In the early 2000s, Allen Stanford was living the good life. He had lots of money, a lavish lifestyle and practically an entire island country as his own private kingdom. Literally he was knighted by the country of Antigua. Then he lost it all.
Today the one-time high-flying financier is serving a 110-year prison sentence after being convicted of running a giant Ponzi scheme and fraud.
This is the story of how Allen Stanford went from enjoying a $2 billion fortune to serving a life sentence.
Robert Allen Stanford was born on March 24, 1950 in the tiny town of Mexia, Texas. His father was actually the mayor at one point, but the family was not well-off. Money became especially scarce after his parents divorced he and his brother moved to Fort Worth with their mother.
Allen earned a BA finance from Baylor University. After working for a time as a bookkeeper and insurance salesman, he decided to try his luck in the fitness industry. In the 1970s he opened a gym for bodybuilders. Unfortunately, it did not succeed.
In the years following the the gym’s failure, Allen and his father began buying real estate. After an oil bubble burst in the 1980s, the father/son team bought vast swaths of property for pennies on the dollar. As the market recovered, they sold portions of their real estate empire, making a fortune in the process.
In 1985, Allen moved to the Caribbean island of Montserrat, where he established Stanford International Bank. In 1990, after a crackdown on offshore banking by British regulators, Stanford moved operations to Antigua.
By 1993, when his father retired, their company, Stanford Financial Group, had 500 employees.
“Success” and Excess
In 1999 he was granted citizenship in Antigua. He was knighted by the country in 2006. By this time, Stanford International Bank Ltd. had plush offices all over the world filled with financial advisors whose main job was to sell certificate of deposits (CDs).
Somehow, Stanford’s CDs offered yields (percentage returns) that were consistently higher than the rates offered at American banks. Stanford explained the advantage by claiming that Antigua’s low tax rates allowed the bank to beat average rates.
For example, at one point in the early 2000s Stanford International Ltd. offered customers a nearly 10% annual compound interest rate. At the same time, a typical American bank was offering around 3%.
[Spoiler alert: Prosecutors would later allege that Allen Stanford “grossly misinformed his 50,000 investors about the level of professional management they were receiving.” He was also accused of taking the money raised for CDs and investing in real estate and his own personal business ventures. He also supposedly used the CD money to pay for his beloved cricket tournaments which we’ll describe in a moment.]
Outside of CDs, the company operated an investment fund called Stanford Allocation Strategy (SAS). In client presentations, SAS claimed it had achieved a nearly 14% average rate of return over a five year period between 1999 and and 2004. In the same period the S&P averaged around 6%.
[Spoiler alert: In a lawsuit eventually brought by the Securities and Exchange Commission, prosecutors claimed that in between 1999 and 2004, SAS’s actual performance was “fictional and/or inflated.”]
Thanks to these extremely attractive rates, Stanford International Bank claimed to be managing $50 billion in client assets.
[Spoiler alert: At its peak, Stanford International Bank managed $8 billion in client deposits. Prosecutors would later allege that roughly $7 billion was wasted on bad investments, Allen’s lavish lifestyle and the general operation of a Ponzi scheme – where old clients were paid with new client money.]
At his peak, Allen Stanford had a net worth of…
According to prosecutors, roughly $1.6 billion of that net worth was simply a loan given to Allen by his own company using client funds.
With his wealth, Allen bought $100 million worth of private jets and helicopters.
He owned the largest newspaper on Antigua, in addition to newspapers in Barbuda and Saint Kitts and Nevis.
He paid $63 million for his own private island, called Maiden Island, off the coast of Antigua. He also owned mansions in Houston and Coral Gables, Florida – where he owned an 18,000 square-foot castle that featured 57 rooms, a moat and tower
According to one particularly egregious anecdote, Stanford paid $12 million to have his yacht lengthened by six feet.
He was at one point the largest employer on Antigua and was therefore revered by Antiguan citizens and politicians alike. As we mentioned previously, he was knighted by the country in 2006. For the next several years he insisted official documents and introductions refer to him as “Sir Allen.”
[Spoiler alert: In 2010 Antigua stripped Sir Allen of his knighthood.]
For some reason, Allen was obsessed with cricket. He was considered the world’s foremost promoter of cricket. He was so obsessed that he built a cricket stadium on Antigua where he routinely held lavish tournaments. Approximately 300 million tuned in to the 2008 “Stanford 20/20” tournament.
For a tournament in London, he offered a $20 million cash prize.
Unfortunately the music stopped for Allen Stanford in early 2009 when it was revealed that the SEC, FBI, and other authorities were investigating Stanford Financial Group because of the consistent, higher-than-market returns generated by the Stanford International Bank.
A former Stanford executive told the SEC that Stanford presented hypothetical results of investments as historical data during sales pitches.
On February 17, 2009, Stanford Financial’s offices were raided by the FBI.
The SEC charged Stanford with orchestrating a “massive ongoing fraud”. In court filings they would soon allege that Stanford bilked investors out of $7 billion.
Stanford’s assets were frozen and he was ordered to surrender his passport.
On the day Stanford Financial’s offices were raided, Allen Stanford was in the United States. He desperately tried to flee the country. He called the owner of a private jet and tried to buy a flight to Antigua with his credit card. However, the private jet company only took wire transfers. On February 19, the FBI found Stanford hiding out at his girlfriend’s house in Virginia. He was served with civil legal papers from the SEC and was arrested on June 18, 2009.
The SEC said that Stanford and his accomplices operated a massive Ponzi scheme, misappropriated billions of dollars of investors’ money, and falsified the Stanford International Bank’s records to hide their fraud.
Stanford’s trial began in late January 2012. On March 6, after just three hours of deliberation, Stanford was found guilty of masterminding the Ponzi scheme. Prosecutors called him “a ruthless predator” who “lived a life steeped in deceit.” He was sentenced to 110 years in prison. The earliest Stanford could be released from prison is in 2105 – when he would be 155 years old.
Stanford has maintained his innocence all along. At his sentencing, he blamed his company’s failures on “Gestapo tactics” by the SEC and FBI. He filed a 299-page appeal in 2014. The appeal was rejected.
Additionally, the U.S. Tax Court found that Stanford and his wife under-reported their taxes in 1990 by $423,531.36. Today he has tax liens against him for more than $212 million.
In a strange twist, Stanford was also sued by Stanford University for trademark infringement. Sometime in the early 2000s, Stanford started claiming that his great-great-great-grandfather was a relative of Stanford’s founder, Leland Stanford. He proceeded to pay for the restoration of one of Leland Stanford’s homes. The university eventually was forced to release a statement saying, “We are not aware of any genealogical relationship between Allen Stanford and Leland Stanford.” The university said the way Stanford was using the school’s name was “injurious.”
Stanford is still being investigated for his possible connection to money laundering for Mexico’s Gulf Cartel.
As recently as 2015, Allen claimed in a court filing that he was flat broke. Prosecutors believe he is still hiding around $300 million “in a slew of foreign bank accounts.”
Source: Celebrity Net Worth