Stanford tracked down by FBI

Billionaire found in Virginia as authorities launch criminal investigation into money laundering claims
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The Independent US

Allen Stanford, the billionaire who bankrolled English cricket, was tracked down in Virginia by FBI agents, two days after being accused of an $8bn (£5.6bn) fraud.

The Texan financier's whereabouts had been unknown since regulators accused him of lying to clients in the US, the Caribbean and across Latin America, and shut down large parts of his $50bn empire. Stanford was not arrested yesterday, since the charges against him stem only from a civil lawsuit brought by America's financial watchdog, the Securities and Exchange Commission. FBI agents served the SEC's lawsuit on Stanford after finding him in Fredericksburg, Virginia, where he has relatives. There was no sign that he had been trying to evade authorities, an FBI official said. He was served with the papers in his car, where he was travelling with a girlfriend. He was "making arrangements to turn in" his passport, the official added.

Yesterday, however, it emerged that the FBI is also examining criminal charges against Stanford, including allegations that his Antigua-based bank was used as a money-laundering centre by drug cartels. The enquiry calls into question the ultimate provenance of the $20m in banknotes that Stanford trailed in a transparent chest through Lord's cricket ground last summer, when he announced his controversial entry into English sport.

The "Stanford Series" Twenty20 cricket tournament – with its $20m prize – that took place in Antigua last October looks certain to be the last, and the fallout has left the bosses of the England and Wales Cricket Board fighting for their future.

Stanford had not been seen in public since the SEC's charges were laid, and his father said he was concerned for his son's safety. It was reported on Wednesday that a Stanford employee had tried to charter a private jet for a one-way trip from Houston to Antigua, but the billionaire's credit card was declined.

In Britain, the Serious Fraud Office said it was monitoring the situation after revelations that Stanford had been using a London-based auditor to oversee a business that, it is now believed, reported fake investment results for up to 15 years.

But it is in the US where the authorities are most actively crawling over Stanford's business empire – a network of banks and brokerages he claimed looked after $50bn on behalf of its clients – and where the FBI has become involved in the investigation.

Stanford International Bank (SIB), headquartered in the offshore financial centre of Antigua in the Caribbean, had been investigated before over allegations of money-laundering, and lurid reports have continued to swirl in the island, in Miami, where Stanford had an office, and in Houston, where the company was based. The FBI is expected to comb through Stanford's accounts to try to examine the provenance of billions of dollars funnelled into Antigua from countries including Mexico, Colombia and Venezuela.

ABC News reported that a Stanford corporate jet had been detained by the FBI as part of a long-running money-laundering inquiry, and was found to contain cheques linked to the violent Mexican drug gang known as the Gulf cartel. Sources in Houston refused to confirm the story, which had been circulating for several months.

In 1998, with the US authorities putting pressure on Antigua to loosen its banking secrecy laws, Stanford handed over $3.1m from the Mexican drug dealer Amado Carrillo Fuentes who had flooded the US with cocaine before his death the previous year. The funds were brought to Stanford's bank by two frontmen, through its Houston-based financial consultants. This was "the first and only time we have ever had an active account where this has happened," Stanford said at the time, and handing the money to the US authorities "was the right thing to do morally, and the legal thing to do".

In Mexico City yesterday, the financial regulator, CNBV, is looking into whether Stanford Fondos, the Mexican operation, broke laws on investing abroad. Financial laws forbid Mexican banks to encourage clients to invest in unauthorised certificates of deposits abroad, yet some 20 per cent of the Stanford funds in Antigua are believed to have come from the country.

Last week, as rumours of an investigation by the Securities and Exchange Commission began to circulate, Stanford promised to "fight with every breath to continue to uphold our good name and continue the legacy we have built together". The business had been created by his grandfather in the teeth of the Great Depression, and his father, James Stanford, is still listed as "chairman emeritus".

Interviewed by the Houston Chronicle, Mr Stanford Snr said he had not heard from his son since he spoke to him last week and told him he had run into difficulties. "He just told me to watch the papers, the Wall Street Journal and all that. He said something, stuff that had been rumoured, but nothing like this," he said. "I cannot imagine, I cannot believe – I will not believe what is being alleged actually happened. I'm worried for his safety. You know, he's my son."

Antiguan authorities again called for calm yesterday, after hundreds had thronged Bank of Antigua trying to get deposits out. Although it is owned by Stanford, the bank is separate from SIB and not under threat, they said.

Venezuela seized a local bank owned by Stanford to stem massive online withdrawals, saying it would quickly sell the bank – Stanford Bank Venezuela, one of the country's smallest commercial banks – and that it had already been approached by potential buyers. Authorities in five Latin American countries have now taken action against Stanford businesses, with Ecuador seizing two units of the group.

SIB employed an army of salesmen to tout its miracle-grow investment products in the US and Latin America, competing against each other for fat commissions and outsize bonuses. Few noted the extraordinary nature of the returns that Stanford was promising: double-digit percentages every year on a set of investments that could not have returned as much.

Two brokers, however, smelt rats and are being hailed as whistleblowers in the case, after helping the SEC and the FBI with their investigations. Charlie Rawl and Mark Tidwell fought a three-year battle with staff at Stanford HQ to get answers to a growing number of questions about the company's purported returns – and they resigned in December 2007 convinced their employer had been lying to clients. In a lawsuit alleging constructive dismissal, they claimed Stanford had been faking investment returns.

"We were happy when we first got there but, over time, the discontent grew as we learnt something one year, another thing the next, two things, then three things," said Mr Rawl.

'Sir' Allen Stanford Is he really a knight?

Three years ago, Allen Stanford's website announced he had been made Knight Commander of the Most Distinguished Order of the Nation after becoming a citizen of the Commonwealth territory of Antigua, explaining: "He was presented [with] this honour by His Royal Highness Prince Edward, Earl of Wessex." But in November last year, it was reported that Prince Edward had merely been present at the ceremony, and that the honour had actually been bestowed by the Governor-General of Antigua and Barbuda. The website was subsequently altered. Candidates for honours in Antigua are usually selected by a committee, but Stanford's knighthood prompted anger around the island after it emerged that he had been nominated by only a few powerful politicians who were using new laws to bypass the normal vetting process.