When we think of the Caribbean, the first thing that comes to mind may be pirates, treasure, rum, and perhaps an image with dark circles and a tricorn hat with its own BGM (background music). But in fact, the Caribbean is better known for its developed offshore financial system and the name of "tax haven", which is a hot spot for investment, vacation and immigration for the world's rich, and many companies in the world today are registered in the Cayman Islands, Dominica, Virgin Islands, St. Kitts, Bahamas and other places.
And under the surge of hot money, there will always be another side of the story.
Hello everyone and welcome to the sixth installment of the Money Never Sleeps series. The protagonist of this issue is somewhat "awesome", not only because he single-handedly created the second largest Ponzi scheme in history after Bernard Madoff (and the first installment of our Money Never Sleeps series), amassing $7 billion in 20 years, but also because his last name is really famous, he is Allen Stanford.
Although there is no evidence that Allen Stanford's ancestors are related to Stanford University founder Leland Stanford, at least when Allen was born in March 1950 in Methya, Texas, the Stanford family was still famous in the local area: Allen's grandfather started from scratch and turned a barbershop into a financial company that integrated real estate and insurance businesses; Allen's dad was politically active, serving as a city councillor for 15 years and mayor for two terms.
Young Allen inherited the business talent and diligence of his ancestors, and at the age of 13 he made his first business: clearing a piece of land for a real estate developer in return for the trees cut down on the land, which Allen then sold as firewood and earned $400. After graduating from high school, Allen chose to enroll at Baylor University in Waco, not far from home, and chose to major in finance without hesitation, and also relied on teaching his classmates to dive to pay for his tuition.
In 1974, Allen, who had just finished college, did not return to his financial company, but chose to start a business in Waco and opened a gym. With his 1.93m toning physique and business acumen, Allen's gym quickly became a local industry leader. Opening a branch, buying a mansion, driving a luxury car, at the age of 30, Allen's little life has been quite moist.
After his 30th birthday, Allen, who was proud, decided to become bigger and stronger, create glory again, and put on all his net worth to enter Houston and open a bigger health club. However, this time, due to the sharp drop in oil prices at that time, the economic environment in the United States was really bad, the fitness market shrank sharply, and only a year later, Allen had to file for bankruptcy.
But talent always makes money. The recession left Houston full of debted homes, so Allen teamed up with his father to make a big splash, and when home prices recovered a few years later, he made a fortune and made tens of millions of dollars.
Expansion into the Caribbean
Allen then set his sights on lucrative offshore banking in the Caribbean. In the sixties and seventies of the 20th century, the British government had been encouraging many of its overseas territories to develop independent financial services industries in order to reduce their financial dependence on London. This policy has had the unintended effect, making these regions popular havens and tax havens for the world's rich.
So, with the money from real estate, the 35-year-old Allen came to the British island of Montserrat and founded Guardian International Bank (GIB). Dissatisfied with the cumbersome regulatory formalities in their home countries, many wealthy people and large companies in Mexico, Venezuela and Central America are eager to move their money abroad, while GIB, which claims to return two percentage points higher than Bank of America, quickly gained favor with the wealthy.
However, Eren soon discovers that he is in the wrong place at the wrong time. Since the mid-80s, the UK began to crack down on illegal offshore banking in its overseas territories, and it didn't take long for Allen's banknotes to be identified as money laundering by British police, and the GIB's business license was revoked.
Rich as an enemy country
If the heart is there, the dream is there, but it starts all over again. Instead of returning home, Allen set his sights on Antigua and Barbuda, a small island nation that had just gained independence from Britain in 1981. The newly independent country had nothing but freedom, so the local government, eager for money, took a detour: in the name of the state, Antigua provided asylum for criminals, provided official money laundering services, and even priced its passport for $100,000.
In Allen's view, although Antigua and Barbuda had a population of less than 100,000 at the time and its economy was heavily dependent on tourism, it was not under London's supervision; And it is precisely because the local area is small and the government is poor, but it is better controlled and has the opportunity to build its own "empire".
In 1990, Ranster-Bird took over his father's scepter and became the second ruler of Antigua and Barbuda. At that time, Antigua was accused by the United States of being a money laundering center, and the state-owned Antigua Bank had suffered a run and had fallen into bankruptcy. Just as a distraught Bird is looking for a buyer for Antigua Bank, Allen appears as a savior.
With his feet on the pink sand, Allen took over the Antigua mess and opened a new bank, Stanford International Bank (SIB), which aims to continue to absorb the deposits of the world's rich, eager to hide their assets, in the form of fixed deposits, and still advertise that he can offer higher returns than Bank of America.
At the same time, Allen is committed to building good relations with the Antigua government, constantly lending money to the government to pay salaries and pensions. By 2004, the Antigua government owed Allen $87 million, almost half of the country's annual tax revenue.
The huge investment also brought great returns to Allen. Allen sits on the advisory board of the Government Bank of Antigua and, with government support, buys one of only two local newspapers and a regular route into Antigua. In its third year in Antigua alone, SIB has $350 million in deposits, supporting Allen to open branches in more than 20 cities in Venezuela, Panama, Peru, Ecuador, Mexico and other countries. In addition, many of Antigua's small islands were renamed Stanford.
Throughout the history of world finance, it is difficult to find a banker like Alan Stanford who is the lifeblood of a country's economy, even if it is a little small. He is both Antigua's largest investor and largest employer – 13,000 of the country's 100,000 people work for him. Antigua's annual GDP is only $1.5 billion, and Allen's personal assets are as high as $2.2 billion, so it is no exaggeration to say that he is rich enough to rival the country.
In 2006, in recognition of his outstanding contributions to Antigua and Barbuda, Alan Stanford was knighted by Prince Edward at the request of the local government, becoming the first American to be conferred such an honor by the United Kingdom.
At the same time, Allen also reached out to the upper echelons of the U.S. government through a large number of political donations. According to the data, since 1989, Allen has provided more than $2.4 million in political donations to the Democratic Party of the United States, and also spent nearly $5 million to lobby members of Congress. As a result, the discussion of the Anti-Money Laundering Act in the United States Congress in 2000 came to an abrupt end, the Financial Services Anti-Fraud Organization Act of 2002 was stillborn, and the Tax Haven Act of 2004 did not come to an end.
The newly promoted "Sir Allen" lived the life of a modern aristocracy. He has a fleet of 6 private jets and a 112-foot yacht; Former US President Clinton praised him, and House Speaker Pelosi hugged him; Prince Charles sits alongside Allen at the London Polo Championship, and Prince Harry is also photographed with him. And all this has helped Alan Stanford to show his financial strength and connections, helping him better attract rich people to his "fixed deposit".
In addition, Allen has sponsored sports such as golf, polo, tennis, sailing and other sports to find potential wealthy customers. The most invested is in cricket, throwing $20 million a year in prize money to build the Stanford Super 20.
Out of the window
On February 20, 2008, then-U.S. President George W. Bush sent a letter to Alan Stanford on White House stationery, congratulating his Stanford Financial Group on expanding its operations in the U.S. Virgin Islands. Less than a year after the letter, Bush left the White House, and Allen received another special letter. In the letter, the SEC charged him with orchestrating $7 billion in investment fraud, the second-largest Ponzi scheme in history, after Bernard Madoff's shocking scam.
Throughout the scam, SIB has been using new clients' funds to repay old customers' redemption requests. Prior to 2008, the global economy boomed, and this approach worked. The FBI later described how the SIB responded to requests from clients to consult on the whereabouts of funds: "The SIB claims to invest customer deposits in highly conservative and liquid securities, which means that depositors can be sold at any time and repaid quickly; The SIB also said its assets are globally distributed, managed by fund managers at top financial institutions and overseen by senior analysts at the SIB.
But when the financial crisis erupted in 2008, the plutocrats demanded a sharp increase in redemption requests, debunking the scam.
If the Antigua government's regulators are too gullible, the U.S. regulators are inactive. The investigation shows that the SEC may have known that Allen Stanford was running a scam as early as 1997, and that examiners conducted due diligence on Stanford in 1997, 1998, 2002, and 2004, each time concluding that it was Ponzi scheme-like fraud, with the only difference being that the scale of fraud was expanding year by year.
However, the SEC also acknowledged that until late 2005, law enforcement did not take meaningful action to investigate the SIB's potential fraud or file a lawsuit to stop Allen. Even in 2006, the U.S. State Department simply warned the U.S. Embassy in the Bahamas that the SIB was "rumored to engage in bribery, money laundering and political manipulation" and urged embassy staff not to interact with it.
It was not until February 17, 2009, that U.S. federal law enforcement took action to arrest him in a mansion in Allen, Virginia. It later turned out that he was planning to take a private jet to Antigua and Barbuda, but it was unsuccessful.
In the face of the SEC's accusations, Allen also made a poisonous oath to "lie and go to hell." However, his college classmate James Davis, SIB's chief financial officer, was trapped in a "prisoner's dilemma" and soon admitted that they had jointly forged documents and financial reports to transfer SIB's deposits to Allen's private account at a Swiss bank.
In 2012, a federal court convicted Allen Stanford of 13 of 14 criminal charges involving wire and mail fraud, obstruction of an SEC investigation, conspiracy to launder money, and more, for a total of 110 years in prison. In the 20-year-old Ponzi scheme of Alan Stanford, more than 30,000 customers in more than 140 countries around the world were scammed of a total of $7 billion, most of which were squandered, of which only about 10% could be recovered. In fact, the court also confiscated $5.9 billion of Allen's personal assets, but because he was penniless, the judgment was only symbolic.
Now, 72-year-old Alan Stanford is being held at Florida's high-security Coleman II federal penitentiary and is expected to be released on March 13, 2103.
As for the government of Antigua and Barbuda, which was highly dependent on Alan Stanford, it could do nothing but strip him of his knighthood and had not yet recovered from the losses caused by his deception.
Resources:
1. Alan Stanford: Super giant embedded in the aura, Zhang Rui
2. Wall Street Crime and Punishment: Allen Stanford's Caribbean Ponzi Scheme Nightmare，Phil Hall
3. Alan Stanford, the "financial giant" of the United States, was sentenced to 110 years in prison, reference news
4. A country where the government takes the lead in money laundering, the "secret garden" of the Chinese, the Chinese Journal