Last year he promised cricket a stack of cash. Last night he was facing disgrace
• US regulator accuses Allen Stanford of banking scam
• ECB pressured to explain deal to transform the sport
The man who touched down last year on the hallowed turf at Lord’s in a helicopter, bearing a big plastic box containing $20m and promising to transform English cricket was accused last night by US financial regulators of an $8bn banking fraud "of shocking magnitude".
Harried England and Wales Cricket Board executives in the West Indies, where the flamboyant Texan billionaire Sir Allen Stanford has lived for 20 years, for the Test series immediately rushed out a statement severing ties with the man they once saw as their saviour.
The Securities and Exchange Commission, under pressure to act after Bernard Madoff’s alleged $50bn (£35bn) fraud came to light in December, charged Stanford and three of his companies yesterday for orchestrating a "fraudulent multibillion-dollar investment scheme".
As a US district judge froze Stanford’s assets and appointed a receiver to manage them, ECB officials were fighting to defend a decision to align a sport that still conjures up associations of village greens and fair play with a controversial Texas billionaire with an aversion to Test cricket.
The US financial regulator alleged that through a network of Stanford Group financial advisers Stanford International Bank (SIB) mis-sold approximately $8bn worth of so-called "certificates of deposit" by promising "improbable and unsubstantiated" high interest rates.
The bank claimed to have achieved double-digit returns for the past 15 years through a "unique investment strategy".
The SEC alleged as false the claims that its portfolio was managed by a team of 20 analysts, that funds were primarily reinvested in that portfolio, and were subject to annual audits by Antiguan regulators.
"Stanford and the close circle of family and friends with whom he runs his businesses perpetuated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Chatman Thomsen, director of enforcement at the commission.
According to the commission, SIB is operated by a circle of Stanford’s family and friends, including his father, who lives in Mexia, Texas, and another resident of the town whose previous business experience was in cattle-ranging and car sales.
Laura Prendergrast-Holt, the chief investment officer of Stanford Financial Group who had no previous experience in the financial services industry, and James Davis, SIB chief financial officer and Stanford’s former college roommate, were also charged.
Born in Texas, Stanford made his first fortune in real estate in the early 1980s but soon set his sights higher. Building up a network of investment banking interests, he moved to the Caribbean and was knighted by the governor of Antigua, the first American to be so honoured by a Commonwealth nation.
He has used sport to increase his profile in recent years, bankrolling cricket in its Twenty20 form in the West Indies as well as golf and tennis events.
Observers saw his $100m deal with the ECB as part of a wider attempt to raise the global profile of his network of financial services companies, including SIB, which has $8.5bn in assets and 30,000 clients according to its website.
The ECB has claimed it did sufficient due diligence on the Stanford deal. Board members this week said they looked into the deal for 10 days but conceded it was on the basis of whether he could afford to pay rather than where his money came from.
Last night, pressure was growing on ECB chairman, Giles Clarke, and chief executive, David Collier. Leicestershire chairman, Neil Davidson, called it "a serious error of judgment".
Lord Marland, who recently tried but failed to unseat Clarke as chairman, said: "What due diligence was carried out? The picture of Giles Clarke, David Collier and Allen Stanford standing behind all those dollars will haunt English cricket."
Unveiling the deal last June, Clarke had claimed: "He [Stanford] is a legendary entrepreneur and he has the entrepreneur’s ability to spot an opportunity and seize it and take it forward."
The ECB’s deal with Stanford had already started to unravel. The inaugural Stanford Series event was overshadowed by a row over images of its founder cavorting with England players’ wives, one sat on his knee, along with discontent among players over the nature of the contest.
Stanford Financial is the latest in a recent string of multibillion-dollar fraud scandals kicked off by the arrest of renegade Wall Street fund manager Madoff on $50bn fraud charges in December.
Legal experts said this latest scandal has come about because US authorities, chastened by failing to catch Madoff earlier, are anxious to show they are on top of events. "In the climate we’re in, we’re going to see many more fraud cases over the next weeks and months," said Bradley Simon, a lawyer in New York.
And as the financial meltdown worsens, chastened investors continue to demand repayment from investment firms, exposing their true financial health.
Such activity evokes an image described by the "oracle of Omaha", the billionaire investor Warren Buffett: "It’s only when the tide goes out that you learn who’s been swimming naked."
Cricket The Stanford Twenty20 tournament takes place in a ground built by the billionaire in Antigua. Stanford has promised to invest $100m (£70.1m) in West Indies cricket. Last June, Stanford signed a $100m, five-year deal with the ECB to create a Twenty20 for 20 super series in Antigua. Before yesterday it was expected to be replaced by a quadrangular Twenty20 tournament at Lord’s and an English premier league.
Golf Stanford sponsors Vijay Singh, Camilo Villegas and David Toms, as well as a number of tournaments.
Tennis Stanford is a sponsor of the Sony Ericsson Open and Champions Series tournaments.
Football Michael Owen signed a deal last April to be an ambassador for Stanford’s group.
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