Stanford Financial: a sticky wicket for investors?

Donna Carson/Reuters
A Stanford Financial Group customer was turned away at the company's Houston office Feb. 17. US authorities have charged the company's owner, Texas billionaire Allen Stanford, with "massive ongoing fraud."

Everything was not quite “cricket” at Stanford Financial, which was shut down on Tuesday by the US Securities and Exchange Commission, which alleges a “massive” fraud over $8 billion in certificates of deposit.

Stanford Financial’s founder, Sir Robert Allen Stanford, a Houston billionaire, is well-known in cricket circles where he had sponsored a $20 million winner-take all tournament in Antigua. He was in the process of negotiating more cricket deals with the England and Wales Cricket Board and the West Indies Cricket Board when the US government raided his offices.

Offered high returns
Cricket is especially popular in nations such as Australia, India, and Britain as well as the English-speaking Caribbean nations. One of those is Antigua, which is also home to Stanford International Bank, which the SEC alleges offered investors interest rates that are well above market rates, supposedly with no risk.

The SEC’s outgoing head of enforcement says Stanford and his family and friends "perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors."

In Madoff's wake

The allegations of fraud follow the alleged $50 billion Ponzi scheme concocted by Bernard Madoff. The US government, the forensic accountants, and a court appointed receiver are still in the process of unraveling that size and scope of the alleged Madoff fraud.

Between 2000 and 2002, the Stanford Financial Group was a significant contributor to both the Republican and Democratic parties. According to the Center for Responsive Politics, in those two years, the Houston-based group gave $797,345 to both parties. In 2004, the organization gave $24,275 to Rep. Pete Sessions, a Dallas Republican and a member of the House Rules Committee.

A longtime Texan

Sir Stanford is a resident of St. Croix, Virgin Islands, but was born in Mexia, Texas. A fifth-generation Texan, he was knighted in Antigua and Barbuda, one of the British Commonwealth nations. He has dual US and Antigua citizenship.

He also has a keen interest in golf. According to Wikipedia, he sponsors golfers V.J. Singh, Camillo Villegas, and David Toms.

His company, Stanford, is also a major sponsor at the arena where the Miami Heat play, according to Business Week. The magazine found he was deeply involved in sponsoring LPGA tournaments as well.

Ron Scherer contributed this report from New York.

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