By Terrence McCoy
By Allie Conti
By Terrence McCoy
By Scott Fishman
By Deirdra Funcheon
By Allie Conti
By New Times Staff
By Ryan Pfeffer
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 vice chairman of which was Florida's own Sen. Bill Nelson. The senator received more of Stanford's cash than any other member of Congress, according to one study, with $45,900 donated to his campaign. Stanford, in fact, personally hosted a fundraising event for Nelson in Florida. The anti-money-laundering bill died in a Senate committee.
Nelson has given all of Stanford's donations to charity, and there's no clear link between his actions as DSCC vice chairman or senator and what appear to be Stanford's efforts to kill the bill. The Florida Democrat was a junior senator in his first term when the bill was taken up, and his staff disputes the notion that he wielded enough power to influence the legislation. The same provisions later found their way into the Patriot Act, and Nelson voted for them there, says Nelson spokesman Dan McLaughlin.
"Allen Stanford never asked us for anything, nor did he ever receive anything," McLaughlin says, adding that $45,900 was not a significant sum in a campaign that garnered tens of millions in donations.
But some experts say it would be foolish to think Stanford expected nothing for his money.
"Being vice chair of the DSCC means you have a great deal of influence over who gets campaign money," says Craig Holman, government affairs lobbyist for Public Citizen. "And Stanford wouldn't pump that much money into a hole that doesn't deliver something in return."
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 Florida Rep. Katherine Harris took one such jaunt to Saint John's. Disgraced Texas Republican Tom DeLay flew 11 times on Stanford's jets, according to the Dallas Morning News.
In the meantime, the red flags kept popping up. In March 2003, just months after Hazlett left Stanford, another employee — a Houston-based broker named Leyla Basagoitia — made even stronger accusations in Texas. In her filings, Basagoitia said Stanford encouraged "fraudulent inducement" and that the company was "engaged in a Ponzi scheme to defraud its clients." The company, she said, forced her to invest her clients' money in its Antiguan CDs even though she believed them to be "risky in nature and unsuitable."
Like Hazlett's, Basagoitia's claims were summarily dismissed, and both brokers were left to pay hundreds of thousands of dollars in back pay and attorney's fees to Stanford. Neither ever heard from the SEC regarding their accusations. And if their voices weren't loud enough for regulators, another Miami employee took his suspicions to court in 2006 and laid out in even greater detail Sir Allen's schemes.
Lawrence De Maria, a former business journalist for the New York Times and Forbes, was hired by Stanford in 2003 to run the company's internal magazine out of the Miami office. He was fired three years later, and soon thereafter, he charged in court that the company kicked him out for asking too many questions about its investment strategy.
In the filings, De Maria said he told his immediate boss in 2004 that he suspected the firm laundered South American drug money, lied to investors, ran a gigantic Ponzi scheme, and paid off Antiguan and American politicians to look the other way. The company settled De Maria's case almost immediately after his lawyers got a court order that would have forced Stanford to testify.
De Maria, who now writes novels in Naples, declined through his lawyer to discuss the case because of the settlement. But a transcript of testimony he gave three years ago in his lawsuit gives details of his claims against the company. "If you're taking money offshore, going through a bank, and then offering up those funds to give high CD rates to lure more money back into the bank — to me, it was a definite Ponzi scheme," De Maria said.
"And I could never get an answer," De Maria continued. He said James Davis told him the firm got great returns by using better computer programs and analysts than anyone else in the business. "And I didn't buy that for a second."
The SEC did open an investigation into Stanford's company in 2006 but dropped the inquiry at the request of another agency that hasn't yet been named, according to several sources. Rep. Dennis Kucinich, among others in Congress, has demanded an explanation from the regulators about why the case was dropped. In 2007, regulators found the company was violating rules about how much capital it needed to keep on hand, so they levied a fine that amounted to a pittance — $20,000. That same year, the company paid another minuscule fine — $10,000 — for "misleading" information about its CDs.
The last, and perhaps most incredible, public warning that Stanford Group was in trouble came only three months ago from a low-key Venezuelan investment analyst named Alex Dalmady.