Is Sir Allen Stanford the New Bernie Madoff?

It is disheartening at the beginning of a new administration, which promised a new brand of politics, to discover that the vice-presidential mansion at the Naval Observatory is for sale.

The Wall Street Journal reported that Paradigm Global Advisors, a $50 million fund of hedge funds controlled by two members of Joe Biden's family, was marketed by companies controlled by Sir Allen Stanford since July 2007. In addition, Stanford-related companies invested $2.7 million from individual investors under the arrangement. Hunter, the son of the vice president, and Biden's brother James control Paradigm.

This begs the obvious question: Who would hire Hunter and James Biden to manage money unless they wanted access to Senator Biden? The Bidens do not have any history of successful money management. Surely, Stanford could have found more qualified money managers. I do not raise this issue as an enemy of the Bidens. I have supported and fundraised for the senator since he first ran for president in 1988.

It appears that Sir (by way of Antigua and not the queen of England) Allen Stanford has been playing fast and loose with his investors' money for a long time. He is the founder and sole shareholder of Stanford Group, which is located in Houston, Texas. The crown jewel of his investment empire is the Stanford International Bank in Antigua (far, far away from regulators' prying eyes) with $8 billion in assets. Most of the investment activity of the Stanford Group involved soliciting buyers for the Antiguan bank's certificates of deposits. These certificates typically paid twice the market rate in interest with no apparent rational explanation of how they were able to accomplish that.

I never had the pleasure of meeting Sir Allen, but I did meet with middle management of the Stanford Group. At that meeting in 2002, a red flag was raised with me immediately. The Stanford employee called the non rated Stanford International Bank debentures that they were offering certificates of deposit. Even though these debentures technically could be called certificates, it seemed to me that the company was deliberately trying to mislead investors into thinking that these were certificate of deposits insured by a government agency.

The Stanford employee did nothing to disavow me of that notion. I asked repeatedly: "These are certificates of deposit?" He said "yes."