This content is from: Portfolio

News, Finally, From Antigua

Allegations of a regulator in bed with Stanford Financial Group.

Okay, so there’s a first time for everything, and last week the Financial Services Regulatory Commission fired off its maiden press release.

This after being in the business of regulating its namesake sector in Antigua and Barbuda since 2002. Accuracy alert: yes, there are additional public pronouncements on the agency’s Web site, but none of the others (all seven of them, roughly one per year) are titled "Press Release." In any case, it wasn’t the best get-the-media-to-know-you event when the commission on June 19 issued the online news that it was sacking Leroy King. Question: Will the next posting at fsrc.gov.ag be a help-wanted ad ("Caribbean interest desperately seeks seasoned media-relations executive")?

If you want to get in touch with the FSRC, by the way, good luck. Their contact info is a form you fill out on line.

THE STANFORD CONNECTION

The commission isn’t in the news by choice, of course. King, who was arrested yesterday by police in Antigua and until this week was the FSRC administrator, is among five defendants in a 57-page indictment brought by U.S. attorneys in Houston in what prosecutors describe as a Ponzi scheme that defrauded investors of somewhere in the neighborhood of $7 billion via Antigua-based Stanford Financial Group. Allen Stanford, the CEO, turned himself in last week a la Bernie Madoff. The other defendants in the case — which very likely stems at least in part from a long-running Securities and Exchange Commission civil suit against the firm — are Laura Pendergest-Holt, the chief investment officer, and two accountants, Gilberto Lopez and Mark Kuhrt. The Stanford chief financial officer, James Davis, is named as a co-conspirator but isn’t charged (he’s said to be cooperating with the authorities).

PORTRAIT OF A REGULATOR ON THE TAKE

Prosecutors say King, who has dual U.S.-Antigua and Barbuda citizenship, had been on the take for years, receiving cash at a few thousand dollars a pop wired by Stanford into a number of bank accounts King had in the U.S. There was $6,000 here, $4,000 there, $8,000 a few weeks later and so on, according to the indictment. Relative to the amount of money Stanford was supposed to be running for investors, those seem like paltry sums. On Feb. 5, 2005, for example, prosecutors say Stanford put $5,000 into one of King’s bank accounts, and followed that 20 days later with an additional $9,000. This at a time when Stanford was saying his firm had $3.1 billion under management, after being up 38.7 percent in 2004 and logging $36.2 million for a fifth straight year of record returns.

What Stanford is said to have gotten in return from King was priceless: an assurance by King to U.S. regulators that the government was keeping an eye on Stanford Financial Group and that the firm was on the up-and-up. Some of the seamy detail in the indictment is that King — perhaps feeling the noose tightening — on Feb. 23 of this year transferred $150,000 to his bank account in Antigua from an investment account in New York and on March 2 made a similar $410,000 transfer. The very next day, prosecutors say he formally refused an SEC request for assistance in investigating Stanford.

A BIG HAUL IN A POOR COUNTRY

By this account, King sold out the agency for a little more than a half-million dollars, peanuts next to what Stanford got from investments — but sill a pretty good haul in a country where the per capita annual income, by comparison, is only $11,650, (behind Estonia but ahead of the Slovak Republic).

The indictment is good reading if you’ve got some time to kill. And it appears to be meticulously constructed, anticipating just the response a reader offered the other day to the Houston Chronicle: "Now all they have to do is prove it."

It doesn’t really look like it’ll be all that hard.

Please send your emails to kcates@iimagazine.com.

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