By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Hazlett was successful, selling more than $10 million in CDs to the firm's offshore bank, which made him one of the company's top producers and earned him a $100,000 BMW as a bonus.
But then he started asking questions. Why were the CDs performing so well? What was the explanation for the incredible returns? And where were the deposits invested? The more Hazlett pressed his managers for an explanation, the more he was stonewalled.
He finally maneuvered his way into a meeting with Laura Pendergest (now married and known as Pendergest-Holt), the company's chief investment officer. His biggest client, a Curaçao native with a $5 million stake, was going to pull out his cash unless she told Hazlett how the deposits were being invested.
According to Hazlett, she refused to give him any answers, saying, "It's proprietary information." She asked him to control his client. Hazlett said when he told Pendergest-Holt he wanted answers himself, she burst into tears and left the room.
Fifteen minutes later, the company's No. 2 executive, James Davis, phoned Hazlett from Memphis. "Do you believe in God?" Davis asked in a dry drawl, his voice rising with passion. "Do you fear God, Chuck?"
God? Hazlett thought. Where the hell am I?
In January 2003, one year after he started for the firm, Hazlett packed a cardboard box inside his apartment-size office. He had just quit, after yet again demanding a meeting with top officials to talk about how the CDs performed so well.
Hazlett's customer in Curaçao had pulled out his investment one month earlier, but Hazlett stuck around longer, hoping his bizarre conversations with Pendergest-Holt and Davis somehow had been an aberration.
Now he believed the worst. He had no proof of what exactly Sir Allen was up to, but Hazlett wanted no part of it. He called his lawyer.
A few weeks later, the broker and his former company met in a Boca Raton arbitration court run by what is now called the Financial Industry Regulatory Authority, an industry group sanctioned by the SEC. Hazlett spelled out his experience: Brokers were heavily pressured to sell offshore CDs and were stonewalled when they tried to find out where the CDs were being invested.
Repeated calls to the SEC's press office seeking comment for this story were not returned.
"I thought, at least I put my story out there and someone on the regulatory side is going to realize these are bad guys," Hazlett recalls today. "Because I know I'm not the only one that had this experience."
Hazlett lost his case and never again heard from the SEC, even though he was right—he wasn't the only Stanford employee complaining to regulators.
In fact, even as Stanford's business holdings and personal wealth grew exponentially, his brushes with legal and regulatory authorities were frequent, and the warning signs that something was amiss were many.
In 1999, a DEA investigation found that members of the vicious Juárez Cartel in Mexico had deposited more than $3 million in Stanford's bank to launder drug money. Stanford quickly surrendered the cartel's money to the DEA and earned praise from the agency for his quick action. But later that year, federal regulators placed Antigua on a blacklist of nations suspected of money laundering and fraud.
That same year, the Clinton administration introduced a bill to crack down on overseas banks favored by gambling rings, drug militias and terrorists. Two months later, according to a study by consumer advocacy group Public Citizen, Stanford hired a powerhouse lobbying group to fight the bill and began donating to both major parties. He handed out $208,000 to Republican campaign committees and $145,000 to Democrats that year. Among his biggest recipients were powerful Texas lawmakers, including House Democratic Caucus Chair Martin Frost from Dallas. The bill, despite passing a House committee 31-1 with strong Treasury Department backing, was allowed to die in a Senate committee.
In 2002, as Congress took up a bill called the Financial Services Antifraud Network Act, which would have strengthened U.S. regulators, Stanford upped his lobbying. That year, according to the Center for Responsive Politics—a nonprofit group that monitors campaign money—Stanford's company gave $800,000 to the Democratic Senatorial Campaign Committee. The anti-money-laundering bill died in a Senate committee, but its same provisions later found their way into the Patriot Act. Some experts say, however, it would be foolish to think Stanford expected nothing for his money. "Stanford wouldn't pump that much money into a hole that doesn't deliver something in return," says Craig Holman, government affairs lobbyist for Public Citizen.
In all, Stanford spent nearly $5 million lobbying Congress between 1999 and 2008 and dished out $2.4 million to federal candidates. He also sponsored dozens of free "fact-finding" trips to Antigua and other Caribbean islands for politicians and their staffs on his fleet of jets. Records of the trips show that former Republican House Majority Leader Tom DeLay flew 11 times on Stanford's jets, according to The Dallas Morning News. Republican Congressman Pete Sessions from Dallas, according to OpenSecrets.com, received $41,375 in campaign contributions from the Stanford Financial Group's PAC, and TheHill.com reports that he traveled twice to Antigua to attend meetings of the Inter-American Economic Council, a nonprofit with close ties to Stanford.