The Stanford Files: FBI’s first probe was 20 years ago

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More than 20 years ago, the authorities repeatedly probed Allen Stanford’s alleged links to some of the world’s biggest and most powerful drug lords. Despite no fewer than five investigations into suspected drug money laundering by law enforcers ranging from Scotland Yard to the FBI, no charges were ever brought.

As banking officials in Central and South America and in the Caribbean moved quickly to freeze accounts linked to Stanford, the full extent of suspicions surrounding his business dealings emerged. Last night, the England and Wales Cricket Board was under growing pressure over its decision to enter into a £50m deal for Stanford’s businesses to sponsor Twenty20 tournaments. The ECB refused to say what detailed steps it took to find out whom it was dealing with before agreeing the deal.

The 58-year-old businessman, whose personal fortune was estimated at $2.2bn last year, headed a global financial group which claimed to have $51bn worth of assets under management. But he is now under investigation by a range of US criminal and regulatory authorities, including the FBI, the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS) and state financial regulators.

The SEC investigation which resulted in civil charges being brought against Stanford and two other employees last week, began as long ago as 2006 but was hampered by the reluctance of the authorities in Antigua, where Stanford’s offshore banking operation is based, to co-operate, according to sources familiar with the investigation. The SEC said this meant it was forced to call in the FBI, which has greater investigative powers, including the power to use wiretaps.

Stanford was already well known to the FBI. He was first investigated 20 years ago when he became a subject of a joint Scotland Yard-FBI investigation into so-called “brass-plate” banks on the Caribbean island of Montserrat. The investigation was set up after the tiny island, with a population of fewer than 13,000 people, had been targeted by criminals who set up more than 300 banks and rapidly found itself at the centre of a worldwide money laundering operation.

Among them was the Guardian International Bank, created by Allen Stanford. The bank was suspected of laundering drug money from the notorious Medellin and Cali drug cartels run by Pablo Escobar and the Orejuela brothers, according to former FBI agent Ross Gaffney, who headed the task force set up to investigate the suspicious explosion of offshore banks on the island.

“We suspected that Stanford’s bank was involved in money laundering, especially as we put people outside it to observe it,” Mr Gaffney said. Before the investigation could develop further, Stanford suddenly voluntarily surrendered his Montserrat banking licence and left the island.

Mr Gaffney said Scotland Yard had to abandon its Stanford investigation because it didn’t have sufficient manpower to pursue him. The Yard’s inquiry was headed by Detective Superintendent Richard Marston, who has since died. “Dick Marston was frustrated because he didn’t have the manpower to do more. I think in the end the Brits were just relieved to get rid of this problem from Montserrat,” Mr Gaffney said.

After Montserrat, Stanford switched his attention to neighbouring Antigua where he set up the Stanford International Bank, which is at the centre of the current investigation. Mr Gaffney said the FBI continued to take an interest in Stanford and set up a second inquiry into that bank after receiving intelligence that it continued to launder money for the Medellin and Cali cartels. “We had hard intelligence about what he was doing and we began to develop it.” Mr Gaffney said.

The FBI was particularly interested in Stanford’s relationship with Lester Bird, Antigua’s former prime minister. “Stanford is a very shrewd businessman. He always took the trouble to build close relations with local people on the islands. When Hurricane Hugo threatened, he flew a lot of his people out of the island to safety. He is affable and has a lot of charm. As a result, he has built up a lot of positive goodwill and personal loyalty to him. There are people who still think their money is safe with him even after the SEC took action.”

Mr Bird became Antigua’s prime minister in 1994, taking over from his father. Under the Bird family leadership, the island was widely regarded as one of the most corrupt in the Caribbean, with well-documented links to arms and drug smuggling and money laundering. In 1990, Israeli automatic weapons ordered by Mr Bird’s brother Vere turned up in the hands of a notorious Colombian drug trafficker. The Birds further angered Washington by giving US fraudster Robert Vesco refuge and protection on the island.

Stanford was warmly welcomed in 1990 as Antiguan politicians sought to diversify their tourism-dependent economy. He acquired dual Antiguan citizenship, became the largest private employer and developed a level of influence over local regulators that worried US watchdogs. In 2006 he was awarded a knighthood in a ceremony attended by Prince Edward.

“In the offshore world, you have a hierarchy and Antigua is at the bottom,” said David Marchant, an offshore banking analyst based in Miami, Florida. “Antigua was the Wild West and Stanford was the chief cowboy.”

Baldwin Spencer, Antigua’s current Prime Minister, credits Stanford for creating some 2,000 jobs, but says his predecessors allowed him to acquire “dangerous” influence and prime real estate. He claims the Birds and their supporters sought to “literally give away Antigua and Barbuda to Allen Stanford”. Lester Bird denies all the allegations and points out that Mr Stanford has not been charged with any criminal matters.

Mr Gaffney said the investigation did not result in Stanford facing charges, because the circuitous route the drug money took before entering Stanford’s bank made the prospect of a successful prosecution unlikely. Despite this Mr Gaffney said Stanford remained “on the FBI’s radar”.

Other FBI and Drug Enforcement Administration (DEA) sources say that further separate investigations into alleged money laundering activities were carried by agents in Dallas and New Orleans. In each case no charges were brought. In the most recent investigation, agents from the DEA probed Stanford’s links with the so-called Gulf cartel based in Mexico. In the late 1990s, according to US court documents, operatives of the Juarez or Gulf cartel began opening accounts at Stanford’s Antigua-based bank in an effort to launder money amassed under one of Mexico’s most vicious drug lords, Amado Carrillo Fuentes. Together, they used Stanford International Bank to open 10 accounts and deposit $3m.

In 1999, Stanford willingly turned over the $3m from his bank after federal agents found it had come from a drug cartel. Stanford’s cooperation won him praise from authorities who said he had not intentionally accepted drug money. Around the same time, however, Texas securities regulators found evidence of potential money laundering involving Stanford, an official said Friday. The details were passed on to the FBI and SEC because the laundering involved offshore banks.

“Why it took 10 years for the Feds to move on it, I cannot answer,” securities commissioner Denise Voigt Crawford told the Texas senate finance committee. “We worked with the FBI and the SEC and basically gave them the case. We told them what we’d seen and they were going to run with it.”

Additional reporting by Paul Bignell

From Obama to McCain

Allen Stanford’s influence stretches across the spectrum of US politics.

Stanford Financial Group donated more than $2.4m to more than 100 US politicians, with nearly two-thirds of the cash going to the Democratic Party. However, last week, many of those who received donations from Stanford were attempting to distance themselves from the Texan as federal authorities investigated the alleged $8bn investment fraud.

President Obama, the third-biggest recipient, received $31,750 during his presidential campaign. The defeated Republican presidential nominee John McCain received more than $28,000. Money also went to other 2008 presidential candidates, including Hillary Clinton, who received $6,900; and Bill Richardson, Rudy Giuliani and Mitt Romney, who each got $4,600.

The biggest single individual donation was reserved for Bill Nelson, the Florida senator who was vice-chairman of the Democratic Senatorial Campaign Committee in 2002. Mr Nelson has promised to return the $45,900 he received.

There is no suggestion of impropriety by the recipients of Stanford’s donations.

A week in the life

Monday, 16 February The FBI and Securities and Exchange Commission (SEC) investigate an offshore bank owned by Stanford. The Texan billionaire emails his staff at the Stanford International Bank vowing he would “fight with every breath to continue to uphold our good name”.

Tuesday, 17 February The England and Wales Cricket Board (ECB) suspends negotiations with Stanford after it emerges that the SEC is applying for a temporary restraining order against Stanford Financial Group over allegations of fraud. ECB chairman Giles Clarke admits that joining with Stanford was a mistake.

Wednesday, 18 February Stanford accused of fraud totalling £5.6bn and company placed in the hands of receivers. Clarke faces pressure to resign over the affair. Stanford “vanishes” after unsuccessfully attempting to leave the US.

Thursday, 19 February Stanford is tracked down by the FBI in Fredericksburg, Virginia, where his girlfriend’s family lives. He is served with the SEC lawsuit and ordered to surrender his passport.

Friday, 20 February Authorities in Antigua seize Stanford’s local bank, to stem a run that threatens to destabilise the island’s fragile economy.