By Chuck Strouse
By Scott Fishman
By Terrence McCoy
By Ryan Yousefi
By Ciara LaVelle, Kat Bein, Carolina Del Busto, and Liz Tracy
By Pepe Billete
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"And I could never get an answer," De Maria continued, explaining that James Davis told him the firm got great returns by using better computer programs and analysts than anyone else in the business.
"[He said] they had a paradigm. They just knew how to play the market better than anybody else," De Maria added. "And I didn't buy that for a second."
The regulatory board that heard Hazlett's and Basagoitia's testimony is sanctioned directly by the SEC, and De Maria publicly made his claims in Miami-Dade Circuit Court. Yet the wing of the government charged with rooting out bank and investment fraud did not respond to the concerns piling up around Sir Allen's operations.
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.
A thin, 48-year-old Caracas native, Dalmady grew up doing balance sheets for his dad, who worked for the accounting firm Price Waterhouse. He spent most of his adult life in the Venezuelan capital, where he analyzed the small national stock exchange in a subscription newsletter he published.
Six years ago, he moved with his family to Weston after getting American residency. Last fall, a friend in Venezuela phoned him after the Madoff scandal and the global banking crisis began, asking him to take a look at his investments.
"Five minutes after I looked at Stanford... I said, 'This just doesn't smell right,'" Dalmady told New Times in late February. "I said, 'Get your money out. Now.'"
"It wasn't just the balance sheets; there's one fishy thing after another," he said. "I looked up their board of directors, and I see it's Stanford, his dad, and some other old guy in Mexia. I looked up his address, and it was on this cattle ranch in the middle of nowhere."
Dalmady never talked to a single person at Stanford and based his research solely on public filings and the company's website. Yet after just a few weeks of reading up on the company, he was so certain Stanford was a fraud that this past December, he called a Caracas business paper and asked if they would publish a story laying out his suspicions. The editor agreed. In January, Dalmady's bylined piece ran in two Venezuelan newspapers and on their websites.
"I expected some kind of outrage," Dalmady says. "Instead, they send us this beautiful collection of PR bullshit. And then it's absolute silence, which was the final confirmation for me. Stanford was running a Ponzi."
Executives in Italian suits and lawyers with accordion files slump in their cushy leather chairs as golden Miami sunlight streams through the boardroom's windows. The walls are crashing down around them.
It's Wednesday, February 4, and Laura Pendergest-Holt is running a PowerPoint presentation at the Stanford Group. James Davis stands next to her. She flips on a pie chart showing the breakdown of the largest tier of the $8 billion invested in the company's Antigua bank — the funds controlled directly by Sir Allen. More than $3 billion, she says, is tied directly into real estate, much of it in Antigua. She pauses.
"Another $1.6 billion have been loaned to a shareholder," she says. "Sir Allen."
There is shocked silence in the room. "Stanford International Bank is insolvent," one executive says in disbelief, swearing he will never testify before the SEC.
The SEC has asked for top executives to testify in five days, and Pendergest-Holt already has agreed to talk. The group meets again the next day in the same room, this time with Allen Stanford himself in attendance. Two of the executives say they plan to tell the SEC everything they learned in the previous day's meeting.
Stanford grows livid.
"The assets are there!" he screams, pounding the table. "The assets are there!"
Less than two weeks later, thanks in part to the testimony of two executives in that Miami meeting, the SEC formally charges Pendergest-Holt, Davis, and Stanford with orchestrating an $8 billion "massive Ponzi scheme."
According to the 25-page complaint, Stanford's company claimed its investments lost only 1.3 percent in 2008 — a year when the S&P 500 dropped 39 percent. Stanford and Davis kept 90 percent of the company's supposed $8 billion in investments in a "black box" shielded from outside scrutiny. In essence, the regulators charge, Stanford never invested any of that money except in a few land deals and pet projects. The rest he used for himself and to pay interest on the older investments.
In the weeks since the SEC brought charges against Allen Stanford and his associates, the fallout has been monumental.