A New Financial Blueprint
The gumshoes at the US securities and Exchange Commission are none too impressed by Allen Stanford’s knighthood. They have accused the flamboyant Texan billionaire and cricket impresario of perpetrating a fraud of shocking magnitude.
But even if the title, bestowed by Antigua and Barbuda, is pukka, it may be the only thing about Stanford that is. He is alleged to have run the Stanford international bank like a piratical Caribbean enterprise, gulling some 30,000 investors out of an estimated $9bn. If the accusations stand up, it will be a severe blow to a fund management industry still reeling from Madoff.
The affair is also a kick in the balls for English cricket. The England Cricket Board, which immediately severed relations with Stanford, insists it ran exhaustive checks on the tycoon before he lured the England cricket team into a circus of Twenty20 pyjama cricket with his own team, the Stanford Superstars. Stanford was rebuked for the tacky quality of his competition, which offered $20m purse to the winning team, and for the inappropriate attention he paid to the cricketers’ wives and girlfriends.
But ultimately the ECB was swayed by his promise to counter India’s growing dominance of the commercial game. Still, alarm bells should have rung from the moment that Stanford – a man with self-confessed loathing of Test cricket – touched down at Lord’s in a gold plated helicopter,. Rumours of money-laundering had long been rife and it was clear to any sane observer that this was a tawdry business. This affair has brought out the worst in English cricket and the men who run it. They have got exactly what they deserved.
The same cannot be said of the residents of Antigua, where Stanford has established himself, in colonial style, as the biggest private employer and business force. His personal fortune dwarfs Antigua’s $1bn GDP and, if he goes down, the island’s economy could sink, too.
Yet Sanford’s other investors are not entirely blameless. In the usual triumph of greed over fear, they missed a parade of red flags: notably the promise that a unique investment strategy would consistently deliver double-digit returns from ostensibly low-risk investments. The SEC, which was alerted by a whistle-blower, is yet to track down 90% of the portfolio, which it claims resides in a “black box” shielded from independent oversight.
It will have to do better than that. The watchdog must now act urgently to address investor panic about how many more multi-billion dollar frauds have yet to be unmasked.