The Stanford Financial Empire

From the mid-1980s through February 2009, R. Allen Stanford (“Stanford”), a former gym owner from Mexia Texas, built a financial service empire that at its height boasted 30,000 customers in 130 countries managing billions of dollars in investment funds. The empire was comprised of over 140 companies from across the globe, all of which were ultimately owned by Stanford himself, that operated under the brand name “Stanford Financial” with its worldwide headquarters located in Houston, Texas. The conglomeration of Stanford companies (hereinafter collectively referred to as “Stanford Financial”) included the main operating companies: the Houston, Texas-based registered broker/dealer and investment adviser company Stanford Group Company ("SGC"); Antiguan based offshore bank Stanford International Bank Ltd. (“SIBL”);

Stanford Trust Company (Louisiana)(“STC”), Stanford Trust Company (Antigua), and the representative offices of Stanford Trust Company (Antigua) that operated in Miami, Houston and San Antonio under the d/b/a “Stanford Fiduciary Investor Services” (“SFIS”), all of which entities were ultimately controlled and managed from the United States, principally Houston, Texas.

Begun initially as an offshore banking operation in the mid-1980s called Guardian International Bank, Stanford Financial grew over the years into a full service financial services group, offering clients private banking and U.S.-based broker dealer and investment adviser services worldwide from its SGC headquarters base in Houston, Texas. Stanford Financial gave all the appearances of a highly successful operation, with lavish offices in some of the world’s premier cities. Stanford himself made the Forbes’ list of the richest people in the world with a personal fortune estimated at $2.2 billion.

The entire Stanford Financial operation was fueled by one primary product: Certificates of Deposit (“CDs”) issued by the Antiguan offshore bank wholly owned and controlled by Stanford himself – SIBL. Clients who were introduced to the Stanford Financial group, whether in Houston, Miami, Caracas or Mexico City, quickly found out that the main financial product being peddled by the group was the SIBL CD. The SIBL CDs were sold worldwide by a web of different Stanford Financial promoter companies, including SGC, STC and SFIS, whose sole function was to promote the sale of the SIBL CDs. By 2009, SIBL had sold over $7.2 billion in CDs.

For the first decade of his CD sales operations, 1985-1995, Stanford and his offshore bank (whether Guardian or SIBL) targeted an exclusively Latin American clientele. But by the mid-1990s, Stanford had begun to establish a foothold in the United States. In 1995 Stanford established SGC and registered it as a broker/dealer and investment adviser in February, 1996. Headed by Louisiana brokers Jay Comeaux and Alvaro Trullenque, SGC established offices initially in Houston and Baton Rouge, and began to grow. Stanford began the practice of “head hunting” for U.S. brokers, bankers, and other financial advisers, paying enormous signing bonuses to the brokers, bankers and other financial advisers to leave their jobs at other firms and transfer their book of clients over to SGC. Fueled by this influx of veteran bankers, brokers and investment advisers, SGC grew from 6 branch offices in the United States to more than 25 offices across the United States (but principally concentrated in the Southern United States) between 2004 and 2007.

Recognizing the huge potential for marketing his offshore CDs to Latin Americans via the “gateway” city of Miami, in 1998 Stanford established SFIS, a representative office of SIBL in Miami and, with the help of the Miami law firm Greenberg Traurig and partner Carlos Loumiet, disguised it as the representative office of Stanford Trust Company (Antigua) in order to evade U.S. banking regulations. From that date forward until it was shut down in 2009, the Miami office of SFIS generated over $1 billion in SIBL CD sales for Stanford, primarily sales to investors from South American countries such as Venezuela, Ecuador, Colombia and Peru. Based on the Miami success of SFIS, Stanford thereafter set up SFIS offices in Houston and then San Antonio, Texas, designed to cater to Mexican investors visiting those cities.

Stanford then decided he wanted to sell the SIBL CDs to the IRA accounts of U.S. investors. He therefore established STC in Baton Rouge Louisiana in 1998 to serve as the trustee/custodian for IRA accounts owned by investors referred to STC by SGC. Once set up with STC, the SGC brokers and investment advisers then convinced the IRA investors to invest some or, in many cases, all of their IRA account into the SIBL CDs.

For all of these promoter companies --- whether SGC, SFIS or STC -- the primary product marketed and sold, and which sustained the operations and paid the employees’ salaries and bonuses, was the SIBL CD. All of these companies were 100% owned by Stanford, and all of these companies were interconnected via various intercompany marketing and referral fee agreements whereby SIBL paid percentage commissions or referral fees to the promoter companies for promoting the CDs. In fact, it was no secret that throughout its history, SGC depended entirely for its survival on the constant influx of referral fees paid by SIBL to SGC for the promotion and sale of the SIBL CDs.

Houston, Texas was the administrative nerve center and principal base for all of the operations of Stanford Financial, including SIBL, SGC, SFIS and STC. All of the sales and marketing practices for the entire Stanford Financial group (including SIBL), as well as general operational and administrative functions, were managed under the overall direction, supervision, and control of the Houston offices of Stanford Financial. SIBL itself never had a sales force or marketing or promotional arm in Antigua – rather it depended entirely on all of the separate promoter or “feeder” companies like SGC, SFIS and STC to sell its CDs. The head of the global sales operation for the marketing and sale of the SIBL CDs was located in Houston, Texas.

All of the Stanford Financial/SIBL sales practices, directives, techniques, strategies and reward programs were developed and crafted in Houston and disseminated to the various Stanford Financial branch offices around the world, including STC and SFIS. All of the sales force training manuals, promotional literature and materials for SIBL, including the Spanish-language promotional materials used by SGC, STC and SFIS, were created, printed, packaged and mailed from Stanford’s Houston headquarters to the other Stanford Financial sales offices around the world to be utilized by the local sales force in each country.

In addition, mandatory sales training for the Stanford Financial sales force for SIBL was conducted principally in Houston (known to the foreign financial advisers as the “Houston experience”) by Stanford Financial personnel headed by Oreste Tonarelli. In those mandatory training sessions, sometimes twice a year, the Stanford Financial financial advisers (“FAS”) were trained to sell the Stanford Financial image. The Stanford Financial “script” for why SIBL was a safe and secure place to invest money, as set forth in the training manuals and reinforced “live” in Houston, was drilled and drilled again into their heads. Therefore all of the sales, marketing and promotional activities for Stanford Financial and SIBL occurred in Texas.

The Stanford Financial/SIBL sales and promotional materials created in Texas and distributed uniformly throughout the world intentionally blurred the lines between Antigua-based SIBL and the other U.S.-based Stanford Financial entities, including SGC, STC and SFIS, and intentionally created the false impression that, e.g., SIBL and SGC were one and the same and therefore that SIBL enjoyed the same regulation and protections as a U.S.-regulated company, including regulation by the SEC and coverage by SIPC. As the Receiver has reported previously, “Stanford’s financial advisors used the apparent legitimacy offered by U.S. regulation of Stanford’s U.S. brokerage subsidiary in order to generate sales of SIBL CDs worldwide.”1 Little did the investors like the Class Plaintiffs know that Allen Stanford, Jim Davis and others were engaged in a long running conspiracy to ensure that Stanford Financial, including SGC, SIBL, STC & SFIS, evaded SEC and other U.S. federal regulations, and regulation from any other governmental agency, foreign or domestic, at all costs, in order to keep prying eyes away from the SIBL portfolio. In the end, keeping the SIBL asset portfolio a secret so that no one knew where the money from the CD sales was going, became the most important facet of Stanford’s global Ponzi scheme.
The Stanford Fraud Victimas Olvidadas de Stanford Stanford's Forgotten Victims