Allen Stanford

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Airportbids aresky high VI firms help recover monies

lost in Stanford schemeBy JASON [email protected]

Standing in his Road Town law office one Fri-day afternoon in January, Martin Kenneyflipped open the brown cover of Stanford Inter-national Bank’s 2007 annual report. He waved itin the air for dramatic effect, a mixture of out-rage and disbelief audible in his voice.

“These are all lies. All of them,” he said as heran his index finger along a row of figures de-tailing the bank’s total assets. The report listedthem as having grown to $7.1 billion by 2007.But the bank lied. It only had about $500 mil-lion in assets at the time of its collapse.

The world learned on Feb. 17, 2009 thatthe bank’s founder and owner, Robert AllenStanford, faked years of financial data in orderto cover up what would become known as thesecond biggest Ponzi scheme in modern his-tory. He is now serving a 110-year prison sen-tence for the estimated $4.6-$4.8 billion inlosses that he caused to some 20,000 investorsand others worldwide.

Two firms with Virgin Islands offices —the insolvency practitioners Grant Thorntonand Mr. Kenney’s eponymous law firm — arekey players in the fight to recover as muchmoney for Mr. Stanford’s victims as possible.Those two firms entered the recovery processtwo years after the fraud’s discovery, substitut-ing in for a team of liquidators who were re-moved from the case by court order.

Recovery effortsAfter deploying investigators to the world-

wide offices of Mr. Stanford’s financial empireto find out exactly what happened, liquidatorsand their lawyers are now engaging in a seriesof massive legal battles in courtrooms fromMontreal to Geneva.

FESTIVAL SEASON SPECIAL REPORT

How to cleanup a $4.8b fraud

Stanford see page 28

Photo: NGOVOU GYANGA member of the BVI Elite Sky Dancers waves the territory’s flag as thegroup dances toward the Queen Elizabeth II Park on Saturday during the20th annual Rotary Club of Road Town Kiddies Fiesta. The event is heldannually to coincide with the August Emancipation Festival, which kickedoff on Friday evening. See story on page 21.

Piled runway plandriving up costsBy JASON [email protected]

Government’s ambitious plans toupgrade the runway and relatedfacilities at the Terrance B. Lett-some International Airport arestill moving ahead, but DeputyPremier Dr. Kedrick Pickeringsaid last Thursday that contractors’initial bids came in far higher thananticipated.

Dr. Pickering, whose Ministryof Natural Resources and Labouris overseeing the project, told theHouse of Assembly that the low-est of the three bids received camefrom the Cayman Islands-basedSir Robert McAlpine HoldingsLtd. at over $377.1 million.

That offer was followed by the

Airport see page 17

Marcus Wide, the managingdirector of Grant Thornton’s VIoffice and the joint liquidator ofthe bank along with the CaymanIslands-based Hugh Dickson,said that the way Mr. Stanfordconducted his business left a messof multinational proportions.

“There was money in Panama;there was money in Colombia; therewas money in Venezuela and busi-nesses in those countries,” Mr. Widesaid. “There was money in London.There was money in Switzerland invarious pots. There was money inCanada, all of which we have to in-vestigate. There was a suggestion thathe had money stashed away in hiswife’s name or through other familymembers’ names elsewhere aroundthe world. So it’s a huge amount ofstuff you have to look into.”

And as the recovery specialistshave looked into Mr. Stanford’scase, they have identified a recur-ring theme: The Ponzi scheme —a con that uses new investors’money to pay seemingly lucrativereturns to existing investors inorder to recruit more — couldhave been stopped much earlier ifbanks, regulators and others hadpaid more attention.

“This one had more red flagsassociated with it over the life ofthe fraud than I’ve ever seen, Ithink, in contrast to any othercase,” Mr. Kenney said. “Whichmeans to say that it was a 20-year-run fraud. It started in about 1990and ran almost to the end of thelast decade.”

Roller coasterThere’s a supremely ironic pho-

tograph on page 12 of the StanfordEagle, a glossy, 60-page booklet pro-duced in 2007 that promoted Mr.Stanford’s financial empire. Thephotograph shows more than adozen tourists, their arms waving inthe air, just as they’re about to de-scend down the track of “BlueStreak,” a wooden roller coaster atthe Cedar Point amusement park inSandusky, Ohio.

On the facing page is a smilingphoto of James Davis, the soon-to-be-indicted chief financial officerof Stanford Financial Group,under the headline: “The StanfordInvestment Model: getting clientsoff the roller coaster.”

Also included in the booklet— amidst photo spreads of a smilingMr. Stanford donating to charities,sponsoring cricket tournaments, andbeing knighted in 2006 by the An-

tiguan government — is the financialgroup’s slogan: “Hard work. Clear vi-sion. Value for the client.”

The financial empire containeda multitude of Mr. Stanford’s com-panies, providing investment man-agement, investment banking andbrokerage services from its officesin Houston, Texas and 32 othercities across the globe. But the

heart of the group and the centreof the fraud took place at the An-tigua-based Stanford InternationalBank.

Financial strategySpurred on by commissioned

salespeople, SIB sold investors cer-tificates of deposits, promising“substantially higher rates of returnthan were generally offered by

banks in the United States,” ac-cording to Mr. Stanford’s 2009criminal indictment.

Mr. Stanford had told investors— a large portion of whom camefrom Latin American countriessuch as Colombia, Mexico andVenezuela, where the public’s trustin national banks is low — that thebank would invest their CDs in

safe, liquid investments generatinghigh returns through a sophisti-cated “global investment strategy.”Instead, Mr. Stanford took at least$2 billion of the bank’s money insecret “loans” to finance his lavishlifestyle and pour monies intoquestionable investments in An-tiguan real estate, airlines andother businesses that weren’t prof-

itable — lying to investors thewhole time, Mr. Wide said.

For example, in 2008 SIBclaimed on paper to have $8 billionavailable to pay investors’ $7 billionworth of CDs. But the bank reallykept the money divided into threetiers, two of which consisted ofcash and portfolios of securities in-vested with global money man-

agers as the bank advertised, Assis-tant US Attorney Gregg Costa al-leged on Jan. 24, 2012 at the startof Mr. Stanford’s criminal trial.Those two tiers only made upeight percent of the bank’s total as-sets, the prosecutor told a jury inHouston, Texas. The remaining 92percent — the tier-three money —masked the secret “loans” made to

Mr. Stanford and hid the core ofthe Ponzi scheme.

“Billions were simply gone,”Mr. Costa said. “Over the yearsMr. Stanford had to use that newmoney each year to pay back theold depositors. And he was payingthese interest rates he wasn’t reallyearning. So lots of it was just goneto keep to the scheme going.”

Guardian BankFor nearly two decades the

scheme worked extremely well forMr. Stanford, who prior to becom-ing a banker had operated a chain ofworkout studios marketed towardwomen. Mr. Stanford’s Total FitnessCenters went bust thanks to overlyrapid expansion and a strugglingTexas economy, ultimately leading

to his personal bankruptcy in 1984,according to a 2009 article in themagazine Vanity Fair. How exactlyhe transitioned from financial ruinto incorporating Guardian Interna-tional Bank in Montserrat in 1985is unclear. But, according to Mr.Kenney, no regulator anywhere

8 | Thursday, August 1, 2013 | The BVI Beacon The BVI Beacon | Thursday, August 1, 2013 | Page 29Special Report Special Report

Exactly 25 years to the day in 1984 that Robert Allen Stanford, a for-mer exercise club owner from Mexia, Texas, declared bankruptcy, his

second attempt at fortune spectacularly imploded on Feb. 17, 2009,leaving a multibillion-dollar mess in its wake. Mr. Stanford’s financialempire included his Antigua-based Stanford International Bank, which

sold certificates of deposit to more than 20,000 investors attracted byhigh interest rates. Mr. Stanford claimed that the depositors’ fundswere being placed in safe, liquid investments. Instead, he operatedhistory’s second-largest Ponzi scheme, using the deposits of new in-vestors to pay returns to others. He went on a billion-dollar spending

spree, buying mansions, supporting cricket and pouring millions intoairlines and other investments. Now, two financial services firms withVirgin Islands offices — Grant Thornton and Martin Kenney and Co. —are key players in the efforts to reclaim some of the $4.8 billion thatdepositors lost.

THE COMPLICATED CASE OF ALLEN STANFORD

Feb. 17, 1984Robert Allen Stanford,

33, declares personal

bankruptcy in Texas,

listing more than

$13.6 million as his

debts. Total Fitness

Center, the Texas chain of exercise studios that

he founded, had gone bankrupt two years prior.

2005 After four previous attempts to initi-

ate legal action against Mr. Stanford, SEC ex-

aminers are finally successful in making a

recommendation to the agency’s enforce-

ment division to open an investigation. But

supervisors decline to pursue enforcement

and refer the matter to the National Associa-

tion of Securities Dealers, an industry group.

June 19, 2009 Mr. Stanford and three other

company officials are arrested and charged with fraud

and obstruction in US District Court. Also charged is

Leroy King, the former administrator of Antigua’s Finan-

cial Services Regulatory Commission, who allegedly re-

ceived bribes from Mr. Stanford to avoid scrutinising SIB.

March 2, 2010 The Vantis liquidators are disqualified

from acting in Canada, after they accidentally erased a large

portion of SIB’s computer records.

Alexander Fundora, an investor who

lost money in the Ponzi scheme, peti-

tions successfully to have Vantis re-

moved as liquidator. Replacing Vantis

is the firm Grant Thornton. The new

liquidators are Hugh Dickson and

Marcus Wide, who works from the firm’s VI office. Martin Ken-

ney, a VI-based lawyer who specialises in fraud matters, be-

comes the liquidators’ co-general counsel.

Feb. 17, 2012 The new liquidators

sue TD Bank, a Canada-based company that

provided correspon-

dent banking serv-

ices to Mr. Stanford’s

companies. The suit

could be worth as

much as $3 billion,

according to Mr.

Kenney. It alleges

that TB Bank knew it was reckless and

should have known of Mr. Stanford’s fraud

and ceased to do business with him.

March 8, 2012 A US grand jury agrees

with prosecutors’ assertion that Mr. Stanford and

the companies should forfeit 29 bank accounts in

London, Zurich, Geneva and elsewhere that prose-

cutors say are worth more than $300 million.

March 12, 2013 After a protracted

negotiation, the US Department of Justice,

US receiver Mr. Janvey, and Messrs. Wide and

Dickson drop legal claims against each other

and agree to share the more than $300 mil-

lion in Stanford group assets that were

frozen in Switzerland, Canada and the UK.

June 14, 2012 Mr. Stanford is convicted on

13 charges after a six-week criminal trial in Texas

and sentenced to 110 years in prison. He is cur-

rently serving time in Coleman United States Peni-

tentiary, a high security prison in Coleman, Florida.

The 63-year-old’s projected release date is April 17,

2105, according to the US Bureau of Prisons.

June 22, 2013 Mr. Wide says partial

distributions to the more than 20,000 Stan-

ford investors who lost money may begin

later this year. He adds that the liquidators

plan to use some of the funds in the March

settlement to finance legal battles against

other banks and parties that were connected

to the fraud.

2006 Mr. Stan-

ford becomes “Sir

Allen” after he is

named Knight

Commander of the

Order of the Nation of Antigua and Barbuda

for his charitable works. The award is later

taken away after news of the Ponzi scheme

breaks.

2008 Mr. Stanford

pledges $20 million to be

paid to the team that wins

the Stanford 20/20 Cricket

Tournament in Antigua. Mr.

Stanford was a major spon-

sor of Twenty20 cricket, a

shortened version of the

game, and spent millions to

promote it in the Caribbean. Ralph O’Neal, the VI premier, is

offered complimentary airfare and accommodations from Mr.

Stanford, but declines, opting to pay his own way.

Nov. 2008 Mr. Stanford reportedly

reaches out to representatives of Libyan dicta-

tor Muammar Gaddafi, asking the country’s

sovereign wealth fund to invest over $100

million in CDs, according to a diplomatic cable

leaked by Wikileaks. The offer is rejected.

Dec. 11, 2008 Bernie Madoff, a US

financier, is arrested and accused of running

the largest Ponzi scheme in history and

causing investors more than $11 billion in

losses. Concern about other Ponzi schemes

and fear of offshore structures leads deposi-

tors to start making withdrawals from SIB.

Feb. 17, 2009 The US Securities and

Exchange Commission files a civil lawsuit

against Mr. Stanford, SIB, SGC and two exec-

utives, seeking “emergency relief to halt a

massive ongoing fraud.” The same day a US

District Court judge in Houston appoints

Ralph Janvey, an attorney, to act as receiver

to take control of the companies’ and the ex-

ecutives’ assets.

Feb. 26, 2009 After An-

tigua’s Financial Services Regula-

tory Commission sues SIB and

Stanford Trust Company Limited,

the Eastern Caribbean Supreme

Court appoints Peter Wastell and

Nigel Hamilton-Smith of the firm

Vantis as “joint receiver-managers”

over the two companies.

April 15, 2009 ECSC Justice

David Harris orders that SIB be liqui-

dated, giving Messrs. Wastell and

Hamilton-Smith permission to gather

up the bank’s assets for the “general

benefit of the bank’s creditors.”

1985 After a brief stint running a ham-

burger restaurant, Mr. Stanford incorporates

Guardian International Bank Limited in

Montserrat. The bank begins offering certifi-

cates of deposit and is later accused by banking

regulators in California, Florida and Texas of op-

erating unlicensed sales offices in those states.

Nov. 28, 1990 Months after

Guardian is investigated by United States

and British authorities allegedy for launder-

ing money for drug traffickers, the financial

secretary of Montserrat writes to Mr. Stan-

ford that his banking licence will be revoked.

Mr. Stanford incorporates Guardian in An-

tigua and Barbuda 10 days later and pur-

chases the Bank of Antigua, a local bank.

Guardian’s assets total about $14 million.

1994 Guardian, which is renamed Stan-

ford International Bank, enters into an

agreement with Antigua Prime Minister

Lester Bird to finance a public hospital. The

bank eventually loans the Antigua govern-

ment more than $40 million.

1997 An accountant with

the US Securities and Ex-

change Commission spends six

days at the Houston office of

the Stanford Group of Compa-

nies examining its books. After questioning the high rate

of interest paid on SIB CDs, the accountant reports that Mr.

Stanford is running a “possible Ponzi scheme.” But the re-

port is not pursued by the SEC’s enforcement staff.

1999 SIB’s assets have grown to nearly $600

million. Mr. Stanford is appointed to chair an

Antiguan task force that removes “false ac-

counting” and “fraud” as charges under the

country’s banking laws. Additionally, Mr. Stan-

ford is appointed to chair the body that oversees

the Antiguan banking regulator. This prompts

US and UK authorities to issue advisories warn-

ing the public about the risks of doing business

with Antiguan banks.

2001 Mr. Stanford launches Caribbean

Star Airlines to compete against LIAT. Three

years later, he starts another airline,

Caribbean Sun, which offers flights across

the region, including the Virgin Islands.

Both airlines are reportedly funded using

money stolen from SIB depositors, liquida-

tors later allege.

Early 2000sMr. Stanford at-

tempts to establish

a presence in the

Virgin Islands and is

rebuffed by then-

Chief Minister Ralph

O’Neal, Mr. O’Neal

later claimed.

Stanford from page 1

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rising him to take control of, cat-alogue and safeguard the individ-uals’ and companies’ assets. Thataction set the asset recoveryprocess in motion.

Receiver Mr. Janvey’s mandate — as or-

dered by US District Court JudgeDavid Godby — technically ap-plied to all of the companies in Mr.Stanford’s financial empire, includ-ing those outside the US, such asSIB and Stanford Trust Companyin Antigua. But two weeks afterMr. Janvey was named to his post,a lawsuit against the companiesfrom the Antigua Financial Serv-ices Regulatory Commissionprompted Eastern CaribbeanSupreme Court Justice David Har-ris to appoint two men from theBritish firm Vantis Business Re-covery Services as receiver-man-agers of the Antiguan-registeredSIB and STC. The men, PeterWastell and Nigel Hamilton-Smith, initially had a similar man-date as the US receiver: toinvestigate and preserve the com-panies’ assets.

Both Mr. Janvey and Vantishad the same aim: to recover asmuch as possible of the estimated$4.8 billion for those who lostmoney in the fraud. Each partyconcentrated on the assets in theircountry: For instance, Mr. Janveytook possession of Mr. Stanford’smansions in St. Croix for the es-tate, while the SIB liquidatorsgathered in $75 million worth oflargely undeveloped lands in An-tigua for their pool of resources.But the receiver and Vantis hadoverlapping claims to bank ac-counts with cash frozen in SIB’sname in London, Geneva andMontreal totaling more than $300million.

And while fighting to berecognised by a Montreal court asthe group with the best claim tothe $20 million frozen in bank ac-counts there, the Vantis teammade a mistake that led to its re-moval from the matter.

Removal SIB’s only office outside of

Antigua was in Montreal, wherethe firm backed up its data andkept a sales office. When the Van-tis liquidators — acting monthsafter the ECSC had broadenedthe firm’s mandate to liquidateSIB and STC — obtained copiesof bank data from the Montreal

computers, they removed thosecopies from the country “withoutpermission, making it impossiblefor the Canadian court to everconfirm their accuracy,” an ECSCjudgment stated. Vantis’ actionsmeant that the liquidator “did notdeserve the trust of the court,”Justice Claude Auclair of theQuebec Superior Court ruled onSept. 11, 2009.

The judge disqualified thefirm from representing the bankin Canada. That led AlexanderFundora, a victim of the Ponzischeme upset with Vantis’ conductof the liquidation, to ask theECSC to remove the liquidatorsand replace them with GrantThornton. The court agreed,naming Messrs. Wide and Dick-

son to the posts. Mr. Kenney,whose firm represented Mr. Fun-dora, became co-lead generalcounsel for the liquidators along-side the Miami-based law firmAstigarraga Davis, which also spe-cialises in fraud recovery.

Cash flow problemsWhen the new SIB liquida-

tors assumed their post in May2011, they faced a big, immediateproblem: The bank’s estate, whichwas to fund their expenses, wasbroke.

“[Vantis] didn’t secure the cashin any way. They didn’t deal withany assets, didn’t generate any rev-enues. So there’s very little cash inour estate,” Mr. Wide said.

During its two years as liq-uidator, Vantis claimed that it

generated $18 million in bills forwhich it was never paid. The ac-countancy firm, citing in part itsnon-payment for work on theStanford fraud, went into re-structuring and sold off its assetsin 2010.

Cash, Mr. Wide added, isneeded not only to distribute to Mr.Stanford’s victims and pay for theadministration of the liquidationbut also to fund lawsuits againstthird parties that may have played arole in the fraud. Those legal actionswill significantly enhance the poolof funds available for victims,Messrs. Kenney and Wide hope.

Sympathetic to the liquidators’cash flow issues, a London judgeadvanced the team $20 millionfrom the frozen funds in London

to finance the estate. That money helped, but it

wasn’t nearly enough to financethe dozens and potentially hun-dreds of lawsuits planned, Mr.Wide said. As plaintiffs who sueunsuccessfully in UK or Canadiancourts can be ordered to pay asubstantial portion of the oppos-ing side’s legal costs, litigantsshould be well funded to guardagainst that risk, he explained.

But attempts to gain access tothe remainder of the moneyfrozen in SIB’s accounts were fur-ther stymied when the US De-partment of Justice broughtcriminal charges against Mr.Stanford in May 2009.

As part of the criminal trial,

The BVI Beacon | Thursday, August 1, 2013 | Page 31Special Report

SPANNING THE GLOBE: THE RECOVERY EFFORTSThe Stanford International Bank liquidators’ efforts to recover the estimated $5 billion stolen from bank depositors spans the globe. The main targets of the liq-

uidators’ efforts are the more the $280 million frozen in bank accounts in London and Switzerland and thousands of acres of land and finished properties in An-

tigua. Additionally, a multitude of lawsuits have been filed, and more may be forthcoming, against firms and individuals that provided services to Mr. Stanford and

SIB, said Martin Kenney, the co-lead general counsel for the SIB liquidators. In addition to these efforts, United States receiver Ralph Janvey is in the midst of his

own recovery campaign, concentrating mostly on Mr. Stanford’s assets in the US.

About $80 million in cash, currently frozenin a London bank account. • The liquidators may sue HSBC, which also pro-vided correspondent banking services to SIB.

•More than $200 million in

cash frozen in Switzerland, to

be split with the US receiver.••

A criminal charge has been launched

by Swiss officials against Societe Gen-

eral. The bank held an account from

which Mr. Stanford allegedly main-

tained a “slush fund,” part of which

was used to pay bribes.

•

A lawsuit is before the courts

against Canada’s TD Bank, which

handled nearly $10 billion in SIB

depositors’ money over the life of

the fraud, Mr. Kenney said. The

lawsuit could be worth as much as

$3 billion.

•

The liquidators may sue

Kroll Advisory Solu-

tions, a firm of private

investigators, which

provided “counter-intel-

ligence” services to Mr. Stanford, Mr.

Kenney said. The firm’s investigators

would counter-investigate journalists

and others scrutinising Mr. Stanford,

according to the lawyer.

• A lawsuit is also planned against

Tom Sjoblom and his two previous

employers: the law firms Proskauer

Rose and Chadbourne and Park. Mr.

Sjoblom’s alleged “negligence” helped

Mr. Stanford avoid regulators’ scrutiny,

Mr. Kenney said.

•

(Right) 1,554 acres of raw land, including

four small islands and 987 acres of the

Crump Peninsula. Estimated to have a value

of $50-$200 million

• (Left) A portfolio of office buildings, a port

facility, Mr. Stanford’s bar, the Sticky Wicket,

athletic facilities, and other holdings worth

an estimated $75 million



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| Thursday, August 1, 2013 | The BVI Beacon Special Report

prosecutors asked and were granteda request to have the $300 millionin cash in the UK, Canada andSwitzerland declared as “proceedsof crime” and forfeited to the USgovernment so that it could be re-distributed to the victims. Whileseizure of assets from drug dealersand other criminals who don’t haveeasily identifiable victims makessense, Mr. Wide said, in this case, inhis experience, the decision didn’t.

“Governments are not wellpositioned to run a claims process.It’s not what they do for a living,”Mr. Wide said. “You don’t want toduplicate the process, so whywould government run a claimsprocess and then have the liquida-tor run another claims process?”

Parties’ settlementBut looking to avoid the

prospect of duplication and furthercostly legal wrangling, the SIB liq-uidators, Mr. Janvey, the Depart-ment of Justice, and a few otherrelated US parties began negotia-tions last year to resolve their differ-ences. An agreement reached inMarch divides the $300 million be-tween the US receivers and the SIBliquidators. Additionally, it allowsboth groups access to each other’srecords and clarifies which rightseach recovery team has to file law-suits against third parties. For theswindled depositors, the settlementmeans that a to-be-determinedportion of that cash will be availableto be disbursed, while the SIB liq-uidators will be able to finance theirlegal battle. The major factor in de-termining how fast that happens,Mr. Wide said, is the speed at whichthe Swiss government can release itsfrozen SIB accounts. But if all goeswell, Mr. Stanford’s victims couldsee their first proceeds from the liq-uidation in the coming months.

“Our objective is try and makea distribution before year end.That’s our objective. The questionis how much,” Mr. Wide said.

And with the disagreementsabout the frozen cash coming to aclose, liquidators are also makingprogress on gathering in thebank’s other assets, including thelarge swathes of coastland in An-tigua Mr. Stanford bought for fu-ture development.

Antiguan coastOn the northeastern coast of

Antigua, not far from the island’sJumby Bay Resort, are four islandsand the Crump Peninsula, total-

ing 1,554 acres. Mr. Stanfordbought the undeveloped lands in2008 from a Malaysian developer,according to Edward Childs, a di-rector of the VI-based office ofSmiths Gore. The real estate ad-visor was hired last year by Mr.Wide’s team to assess and marketthe portfolio of lands. The state ofthe economy and the availabilityof properties across the regionmake that difficult, but Mr. Childssaid the firm and its partner, theUS broker CB Richard Ellis, haveseen some interest.

“If you’ve got land at the mo-ment, there’s not that many inter-national investors that are lookingto purchase land because it’s sospeculative,” Mr. Childs said. “Soquite often land will go to peoplein the local market.”

The acreage is being sold asone joint parcel, though the 32-acre Pelican Island can be split offfrom the group if a buyer wants topursue a “Necker Island-style de-velopment,” Mr. Childs said.

He added that he’s optimisticabout the properties’ prospects be-cause they combine land on thepeninsula with a sought-after island:“When you can say, ‘Oh, you’ve gotan island,’ that always helps.”

Additionally, the broker said,the Antigua government recentlylaunched the “Citizenship by In-vestment” programme, allowingforeigners who donate more than$250,000 to the country’s devel-opment fund or purchase morethan $400,000 worth of propertyto obtain an Antiguan passport.The promise of a second passport— though the programme doesn’tconfer voting rights — is a plusfor some investors because it couldallow them visa-free travel tocountries in North America orEurope, Mr. Childs said.

Other properties Mr. Kenney, the liquidators’

lawyer, estimated that the CrumpPeninsula portfolio could fetchanywhere from $50 million to$200 million, depending on mar-ket conditions. He has high hopes,too, for a portfolio of buildingsand properties owned by StanfordDevelopment Company, anotherSFG subsidiary that will likely beliquidated by Mr. Wide’s team.Those properties include four of-fice buildings constructed to topUS commercial standards; Mr.Stanford’s bar The Sticky Wicket;The Stanford Cricket Ground;the upscale Pavilion Restaurant,from which a $2 million wine col-lection was sold off for $400,000

before Vantis made efforts to se-cure it, Mr. Kenney said; and aport facility complete with refrig-eration that cost $55 million tobuild.

“Anything Mr. Stanford wouldbuild would usually be built at thehighest level,” the lawyer said.

In some cases, Mr. Kenneyadded, liquidators will sue to re-cover assets that they feel shouldhave been part of the estate. Forexample, last November the gov-ernment of St. Kitts and Nevispurchased from SDC six acres ofland at the country’s airport thatwas the former headquarters ofCaribbean Star Airlines.

“The Kittian government paid$3.6 million in cash for it under cir-cumstances that make me nervous,”Mr. Kenney said. “And we’ve frozenone million of the proceeds of thatlittle funny business in the trust ac-count of Hugh Marshall Jr., thelawyer for SDC in Antigua. We’vegot to figure out who made off withthe rest of the other $2.6 million ofthat $3.6 million.”

Lawsuits But the best prospects by far

for depositors to get their moneyback, Messrs. Wide and Kenneysaid, are the series of lawsuits thathave been filed or will be filedagainst the third parties thatshould have known about thePonzi scheme and stopped it.Foremost among those responsi-ble, the recovery specialists feel, isthe Canada-based TD Bank,which is the subject of a claim thatcould be worth as much as $3 bil-lion to the swindled depositors,Mr. Kenney said. TD Bank pro-vided “correspondent banking”services to SIB, allowing at least$10 billion of wire transfers fromCD investors to be sent and re-ceived from accounts that SIBheld at TD Bank, Mr. Wide said.

“It was like rent-a-bank in thesense that in order for a customerfrom Mexico to deposit $100,000US dollars at SIB there was noplace to wire transfer it to in An-tigua,” he said. “Because SIB could-n’t receive a wire transfer. Theyweren’t set up as a proper bank.”

SIB was very dependent onTD’s services, Mr. Kenney said, andTD was bound to follow anti-money-laundering regulations, per-forming “know-your-customer”checks and other due diligence ver-ification to make sure that SIB’s ac-tivities were aboveboard.

Correspondent relationshipsbetween foreign banks are oftenused to offer customers the con-

venience of dealing in their owncurrencies abroad, Mr. Kenneysaid. For instance, an Antiguantaxi driver earning EasternCaribbean dollars who had an ac-count at the Bank of Antigua — asmall bank Mr. Stanford pur-chased in 1990 and merged withSIB forerunner Guardian Bankwhen he relocated to the island —would be able to use his bank’scorrespondent account at TDBank to access his funds while vis-iting relatives in Canada.

When SIB set up a corre-spondent account, TD Bankshould have checked into Mr.Stanford’s history, the lawsuit al-leged. Those checks would haveuncovered Mr. Stanford’s per-sonal bankruptcy, the revocationof his Montserratian banking li-cence, regulators’ previousscrutiny, law enforcement con-cern that Antigua was a haven formoney laundering, and manyother red flags, Mr. Kenney said.He added that a “reasonablebank” would have decided not todo business with Mr. Stanford orhis companies.

Instead, because SIB’s sisterentity, the domestic Bank Of An-tigua, had an existing correspon-dent relationship with the Bank ofNew York, the assets of whichwere later purchased by TD Bank,SIB was able to “piggyback” onthe domestic bank’s prior relation-ship and extensive due diligencethat previously occurred.

“We think they were recklesslyindifferent and negligent with thestewardship of their relationship ascorrespondent bank for Stanford,and did know enough informationto put an honest banker on hisguard — to shut down the account,go to police and blow the whistleon this thing — at least as far backas the year 2000,” Mr. Kenney said.

‘Slush fund’TD Bank isn’t the only major

financial institution to face the liq-uidators’ recovery efforts. SocieteGenerale Credit Suisse, a Paris-headquartered bank, provided SIBwith accounts in Switzerland, Mr.Kenney said. At Mr. Stanford’scriminal trial, Mr. Davis, SFG’s for-mer chief financial officer, describedthose accounts as the companies’“slush fund.”

“They were the font of what Iwould characterise as bribes paidto Charles Hewlett, who was au-ditor of SIB’s books. And he waspaid to issue audit opinions thatwere clean as a whistle when thisthing stank to high heaven, and no

auditor would have done that if hewasn’t being bribed with a lot ofmoney,” Mr. Kenney said.

The lawyer added that theSGCS accounts were a mecha-nism for SIB to “wash the moneystolen by Stanford.”

Liquidators have petitionedthe Swiss government to launch acriminal complaint against thebank and its then-executive vicepresident, Blaise Friedl, who re-portedly had a long friendshipwith Mr. Stanford.

The liquidators are also investi-gating a third bank, HSBC, whichalso provided correspondent bank-ing services to SIB, Mr. Kenneysaid. HSBC recently was fined $2billion by US regulators because itsPanamanian-based compliance de-partment allegedly didn’t detect andturn away drug traffickers’ fundsfrom entering the banking system,Mr. Kenney said. That same com-pliance department was responsiblefor watching SIB’s activities, he as-serted.

Other suitsMr. Kenney’s laundry list of

lawsuits may not stop at bankers.Included in the liquidators’ sightsis Kroll Advisory Services, whichMr. Kenney said provided privateinvestigators who would scrutinisejournalists and others who wereinvestigating Mr. Stanford.

“So if you’re sitting in RoadTown and you’re being aggressiveagainst Stanford because you de-tect something that’s bad, youwould have Kroll counter-investi-gating you, looking for rubbish inorder to disseminate that to dis-credit you,” Mr. Kenney said.“That was the kind of thing hewas doing. It’s like out of a Holly-wood movie, this stuff.”

The New York-based firmdoesn’t yet face a lawsuit but couldin the future, the lawyer added.

Additionally, Tom Sjoblom, aformer SEC lawyer who repre-sented Mr. Stanford’s companieswhile in private practice, could besued, along with two of the lawfirms at which he worked, Mr.Kenney said. In Mr. Davis’ 2011guilty plea agreement, Mr.Sjoblom is described as “OutsideAttorney A,” Mr. Kenney said.

According to the plea agree-ment, when the outside attorney“heard through the grapevine” thatthe SEC was investigating Mr.Stanford’s companies in 2006, hecalled the agency, touting his previ-ous anti-fraud experience, and gave



his opinion that SIB was an “in-credible institution” that was “cred-ible in all its dealings.”

Though it’s a lawyer’s job torepresent a client’s interests, Mr.Sjoblom’s actions crossed the line,Mr. Kenney said, and his loyaltiesshould have been to the bank’s de-positors, not to Mr. Stanford.

“That means if the bank’smanagement is doing somethingwrong, his mission in life shouldbe to protect the bank, not to pro-long fraud,” Mr. Kenney said.

Even some SIB depositors —those who scrambled to the bank tocash out their CDs in the weeks be-fore the 2009 collapse — may haveto give back their withdrawn fundsonly to see them redistributed bythe liquidators, Mr. Wide said.

“If you were knocking on thedoor [of SIB] before your CD wasdue and you were paid in that lastvery short period of time whenover a billion dollars went out ofthe bank, we’re saying that youjust got lucky at the expense ofyour neighbour,” he explained.

Recovery processMr. Wide has liquidated more

than 30 banks during his career.He’s seen depositors lose moneymany times. And what sticks outin the Stanford fraud, he said, isthe Texan’s brazenness and thescale of depositors’ losses.

“There are some real tragediesin this file. There are some peoplewhose life work was in the bank.And they’ve lost it,” he said.

For Mr. Kenney, the Ponzischeme is notable for its size andthe number of “red flags” it shouldhave raised.

“As a fraud recovery lawyer, Iget access to victims’ impact state-ments, evidence indicative ofhuman pain and suffering,” hesaid. “The scale of human painand suffering in this case is noth-ing short of massive. Endemic.Ludicrous. Ludicrous for thenumber of times when it couldhave been stopped.”

Mr. Wide added that despitepast delays, many of the hurdlesthe liquidators had to overcomehave been cleared. A claims veri-fication process, through whichdepositors detail and submit theirlosses in order to receive futurepayment, is almost finished. Theteam has received more than16,000 claims, he said, noting thatthe discrepancy between thatnumber and the estimated 20,000victims is typical.

“There is, in any insolvency, anumber of people who just don’tclaim for all sorts of reasons,” hesaid, adding that he hopes to an-nounce soon when depositors willreceive their payments.

Table talkBut how much of the financial

damage caused by the Ponzi

scheme can be undone by the liq-uidators’ efforts? Messrs. Wideand Kenney say that while they’dlike to recover the full amount forvictims, this isn’t likely.

Sitting in the conference roomof his Road Town office a fewweeks ago, Mr. Kenney demon-strated the enormity of the liq-uidators’ task by motioning to his25-foot-long boardroom table asif it were the more than $4.6 bil-lion in depositors’ losses.

He held his hands a few feetapart.

“If we draw a line here and aretalking about recovering $300 mil-lion from Canada, Switzerland, theUK, you can see we’re not even be-ginning to fill it up,” he said.

He widened the distance be-tween his hands as he describedthe land sales, totaling assetsworth $500 million.

“That’s ten percent, ten centson the dollar. Are victims going tobe happy with ten cents on thedollar?” he said.

Listing the US receiver’s con-tributions and the lawsuits, hewalked closer to the end of theroom and stopped.

“Various judges and various set-tlement discussions and variousthings may result in not achievingthe full amount, the $4.6 billion,” hesaid. “We may get stuck halfwaydown. But halfway down is $2.3 bil-lion and that’s a heck of a lot betterthan peanuts. Fifty cents on the dol-lar is a lot better than ten.”

The BVI Beacon | Thursday, August 1, 2013 | Page 33Special Report


Allen Stanford

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