As
Antifascist Calling
reported last summer, Stanford International Bank (SIB) and Stanford
Financial Group (SFG), once conservatively valued at $50 billion, were
no more legitimate than penny stock frauds or advance fee scams on the
internet. To make matters worse, for
years federal regulators turned a blind eye towards the bank's reckless practices.
As it turns out, so too did the U.S. Embassy.
Cablegate file
06BRIDGETOWN755,
"Cricket Breakfast Serves Up First Encounter with Allen Stanford,"
dated 03 May 2006, revealed that "Ambassador Kramer met controversial
Texan billionaire Allen Stanford for the first time at an April 21
'Legends of Cricket' breakfast in Barbados."
The confidential
embassy cable reported that "Stanford bent the Ambassador's ear
concerning his significant new tourism and property investments in
Antigua and plans for his Caribbean Star and Caribbean Sun airlines."
The
occasion for the meeting, an inadvertent encounter if the embassy's
account is to be believed, was an April 21, 2006 breakfast at the
Barbados Hilton.
Stanford, who went on to donate some $20 million
to the England and Wales Cricket Board, attended the lavish affair in
the company of Barbados Prime Minister Owen Arthur, U.S. Ambassador Mary
E. Kramer, assorted sports stars and local luminaries.
The cable
averred that "Allen Stanford is a controversial Texan billionaire who
has made significant investments in offshore finance, aviation, and
property development in Antigua and throughout the region. His companies
are rumored to engage in bribery, money laundering, and political
manipulation."
Rumored by whom, one might reasonably ask? An important point since this was certainly
not general knowledge at the time, particularly amongst those who were being fleeced.
But
rather than blowing the whistle when it could have mattered most to
investors and Antiguan citizens, the Bush-appointed official took cover.
"Embassy officers do not reach out to Stanford" we read, "because of
the allegations of bribery and money laundering. The Ambassador managed
to stay out of any one-on-one photos with Stanford during the
breakfast."
Why would Kramer have done otherwise? After all, as
Secretary of State Hillary Clinton piously intoned last month denouncing
WikiLeaks, "this is the role our diplomats play in serving America."
A "Unique Investment Strategy"When "Sir Allen" was arrested in 2009, the federal
indictment
charged that the high-flying Texan had sold more than $7 billion in
fraudulent certificates of deposit and some $1.2 billion in mutual
funds.
The centerpiece of SIB's "unique investment strategy" were
financial instruments that were claimed to be safe, liquid and
redeemable at a moment's notice.
According to a blurb on the "Sir Allen Stanford"
web site,
the Stanford Financial Group "provides private and institutional
investors with global expertise in asset allocation strategies,
investment advisory services, equity research, international private
banking and trust administration, commercial banking, investment
banking, merchant banking, institutional sales and trading, real estate
investment and insurance."
The reality was far different,
however. In fact, the majority of Group "assets" were in very illiquid
real estate holdings and private accounts managed by just two
individuals, Allen Stanford and his college roommate, James M. Davis,
the bank's chief financial officer.
According to federal
prosecutors, accounts were divided into three tiers, I, II and III with
Tier III accounts representing "more than 80% of the purported total
value of SIBL's investments."
"STANFORD and DAVIS" the charge
sheet reads, "directed, managed, and monitored ... the Tier III
investments. According to internal SIBL documents, as of June 30, 2008,
these Tier III investments comprised the majority of the purported value
of SIBL's investment portfolio. Approximately 50% of the purported
value of Tier III (approximately $3.2 billion) included investments in
artificially valued real estate and approximately 30% of the purported
value of Tier III (approximately $1.6 billion) included notes on
personal loans to STANFORD. STANFORD, DAVIS and others did not disclose
to, and actively concealed from, investors, SGC and SIBL employees, and
others the fact that approximately $4.8 billion in purported Tier III
investments consisted of such artificially valued real estate and notes
on personal loans to STANFORD."
A sweet deal if you're in on the fix.
Lured
by "high rates that exceed those available through true certificates of
deposits offered by traditional banks," thousands of investors were
indelicately relieved of their life savings. Of the more than $8 billion
hoovered up by the banker and his cronies, only about $500 million has
been recovered.
This raises the question: where
did all that money go? Did it just simply vanish into thin air, secret Stanford accounts, or perhaps, was it diverted
elsewhere by the banker's silent partners in a certain three-lettered agency?
When asked during a 2009
interview
by CNBC's Scott Cohn whether he had been "helpful" to U.S. authorities
in Latin America, Stanford replied, "Are you talking about the CIA?"
Cohn: "Well, you tell me?" Stanford: "I'm just not going to talk about
that."
Stanford's reticence to discuss possible Agency connections are certainly understandable.
We
do know however, that like many dubious banking ventures before it,
Stanford Financial Group had powerful friends in high places, in the
White House,
Congress, amongst
regulatory agencies
and, plausibly, the CIA; all of whom tripped over themselves furnishing
Stanford's "family" of companies with a watertight "roof."
The More Things "Change"According
to available evidence, why would the banker have believed his shady
empire was on the brink of collapse in 2009, or that well-connected
friends wouldn't come to the rescue? After all, it happened before.
Last year
The New York Times
disclosed that Stephen J. Korotash, an associate regional director of
enforcement at the Ft. Worth, Texas office of the Securities and
Exchange Commission (SEC) said the regulatory agency "stood down" their
investigation "at the request of another federal agency, which he
declined to name."
A curious admission all the more damning for
regulators considering that suspicions, and hastily-closed
investigations, have dogged the bank for the better part of two decades.
Damning perhaps, but not surprising.
Nearly
a quarter century before charges were laid against Allen Stanford, the
late investigative reporter Penny Lernoux recounted in her still-timely
book,
In Banks We Trust, a
fraudulent scheme by Citibank (now Citigroup) to evade paying taxes
while cooking the books and dodging "legal requirements on bank
reserves, liquidity, and lending limits." And, similar to the Stanford
grift, the SEC did worse than nothing.
Lernoux averred that even
after a whistleblower and former bank vice president proved
"conclusively" that Citibank had "systematically" violated the law, "the
SEC's enforcement staff refused to take any action against the bank on
the ground that its pursuit of unlawful profits accorded with
'reasonable and standard business judgement'."
Here's the kicker.
Lernoux wrote that the "SEC also concluded that Citibank's management
had no duty to disclose improper actions since the bank had never
claimed its top officers possessed 'honesty and integrity'." Sound
familiar?
Fast forward to the era of the Bush crime family and we learn that in 2006,
BusinessWeek
revealed that the president "bestowed on his intelligence czar ...
broad authority, in the name of national security" to excuse companies
from "their normal accounting and securities-disclosure obligations" if
they revealed "certain top-secret defense projects."
Would such
"broad authority" also cover financial institutions accused of
laundering drug money for select "War on Terror" allies?
Interestingly
enough, Bush's "intelligence czar" at the time, John D. Negroponte, was
U.S. Ambassador in Honduras during the 1980s at the height of the
Reagan administration's anticommunist jihad in Central America.
In addition to covering for the CIA as the Agency stood-up
death squads in Honduras, Negroponte, as
The Baltimore Sun
revealed in 1995, turned a blind eye as America's "freedom fighters,"
the Nicaraguan Contras, financed their terrorist insurgency against the
leftist Sandinista government by importing billions of dollars of
cocaine into the United States with a major assist from their
ideological soul-mates, the Medellín and Cali drug cartels.
Recall that during this period of intensified U.S. covert operations, the Reagan Justice Department signed a
Memorandum of Understanding
with the CIA. That 1982 memo, brokered between U.S. Attorney General
William French Smith and CIA Director William Casey, absolved the Agency
from reporting drug smuggling by their assets, the Nicaraguan Contras
and Afghan mujahideen.
Leveraging their anticommunist bona fides
to import massive quantities of drugs into the United States, and
laundering the proceeds through a spider's web of U.S. and offshore
banks including, as several investigative reports have alleged, a
Stanford bank, one can only wonder whether similar cosy arrangements are
in force today.
Recall also that illegal activities by institutions as diverse as Paul Helliwell's
Castle Bank and Trust in the Bahamas, Frank Nugan and Michael Hand's
Nugan Hand Bank in Sydney, Saudi Arabia and the Cayman Islands, or the far-flung, crooked empire of Agha Hasan Abedi's
Bank of Credit and Commerce International,
were all financial black holes where organized crime, drug-fueled
intelligence operations and geopolitical intrigue freely intermixed.
Separated
in time and geography, what all three banks had in common was their
close proximity to international drug trafficking networks and the CIA,
particularly in areas of acute interest to U.S. policy planners. Did
Stanford International Bank have an analogous relationship with the
Agency?
After all the Stanford bank, like Castle, Nugan Hand and
BCCI before it had been focal points of unseemly financial practices for
years. Indeed, nearly thirty years ago investigative journalist Nancy
Grodin reported in
CovertAction
(Number 16, March 1982), that like SIB, Nugan Hand enticed prospective
investors "with offers of private banking services, high interest rates
(higher than anywhere else in the region), tax-free deposits and
complete secrecy."
Across the decades, investigations revealed
that leading figures in Castle, Nugan Hand and BCCI had actively
conspired with drug traffickers to import narcotics into the United
States.
Top bank officials Helliwell, Nugan, Hand and Abedi worked alongside organized crime figures
and
former intelligence and Pentagon officials, including a past director
of the CIA. And when the chips were down, all managed to evade being
held to account for the most serious charges: drug trafficking, money
laundering, arms smuggling, murder, terrorism, even nuclear
proliferation, precisely because such exposure would have revealed
"sensitive intelligence operations."
While some might argue that
in the broad scheme of things considering the depth of capitalism's
economic meltdown, Stanford's alleged grift was mere chump change
compared to the trillions of dollars plundered by even bigger fish.
From a
parapolitical
perspective however, the multiple obfuscations, smokescreens and
outright falsehoods surrounding the scandal indicate this is no simple
case of greed or another tawdry example of "elite deviance."
Rather,
as researcher Peter Dale Scott has assiduously documented over the
years, the vicissitudes of "L'affaire Stanford" may be emblematic of
"continuous U.S. involvement in the global drug connection," a "global
financial complex of hot money uniting prominent business ... and
government as well as underworld figures" for purposes of "achieving and
maintaining global American dominance."
Drug Links Covered-UpWhile
Ambassador Kramer may have avoided having her photo snapped with the
accused fraudster, her rather pedestrian concerns pale in comparison to
the fact that Stanford has been the subject of multiple drugs
investigations over a 20-year period that have all been scrupulously
covered-up.
Indeed, years before the federal government ran SIB
to ground, earlier probes, including those investigating drug-money
laundering during the Iran-Contra period were killed.
Stanford's
Montserrat-based Guardian International Bank, a suspected conduit for
Contra drug funds, short-circuited investigators when it pulled-up
stakes, surrendered its banking license and left the island.
By
1986, evidence emerged that top Contra officials and the Agency enjoyed
cosy ties with both Pablo Escobar and the Orejuela brothers, respective
kingpins of the Medellín and Cali drug cartels.
Under pressure
from the Reagan administration however, Congress and corporate media
buried the drug angle to the investigation, as
Consortium News journalist Robert Parry has documented in a series of groundbreaking reports.
After
his departure from Montserrat under a cloud, the banker trained his
sights on Antigua and Barbuda where he developed a close relationship
with former prime minister Lester Bird.
The Independent
reported that during the course of a joint Scotland Yard-FBI
investigation, the bank "was suspected of laundering drug money from the
notorious Medellin and Cali drug cartels run by Pablo Escobar and the
Orejuela brothers."
"Under the Bird family leadership"
The Independent
disclosed, "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."
The former FBI agent who led the Guardian probe, Ross Gaffney, told
The Independent
"we suspected that Stanford's bank was involved in money laundering."
Gaffney said that even after Guardian closed, 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."
The former federal agent said, "We
had hard intelligence about what he was doing and we began to develop
it" but that investigation died or more likely, was deep-sixed, by
officials higher-up the food chain.
According to
The Observer,
a second FBI source "confirmed the agency was looking at links to
international drug gangs as part of the huge investigation into
Stanford's banking activities."
Other sources "in the US Drug Enforcement Administration"
The Observer
reported, "also confirmed that while the investigations into Stanford's
affairs were 'with the FBI and Securities Exchange Commission, there
may well have been a trail connecting his Mexican affairs to
narco-trafficking interests'."
But even after the stench of
Iran-Contra faded from the headlines, drug probes targeting the bank
continued well into the 1990s. The
Houston Chronicle
reported that according to court documents "operatives of the Juarez
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," the
Chronicle
disclosed, "they used Stanford International Bank to open 10 accounts
and deposit $3 million--a small sliver of the cartel's fortunes but
enough to pique authorities' interest."
Despite long-running investigations, federal sources told the
Chronicle,
"any alleged Stanford connection to drug cartels and their money could
lie buried in the paperwork gathered for the Security and Exchange
Commission's civil inquiry."
Federal officials claimed, despite
probes that resulted in stiff fines for illicit practices by other U.S.
banks including, most recently, Wachovia, as
Bloomberg Markets magazine reported, that tracing drug profits laundered through offshore banks like Stanford's "is difficult to document."
That
is, acutely "difficult" if investigators are ordered to look away, and
evidence suggests they were. How else would one interpret the statement
by
The Observer's DEA source
who told the British newspaper, "I think we'll find that any possible
drug-related trail and SEC priorities are not all in the same frame."
When the scandal broke, Cablegate file
09BRIDGETOWN114,
18 February 2009, "Antigua: Upheaval on the Eve of Elections," informs
us that the 17 February announcement of new parliamentary elections "was
almost immediately overshadowed by an announcement by the Securities
and Exchange Commission of action being taken against U.S.-Antiguan
citizen Sir Allen Stanford for 'massive, on-going fraud'."
The
Embassy informed the State Department that "local fears over Stanford
indictment have led to a run on the Stanford Financial Group's
subsidiary the Bank of Antigua, with depositors lining up for an hour or
more to withdrawal their money."
As reported above, through a
series of maneuvers and what were alleged to be illicit payments to
former Antiguan Prime Minister Lester Bird, Stanford set up shop on the
Caribbean island in 1990, and gobbled up prime real estate, acquired
dual citizenship and a knighthood, and eventually took control of the
Bank of Antigua in a highly-dubious "reorganization."
The ripples
from the indictment spread like a rogue wave across Antigua and the
Eastern Caribbean. Antiguan officials, and the U.S. Embassy, were
concerned that once the depth of the fraud sank in, "unrest" would
follow in its wake.
Shortly after that 2009 embassy cable,
The Guardian,
reported that an investigation by the Antiguan government uncovered
"large payments ... in Isle of Man bank accounts controlled by Antiguan
politicians."
According "to documents seen by
The Guardian,
HSBC bank, in the Isle of Man, accepted $3.2m (£2.3m) on behalf of Asot
Michael, once chief of staff to the former Antigua prime minister
Lester Bird."
"The cash under investigation" the British
newspaper disclosed, "came via an Israeli businessman, Bruce Rappaport,
who is alleged to have diverted Antiguan funds into his own pocket while
making payments to local politicians."
HSBC denied all
wrongdoing and "would publicly neither confirm nor deny information
about individual Manx accounts," saying the bank "has robust anti-money
laundering policies and clearly defined policies and procedures
concerning politically exposed persons."
"It is unclear" the
Embassy averred, "if either party will try hard to use the Stanford
indictment as an election issue--Stanford amassed his fortune under an
ALP [Antiguan Labor Party] government, and was knighted by a UPP [United
Progressive Party] government, so all hands are likely equally dirty."
"Many
worry that these issues [crime, fraud and violence] could not only
spell disaster for the UPP, but for the country's economy as a whole,
leading to a severe economic depression and intolerable unemployment
creating more violence and a cycle of less tourism, more unemployment
and more crime."
Curiously, while corporate media have focused on
Stanford's lavish lifestyle, girlfriends and upscale island properties,
nary a word has been whispered about the banker's alleged links to
notorious drug cartels or to some of the CIA's dirtiest operations.
Even
at this late date, it appears that the dodgy banker has well-connected
friends who want to bury this angle of a scandal that has defrauded
thousands and wrecked entire economies.
The question is,
why?
Follow the Money, but Where?Investors
in the Stanford Ponzi scheme have lost their shirts, and its likely
they'll never recover even a fraction of their losses.
"In the past two years" the
Houston Chronicle
reported, "Stanford himself has ceased to be the story. The most
amazing aspect of the Stanford saga is how little money has been
recovered. As the court-appointed receiver has chased assets around the
globe, he's found Stanford's accounts stunningly empty."
During
the investigation that led to the indictments, auditors learned that
that funds were moved through Stanford-controlled accounts to offshore
banks, including HSBC London; Bank Julius Baer, Zurich; Credit Suisse,
United Kingdom; SG Private Banking, Geneva; Banque Franck Galland &
Cie S.A., Geneva; RBS Coutts, Zurich; Coutts Bank Von Ernst, Geneva and
Toronto Dominion Bank, Canada; banks which have figured in past money
laundering or tax-avoidance scandals. In all, 28 numbered accounts were
listed by prosecutors, veritable black holes that escaped regulatory
scrutiny.
Nearly a decade ago, investigative journalist Stephen Bender wrote in
Z Magazine
that "an understanding of the drug trade's machinations is incomplete
without an analysis of the crucial role transnational banks play in the
laundering of drug proceeds."
The House Permanent Subcommittee on
Investigations reported back in 2000: "Despite increasing international
attention and stronger anti-money laundering controls, some current
estimates are that $500 billion to $1 trillion in criminal proceeds are
laundered through banks worldwide each year, with about half of that
amount moved through United States banks."
Recall that at the
height of capitalism's current global economic meltdown, Antonio Maria
Costa, the director of the United Nations Office on Drugs and Crime told
The Observer that "drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis."
Costa
told the British newspaper he saw substantial evidence that that
proceeds from the illicit trade were "the only liquid investment
capital" available to some banks on the brink of collapse last year and
that "a majority of the $352bn (£216bn) of drugs profits was absorbed
into the economic system as a result."
The UN drugs chief said
that in "many instances, the money from drugs was the only liquid
investment capital." And with markets tanking and major bank failures a
near daily occurrence, "liquidity was the banking system's main problem
and hence liquid capital became an important factor."
If only a
tiny portion of these illegal proceeds were siphoned-off by secret state
agencies, including the CIA, funds available for covert operations and
other dubious purposes, such as suborning treason amongst foreign
officials to spy on their own governments, as WikiLeaks diplomatic
cables revealed, the amounts would be staggering.
Bender informed us that one conduit for laundering drug profits is the private banking system.
"U.S.-based
private banks" Bender wrote, "operate in a regulatory twilight zone
enabling the laundering of drug profits as confirmed by the GAO. Private
banks are 'not subject to the Bank Secrecy Act,' thus exempting banks
from complying with 'specific anti-money-laundering provisions...such as
the one requiring that suspicious transactions be reported to U.S.
authorities'."
And with "international private banking" a
prominent selling-point of the Stanford firm's dark web, one might
reasonably surmise that drug traffickers would also view this regulatory
black hole in the most favourable light.
Indeed, this "twilight zone" was precisely where Allen Stanford operated. As
The Miami Herald
reported, state and federal regulators allowed SIB to move "vast
amounts of money offshore--without reporting a penny to regulators."
SIB's
arrangements with the Florida Office of Financial Regulation were so
lax that the company "was allowed to sell hundreds of millions in bank
notes without allowing regulators to check for fraud." Indeed, Florida
regulators granted Stanford's bank "sweeping powers never given to a
private company."
But what if that "private company" were handed
an exemption from "their normal accounting and securities-disclosure
obligations" as
BusinessWeek
reported, on grounds of "national security," and investigations into
that firm were squashed "at the request of another federal agency,"
wouldn't this also suggest that Stanford's Ponzi scheme may have also
been a cover for ongoing U.S. intelligence operations?
And once
the scope of the fraud became too large to ignore, it wouldn't be a
stretch to conclude that the Agency decided to cut their losses and
"move on"?
As investigative reporters Jonathan Beaty and S.C. Gwynne uncovered in their stunning exposé,
The Outlaw Bank, it wouldn't be the first time.
For
years the CIA had concealed their close involvement with the crooked
Bank of Credit and Commerce International (BCCI), tied to everything
from drug trafficking to money laundering and from nuclear proliferation
to the financing of terrorist groups, including those that morphed into
Al-Qaeda.
And when they "came clean" to Treasury Department
officials in a report that remains classified to this day, "suddenly,
and for no apparent reason," Beaty and Gwynne wrote, Treasury "lost all
interest in BCCI."
Perhaps for similar reasons too, in the years
ahead we'll find that "any alleged Stanford connection to drug cartels
and their money could lie buried in the paperwork gathered for the
Security and Exchange Commission's civil inquiry," where its likely to
stay buried.
Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly and Global Research,
an independent research and media group of writers, scholars,
journalists and activists based in Montreal, his articles can be read on Dissident Voice, The Intelligence Daily, Pacific Free Press, Uncommon Thought Journal, Rowan's Avenger, and the whistleblowing website Wikileaks. He is the editor of Police State America: U.S. Military "Civil Disturbance" Planning, distributed by AK Press.
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