Stanford International Bank
Encyclopedia
Stanford International Bank was a bank based in the Caribbean
, which operated from 1986 to 2009. It was an affiliate of the Stanford Financial Group
.
in 1986 in Montserrat
where it was called Guardian International Bank. Allen Stanford's move into banking utilised funds he had made in real estate in Houston, Texas
in the early 1980s. There was no direct connection between Stanford's insurance business in Texas
and the banking business.
Stanford relocated its operations to Antigua
. The bank's portfolio was overseen by an investment committee consisting of Allen Stanford; his father; Laura Pendergest-Holt
, Stanford Financial Groups' Chief Investment Officer; James M. Davis
(Allen Stanford's college roommate), CFO of Stanford International Bank; and a resident of Mexia, Texas
(where Stanford's US interests were based) with cattle ranching and car sales experience.
, including the bank. On 13 February Stanford was quoted saying "the bank remains a strong institution".
On 17 February 2009 the SEC charged Allen Stanford, Pendergest-Holt and Davis with fraud in connection with the bank's US$8 billion certificate of deposit
(CD) investment scheme that offered "improbable and unsubstantiated high interest rates". This led the Federal government to freeze the assets of the bank and other Stanford entities. In addition, the bank placed a 60-day moratorium on early redemptions of its CDs.
On 27 February 2009, Pendergest-Holt was arrested by Federal agents in connection with the alleged fraud. On that day the SEC said that Stanford and his accomplices operated a "massive Ponzi scheme", misappropriated billions of investors' money and falsified the Stanford International Bank's records to hide their fraud. "Stanford International Bank's financial statements, including its investment income, are fictional," the SEC said.
, which rapidly developed a network of branches throughout the country. There was a run on the bank in February 2009 following the SEC's investigation into Stanford's affairs in the US, and this forced the Venezuelan authorities to seize the bank. It was sold to Banco Nacional de Crédito
in May 2009.
's financial regulator announced on 19 February 2009 that it was investigating the local affiliate of Stanford bank for possible violation of banking laws.
. Janvey retained control until the SEC suit is resolved.
On 19 February 2009 Nigel Hamilton-Smith and Peter Wastell of the British accounting firm Vantis
were appointed joint receivers
of the bank, and were made liquidators
on 15 April 2009.
In February 2010, Vantis' auditors Ernst & Young
expressed concern about whether Vantis would receive payment for its work on Stanford. Properties in Antigua emerged as an important part of the company's assets, to be sold to enable payment of creditors and Vantis' own fees.
In June 2010 it was announced that the liquidators and the US receiver had entered into a co-operation agreement, under which the liquidators were to deal with the realisation of the bank's assets in Antigua and the United Kingdom, and the US receiver was to deal with the realisation of the bank's assets in the US and Canada.
In June 2010, the High Court of Antigua resolved that Vantis should be removed from its responsibilities. The firm, which had recently received government approval to sell the property assets, appealed the decision. Vantis itself was placed in administration on 29 June 2010 and promptly broken up, with the various offices and businesses being sold as going concerns. Hamilton-Smith and Wastell transferred to the buyout firm FRP Advisory
, and continued their legal fight to be reinstated as liquidators of Stanford. In May 2011 following a claim made to the Eastern Caribbean Court of Appeal, Hamilton-Smith and Wastell were removed as liquidators.. On 12 May 2011, Marcus Wide and Hugh Dickson of the international accounting firm Grant Thornton
were appointed the new liquidators by the High Court of Antigua..
In September 2011 it was reported that the U.S. Justice Department was investigating whether a Swiss subsidiary of Société Générale
was used to channel funds to Stanford's personal accounts and failed to follow due diligence procedures or to ask questions about irregular banking activity.
The liquidators reported that they had met with a number of representatives of various national governments. These governments each have taken their own independent legal actions under their regulatory and/or court systems. The USA is also contemplating a tax lien
against the assets that could deprive the creditors of a sizable sum.
US$5 million has already been spent by the liquidators.
The liquidators established a mulitnational creditors committee composed of six larger individual large claimants and one attorney representing a number of individuals. This committee is not required by law or the court.
The liquidators reported that an interim distribution may be made in the first quarter of 2012.
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
, which operated from 1986 to 2009. It was an affiliate of the Stanford Financial Group
Stanford Financial Group
The Stanford Financial Group was a privately held international group of financial services companies controlled by Allen Stanford, until it was seized by United States authorities in early 2009....
.
Operations
The bank was started by Allen StanfordAllen Stanford
Robert Allen Stanford is a former prominent financier and sponsor of professional sports who is in prison awaiting trial on charges his investment company was a massive Ponzi scheme and fraud. Stanford was the chairman of the now defunct Stanford Financial Group of Companies. A fifth-generation...
in 1986 in Montserrat
Montserrat
Montserrat is a British overseas territory located in the Leeward Islands, part of the chain of islands called the Lesser Antilles in the West Indies. This island measures approximately long and wide, giving of coastline...
where it was called Guardian International Bank. Allen Stanford's move into banking utilised funds he had made in real estate in Houston, Texas
Houston, Texas
Houston is the fourth-largest city in the United States, and the largest city in the state of Texas. According to the 2010 U.S. Census, the city had a population of 2.1 million people within an area of . Houston is the seat of Harris County and the economic center of , which is the ...
in the early 1980s. There was no direct connection between Stanford's insurance business in Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
and the banking business.
Stanford relocated its operations to Antigua
Antigua
Antigua , also known as Waladli, is an island in the West Indies, in the Leeward Islands in the Caribbean region, the main island of the country of Antigua and Barbuda. Antigua means "ancient" in Spanish and was named by Christopher Columbus after an icon in Seville Cathedral, Santa Maria de la...
. The bank's portfolio was overseen by an investment committee consisting of Allen Stanford; his father; Laura Pendergest-Holt
Laura Pendergest-Holt
Laura Pendergest-Holt is an alleged Ponzi scheme artist financier and former Chief Investment Officer of Stanford Financial Group, who was charged with a civil charge of fraud on February 17, 2009...
, Stanford Financial Groups' Chief Investment Officer; James M. Davis
James M. Davis
James M. Davis is the former chief financial officer of Stanford Financial Group. On 27 August 2009 he pled guilty to charges of fraud and obstruction of Justice in relation to a $7 billion investment fraud Ponzi scheme allegedly run by the company....
(Allen Stanford's college roommate), CFO of Stanford International Bank; and a resident of Mexia, Texas
Mexia, Texas
Mexia is a city in Limestone County, Texas, United States. The population was 6,552 at the 2008 census.The city's motto, based on the fact that outsiders tend to mispronounce the name , is "A great place, no matter how you pronounce it."...
(where Stanford's US interests were based) with cattle ranching and car sales experience.
Regulatory investigation in the United States
In February 2009 the US Securities and Exchange Commission (SEC) investigated the US operations of the Stanford Financial GroupStanford Financial Group
The Stanford Financial Group was a privately held international group of financial services companies controlled by Allen Stanford, until it was seized by United States authorities in early 2009....
, including the bank. On 13 February Stanford was quoted saying "the bank remains a strong institution".
On 17 February 2009 the SEC charged Allen Stanford, Pendergest-Holt and Davis with fraud in connection with the bank's US$8 billion certificate of deposit
Certificate of deposit
A certificate of Deposit is a time deposit, a financial product commonly offered to consumers in the United States by banks, thrift institutions, and credit unions....
(CD) investment scheme that offered "improbable and unsubstantiated high interest rates". This led the Federal government to freeze the assets of the bank and other Stanford entities. In addition, the bank placed a 60-day moratorium on early redemptions of its CDs.
On 27 February 2009, Pendergest-Holt was arrested by Federal agents in connection with the alleged fraud. On that day the SEC said that Stanford and his accomplices operated a "massive Ponzi scheme", misappropriated billions of investors' money and falsified the Stanford International Bank's records to hide their fraud. "Stanford International Bank's financial statements, including its investment income, are fictional," the SEC said.
Venezuela
In 2007 the bank formed a subsidiary in VenezuelaVenezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
, which rapidly developed a network of branches throughout the country. There was a run on the bank in February 2009 following the SEC's investigation into Stanford's affairs in the US, and this forced the Venezuelan authorities to seize the bank. It was sold to Banco Nacional de Crédito
BNC (bank)
BNC , Banco Nacional de Crédito, is a Venezuelan commercial bank headquartered in Caracas. It was founded in 1977 in San Antonio del Táchira as Banco Tequendama branch of the Banco Tequendama Colombia....
in May 2009.
Mexico
MexicoMexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
's financial regulator announced on 19 February 2009 that it was investigating the local affiliate of Stanford bank for possible violation of banking laws.
Receivership and liquidation
In the United States District Judge David Godbey froze all of the Stanford personal and corporate assets in the US and appointed Ralph Janvey of Dallas as receiverReceivership
In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights." The receivership remedy is an equitable remedy that emerged in...
. Janvey retained control until the SEC suit is resolved.
On 19 February 2009 Nigel Hamilton-Smith and Peter Wastell of the British accounting firm Vantis
Vantis
Vantis plc was an accountancy firm based in London, England, providing accounting, tax and business advice to owner-managed businesses, listed companies, not for profit organisations, high net worth individuals and other professionals...
were appointed joint receivers
Receivership
In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights." The receivership remedy is an equitable remedy that emerged in...
of the bank, and were made liquidators
Liquidator (law)
In law, a liquidator is the officer appointed when a company goes into winding-up or liquidation who has responsibility for collecting in all of the assets of the company and settling all claims against the company before putting the company into dissolution....
on 15 April 2009.
In February 2010, Vantis' auditors Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
expressed concern about whether Vantis would receive payment for its work on Stanford. Properties in Antigua emerged as an important part of the company's assets, to be sold to enable payment of creditors and Vantis' own fees.
In June 2010 it was announced that the liquidators and the US receiver had entered into a co-operation agreement, under which the liquidators were to deal with the realisation of the bank's assets in Antigua and the United Kingdom, and the US receiver was to deal with the realisation of the bank's assets in the US and Canada.
In June 2010, the High Court of Antigua resolved that Vantis should be removed from its responsibilities. The firm, which had recently received government approval to sell the property assets, appealed the decision. Vantis itself was placed in administration on 29 June 2010 and promptly broken up, with the various offices and businesses being sold as going concerns. Hamilton-Smith and Wastell transferred to the buyout firm FRP Advisory
FRP Advisory
FRP Advisory is one of the largest independent restructuring, business recovery and insolvency firms in the UK, providing solutions to the mid-market business and financial community.-Locations:...
, and continued their legal fight to be reinstated as liquidators of Stanford. In May 2011 following a claim made to the Eastern Caribbean Court of Appeal, Hamilton-Smith and Wastell were removed as liquidators.. On 12 May 2011, Marcus Wide and Hugh Dickson of the international accounting firm Grant Thornton
Grant Thornton
Grant Thornton LLP encompasses the U.S. operations of Grant Thornton International, the largest accounting organizations outside of the Big Four . The member firms of Grant Thornton International comprise a global network of 27,000 employees and 2,207 partners in more than 110 countries...
were appointed the new liquidators by the High Court of Antigua..
In September 2011 it was reported that the U.S. Justice Department was investigating whether a Swiss subsidiary of Société Générale
Société Générale
Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...
was used to channel funds to Stanford's personal accounts and failed to follow due diligence procedures or to ask questions about irregular banking activity.
Online Creditors Meeting
On 11 October 2011 the liquidators convened an online creditors meeting. The liquidators emphasized that there was a huge shortfall between the available assets and the claims. The claims are around US$7 billion. The assets available are estimated to range from US$73 million to US$1.5 billion. Some of the assets are harder to liquidate such as property. Therefore, patience will be required to obtain the highest values in the long-term. Another goal of the liquidators is to avoid litigation that could be costly.The liquidators reported that they had met with a number of representatives of various national governments. These governments each have taken their own independent legal actions under their regulatory and/or court systems. The USA is also contemplating a tax lien
Tax lien
A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes....
against the assets that could deprive the creditors of a sizable sum.
US$5 million has already been spent by the liquidators.
The liquidators established a mulitnational creditors committee composed of six larger individual large claimants and one attorney representing a number of individuals. This committee is not required by law or the court.
The liquidators reported that an interim distribution may be made in the first quarter of 2012.