Stanford: panic spreads as fraud inquiry widens

There were desperate scenes outside banks owned by Sir Allen Stanford, the Texan financial mogul and brash cricket sponsor, as the fallout from fraud charges laid against him spread across the Americas.

The American authorities have accused the billionaire of running an $8bn (£5.6bn) fraud from the Caribbean island of Antigua. They said they did not know his whereabouts, following reports that he tried to hire a private jet to fly from Houston in the hours after regulators swooped. Sir Allen, ranked 605 on Forbes’ list of richest people, with a fortune estimated at $2.2bn, owns a banking and brokerage empire spread across the world. He claimed to control $50bn on behalf of 50,000 clients, although those figures could not be verified. The business was built with his university friend James Davis, who was also charged by the Securities and Exchange Commission on Tuesday. However, many of their offices were closed yesterday.

In Antigua, where Sir Allen is the biggest private sector employer, hundreds of clients of the Bank of Antigua descended on its three branches to withdraw their money, despite assurances from the authorities there that the bank is separate from Stanford International Bank, where the fraud was said to have been centred.

The Prime Minister, Baldwin Spencer, said the charges in the US have “profoundly serious implications” for the country, threatening “catastrophic and immediate consequences”, but he appealed for calm while regulators warned that panic could cause a bank run. Long queues continued through the day yesterday, with bank staff letting customers in 10 at a time.

In Venezuela, whose investors may account for $3bn of the $8bn invested with Stanford in Antigua, people streamed into the Caracas offices of his brokerage business for the second day running. Wealthy Venezuelans were apparently lured to put their money with Sir Allen on the promise of unprecedented investment returns, and the reassurance of having their money offshore. Staff pleaded with clients to go home, since their accounts had been frozen since news of the fraud charges broke. But still they kept coming.

After Venezuela, Mexico may be the next hardest hit, since some 20 per cent of Stanford’s Antiguan fund is believed to have been solicited through brokers there. The Colombian authorities suspended Sir Allen’s brokerage business from trading on the stock exchange. The Peruvian securities regulator Conasev sent an inspection team to the local office of Stanford Financial. And in Panama City, dozens of people stood outside the office of Sir Allen’s affiliate there, reading a note taped to the door that said that the bank had been taken over by the government.

Sir Allen, a Texan whose grandfather started the family financial firm during the Great Depression, was charged with “massive, ongoing fraud”, accused of inflating returns and lying to investors about where their money was going. If the SEC’s charges are proved, it could be one of the largest frauds in US history, but one still dwarfed by the recent Bernard Madoff scandal. Neither Sir Allen, Mr Davis nor a third accused, Laura Pendergest-Holt, Stanford investment’s chief, had co-operated with the SEC’s months-long investigation, it claimed. After the SEC turned up the heat, a lawyer for Sir Allen “disaffirmed” his previous statements to the investigation.

There are no warrants for Sir Allen’s arrest and the SEC says it still hopes for his co-operation. However, it has not been able to serve its lawsuit on him. Television reports suggested that he had tried to charter a private jet for a one-way flight to Antigua from Houston, but that the jet lessor had refused to take his business credit card.

In Britain Sir Allen is best known as the sponsor of the new Twenty20 cricket tournament with a £10m prize. In the US, it was golf sponsorships that brought him to prominence, along with his astonishing claims to high and steady investment returns.

The British connection: Stanford’s accountant

Sir Allen Stanford’s financial empire was audited by a tiny accountancy company with offices in London. The 58-year-old billionaire charged CAS Hewlett – a little-known company primarily based in Antigua, but with addresses listed in Enfield, Haringey, Illford and Islington – with overseeing his huge fortune.

The company was run by Charlesworth Shelley Hewlett from its headquarters in the Antiguan capital, St John’s, until the 72-year-old’s death last month. Now, its operations have moved to London under the stewardship of his daughter, Celia Hewlett. Yesterday a member of staff in Antigua confirmed that CAS Hewlett has just five employees on the Caribbean island – and two in Britain. Its UK arm is registered at 61a Southbury Road, Enfield, but staff in neighbouring offices said they had never heard of the company. The Serious Fraud Office has confirmed that it is monitoring the situation in Antigua, but denied that an investigation had been launched into the |activities of CAS Hewlett.

Mark Hughes