a couple events that took place that got us concerned," he said.
But Tidwell told anchor Harry Smith that when he confronted company officers about SEC inquiries, "They told us everything was
fine. They said that this was part of a routine inquiry that we shouldn't be worried about it, that we should reassure our customers that everything was okay."
Tidwell said that some fines were levied on Stanford, but for very low sums: $10,000 to $20,000. "That seemed to go along with the things that they were telling us - it was such a small fine that, obviously, it couldn't have been, you know, that big of a deal."
Tidwell and another Stanford investor left the company about a year ago, taking many of their clients with them (who are, given the troubles facing Stanford investors, very grateful). They are suing Stanford for wrong termination. Stanford is now countersuing the two.
Kelly DeHay and Rod Danielson are two investors who put their money into Stanford, based on the advice of a conservative financial adviser who had joined Stanford. Detailing their experience with the Stanford Financial Group on The Early Show, DeHay said, "We had a lot of faith, and we had a lot of confidence. And most importantly, we had a lot of trust in him."
Danielson said that his initial investments were in CDs in the middle of 2006, and that the returns promised were not exorbitant. "At that point the rate that they quoted us was 8.25%, which at that time U.S. banks were paying somewhere in the order of 6%."
Danielson also said that while Stanford's banks were not regulated by U.S. authorities, they had higher reserve margins than any U.S. bank. "It was really safe," he said.
"Everything seemed reasonable," said DeHay. "This was just another tool, another vehicle."
Now those vehicles are frozen; DeHay and Danielson have both been told they cannot withdraw their deposits for two months. "It's a little horrifying," said DeHay, "especially after hearing Mark this morning say that there were issues back in 2006; it sounds like it was before we became investors. And I'm just hoping our financial adviser did not do this to us for a fee and a recurring fee each year."
"I mean, ironically, we thought these CDs were the safest thing in our portfolio when we were seeing mutual funds and stocks going south," Danielson told Smith.
© MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
Add a Comment See all 126 Comments
- madoff,enron,bear sterns,the long weekend breaks,the fat beefsteaks,the alcohol.... & now Stanford....Americans ought to be rubbing their hands in bewilderment ...with meek SEC & other obliging(to the crooks) authorities,its high time & better for public take matters directly to hand
Posted by daviolo at 4:46 PM : Feb 19, 200
Reagonomics and who was Stanfords best friend Hannity of Faux nooz - Reply to this comment
- From here on out, anytime you hear the word "Democrat", remember just what criminal acts of wasteful spending and a doubling of the National Debt the Democrats are heaping upon America, at a time when our economy is in crisis.
Posted by CBSisPravda1
So all of a sudden you right wing hypocrites are worried about spending. Where were you when the neo con Nazis were lying us into illegal invasions? Or when they were handing trillions of our tax money to the banks and oil corporations? Or WHEN THE REPUBLICAN COMPLETELY RUINED THE AMERICAN ECONOMY and turned us into a 3rd world country. Don't make me laugh with your utter stupidity and propaganda Newspeak. - Reply to this comment
- Americans need to work harder now....off with the long weekend breaks & stop relying too much on beefsteaks(the acknowledged biggest contributor to methane accumulation to hothouse enviro..)...not to go anywhere near the tipsy causing spirits ...enough...
Posted by daviolo
Oh boy, the IDIOTS are out today!! BTW daviolo, when it comes to working hard, you probably couldn't hold the jock of 98 percent of the workforce!! About your greenhouse gasses comment, that just reinforces all the more your IDIOCY........so you are a proponent of taxing livestock because they produce methane gas from pharting!? You've been sniffing too may dairy cow arses haven't you!? - Reply to this comment
- A person can only be conned out of their money by fear or greed; I don't smell any fear.
- Reply to this comment
- Americans need to work harder now....off with the long weekend breaks & stop relying too much on beefsteaks(the acknowledged biggest contributor to methane accumulation to hothouse enviro..)...not to go anywhere near the tipsy causing spirits ...enough...
- Reply to this comment
- 99% of all politicians are corrupt and they give a bad name to the rest of em.
- Reply to this comment
- culture of corruption".
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Posted by LoonyLeft at 04:44 PM : Feb 19, 2009
Though tough anti-money-laundering legislation overwhelmingly sailed through the House Banking Committee in 2000, it had difficulty getting to another vote as powerful GOP lawmakers -- then-House Majority Leader *** Armey, then-House Majority Whip Tom DeLay and then-Senate Banking Committee chair Phil Gramm stymied its future.
DeLay was among the largest recipients of Stanford's largesse. And "DeLay's committees paid for flights on Stanford's jets at least 16 times since 2003, including on Oct. 20, the day the former House majority leader was booked in a Houston courthouse on money-laundering charges," according to Bloomberg News.
Stanford Financial or its employees also contributed to the legal defense funds of three lawmakers tarnished by ethics allegations -- DeLay, Democratic Senator Robert Torricelli, Republican Bob Ney. - Reply to this comment
- madoff,enron,bear sterns,the long weekend breaks,the fat beefsteaks,the alcohol.... & now Stanford....Americans ought to be rubbing their hands in bewilderment ...with meek SEC & other obliging(to the crooks) authorities,its high time & better for public take matters directly to hand
- Reply to this comment
- I'll bet botox pelosi knows where Stanford is located. In the photos I've seen (not available on the loony-left liberal media, of course) she seems to enjoy dancing and drinking with him at his parties.
It took JUST TWO WEEKS for the pelos-hussein regime to become the most TAX CORRUPT GOVERNMENT IN HISTORY by putting acknowledged TAX CHEATS in high level positions. The loony-left liberal d-crats have brought back the "culture of corruption". - Reply to this comment
- Good point mortal13, spoken like a true democrat. When the dems do something bad, point the finger the other way, but when the Reps do it, there is only one bad party.
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Posted by drputt45 at 03:31 PM : Feb 19, 2009
So all the republicans that took campaign contributions from this crook are now democrats? - Reply to this comment
- Americans are a bunch of liars and frauds. There ain't no one can trust anymore.
You guys lie, lie, lie and then dare others to believe your lie and if they don't they then become your enemies.
You've lied about the Gulf of Tonken in Vietnam, you've lied about your rightwing dictators friends in Latin America, you've lied about Iran, about Hezbollah, about Palestine, about WMDs in Iraq, about Syria, about Georgia and Russia, about real state values in the US, etc, etc.
That's all your media does is lie, lie, lie trying to sell a bogus product in the same way people like Madoof and Stanford lie, lie, lie just so they can take all your freaking money and run with it.
Americans, not even Obama and the likes of Hilary, should ever be trusted again by anyone in the world.
You're nothing but a bunch of showoffs and frauds. - Reply to this comment
- Investigators say R. Allen Stanford masterminded an $8 billion fraud. Like Madoff, he has contributed money to the biggest names in Washington, including senators John Cornyn and Kay Bailey Hutchison and congressmen Pete Sessions, Joe Barton and Sam Johnson.
Republican Rep. Pete Sessions of Dallas was one of Stanford's favorites; he has contributed more than $40,000 since 1989.
A spokesperson said Sessions is keeping the money.
Sen. John Cornyn took almost $20,000 from Stanford and is also keeping the money. A spokesperson told News 8 Cornyn believes in the "presumption of innocence".
In 2004, Stanford hosted Cornyn and his wife on trip to Antigua worth $7,400. The Senator described it as a "fact-finding mission."
Just for the record: All Republicans. - Reply to this comment
- Since he loves cricket, have a fast bowler hit his head with a 100+ MPH bouncer.
- Reply to this comment
- this is nothing compared to the ponzi scheme called social security
- Reply to this comment
- We should have death penalties for crooks like stanford and Madoff. There are too many church do gooders around who want to stop death penalty. Churches don't even pay taxes but they figure out all kinds of ways to spend tax payers' money.
- Reply to this comment
- Most Democrats and most Republicans are not corrupt. The few who are get all the attention.
It wouldn''t surprise me though if a lot of these criminals gave overwhelmingly to Democrats. Republicans by and large have no voice in the decision-making process. They are losing elections left and right. No pun intended.
All this during 8 years of Republican rule. Fact - Reply to this comment
- Most Democrats and most Republicans are not corrupt. The few who are get all the attention.
It wouldn''t surprise me though if a lot of these criminals gave overwhelmingly to Democrats. Republicans by and large have no voice in the decision-making process. They are losing elections left and right. No pun intended.
All this during 8 years of Republican rule. Fact - Reply to this comment
- some of these posting idiots want to relate the democrats with corruption but they seem to forget who not only did corruption through Haliburton, Blackwater and many other republican financed operations a few months ago and still going.
- Reply to this comment
- Don't make me laugh trying to take blame from the fiasco that is the GOP.
Watching this right wing disaster unfold is almost comical. You can only blame government hating Republicans for looking the other way while the right wing fascists who run the big corporations and banks went hog wild. Dems want some oversight and government control since it is about we the people. - Reply to this comment
- Most Democrats and most Republicans are not corrupt. The few who are get all the attention.
It wouldn't surprise me though if a lot of these criminals gave overwhelmingly to Democrats. Republicans by and large have no voice in the decision-making process. They are losing elections left and right. No pun intended. - Reply to this comment
The road ahead in Afghanistan, and the crucial decision Obama faces.
