SEC Says Texas Financier Sir Allen Stanford Swindled Investors Out of Billions.

It didn't have to happen.

It was a postcard-perfect January afternoon in Scottsdale, a winter's day more like a postcard-perfect spring afternoon. Some 60 Stanford Group Company "wealth managers" had flown to Arizona for the company's quarterly meeting—the kind most of these advisors might have skipped most other quarters. But not this one, not now, not "with the world in turmoil," says one of the 60 in attendance.

"We wanted to hear it," says Lawrence Messina, a former wealth manager in the 10-person Crescent Court offices of Stanford Group. And they wanted to hear it from the man himself: R. Allen Stanford, the cricket king from Houston by way of Mexia who built a banking empire on the tiny Caribbean island of Antigua claimed to be worth upward of $50 billion.

Weeks before, Stanford had been in Dallas to reassure the locals all was well, despite what Messina calls, with some understatement, "the tough economy." For three years, Messina sold the now-infamous Stanford certificates of deposit, which provided an unfathomable rate of return of nearly 10 percent in compounded annual interest—"about six percentage points higher than prevailing bank U.S. rates at the time," explained a recent Wall Street Journal story.

R. Allen Stanford faces federal allegations that his bank was a “massive Ponzi scheme.”
REUTERS/Newscom
R. Allen Stanford faces federal allegations that his bank was a “massive Ponzi scheme.”
The Stanford office in Miami, with its brass-studded leather couches resting on Oriental rugs, conjured up images of an old British banker in his study. Allen Stanford was from Mexia.
The Stanford office in Miami, with its brass-studded leather couches resting on Oriental rugs, conjured up images of an old British banker in his study. Allen Stanford was from Mexia.

But as the economy crumbled, investors were making runs on the banks and cashing out early on the very CDs Stanford was selling. Only, Stanford had an out: His deal with investors allowed him to cut off their ability to early withdraw whenever he saw fit. Never happened before, but, well, times were tight. So off to Arizona Messina went, looking for reassurance that early withdrawal would be allowed—and the boss' word that all was well.

He'd heard it earlier: Messina says that last November, Stanford was in Dallas, recruiting a fresh-faced batch of advisors for his sales team. Stanford hung around an extra hour, explaining how he'd just replenished his company's rainy-day reserves no less with an extra $540 million, which pushed it past a billion dollars. He smiled and said, "Don't worry."

"He told me they had enough money to cover six months of [CD] redemptions," Messina says. "I think his quote was, 'It's really unfortunate that the world is in the place that it's in right now,' and he said, 'We are going to continue to do what we can do to help everybody.'"

Which is just what Messina liked about working for Stanford: that "it's all good, and we're all in this together" feeling. Messina, who moved from Northern California to Fort Worth in the early 1990s to work for an international investment firm, had been reluctant to leave his first and only Texas employment for Stanford. But he liked what Stanford was selling: a place where you could "bring a $20 million dollar experience to a $2 million client." The wealth manager's client base, a group of some 100 retirees, airline pilots, corporate execs and business owners assembled over 16 years, had become disenchanted with their cold, faceless investment house, which was the key reason he moved to Stanford.

"[My clients] were putting a lot of pressure on us to find something that was more about them," Messina says. That's precisely what Stanford was offering. And his customers "were really, really treated well," he adds. "It wasn't about perks; it was about Stanford treating their clients like a big wire house treats their investment banking clients."

There was an attitude the firm promoted that may have enabled even sophisticated investors to get sucker-punched: that the firm's owner, employees and clients were all one great big family. "That's how the clients felt about us," Messina says, "and that's how we felt about them."

Messina had been spoon-fed the Stanford story, which was the tale of a humble yet scrappy family from Nowhere, Texas, who knew the value of hard work and who turned a few bucks into a fortune. And when everyone is making money and lots of it, there's nothing suspicious about the boss cozying up to the island government where his offshore bank is headquartered.

Which brings us back to the Arizona desert in January, where Stanford and his acolytes stood at a hotel lectern and sang hymns of prosperity in the face of despair. And the disciples were comforted for the second time in recent weeks. They broke for lunch, retreating to the courtyard for a lavish buffet.

Messina recalls that afternoon with great clarity: Those from the Dallas office sat at their table, eating and chatting. They noticed Stanford standing alone, a plate of food in his hand. He scanned the group; Messina thought at the time he was scanning the room for the most interesting table, some lackeys with whom he could shoot the shit. "It looked like, 'All right, this guy really wants to connect with his people,'" Messina says.

So some in the Dallas office motioned him over. Because, see, they still had questions. And Stanford had answers. Said the bank wasn't losing money. Said he'd gone short on oil in the summer and long on the dollar in the winter. Said a bunch of stuff that didn't seem to mean much. But these Dallas wealth managers were fine with it. For a few more weeks, anyway. It wasn't until February 10 that Messina and his colleagues knew something was up: On that day, for the first time in the firm's history, Stanford stopped allowing early withdrawals. Clients couldn't get to their money.

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