Feds probing many ties of banker Allen Stanford and U.S. Congress
The ties between indicted banker Allen Stanford and members of Congress -- including millions in contributions and weekends in five-star Caribbean resorts -- are now the subject of a sweeping federal investigation.
BY MICHAEL SALLAH AND ROB BARRY
Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions.
``I love you and believe in you,'' said the e-mail sent on Feb. 17. ``If you want my ear/voice -- e-mail,'' it said, signed ``Pete.''
The message from the chair of the National Republican Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents.
The Justice Department is investigating millions of dollars Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua, The Miami Herald has learned.
Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar.
The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation's largest Ponzi schemes.
Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests.
Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford's bank and brokerages.
His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. ``I haven't seen it, so I can't verify its authenticity at this time,'' she said.
But the message found on Stanford's computer servers and the contributions he made to Sessions and other lawmakers -- totaling $2.3 million -- are now part of the government's inquiry.
Records show </b>Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork -- the money plundered from his customers' accounts</b>.
Over the years, he took on battles to protect his banking network while fending off regulators.
In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.
The next year, he helped block legislation that would have drawn more government scrutiny to his bank.
While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers.
Stanford hosted New York Congressman John Sweeney's wedding dinner at his five-star restaurant in Antigua in 2004 -- toasting the couple for photographers -- and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office.
``He legitimized himself by having himself vetted by powerful members of Congress,'' said Steven Riger, a former vice president at Stanford's Miami brokerage. ``It was all about the public's perception.''
Kent Schaffer, Stanford's court-appointed attorney, said his client never asked for special favors. ``Stanford gave contributions to politicians, but there was nothing criminal behind it,'' he said.
The federal investigation comes after months of criticism from victims' groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.
Most members of Congress contacted by The Herald declined to discuss their ties to the banker, other than to say they have since returned the contributions.
Stanford's foray into the Washington power game began in 2001, shortly after he was allowed to open a controversial trust office in Miami.
The special office was a boon to Stanford's bank, generating millions in the sale of certificates of deposit -- the money stuffed in pouches and sent on jets to his banking headquarters in Antigua.
But when a bill was created to compel offshore bankers to reveal the sources of money flowing into their banks, Stanford jumped into the fight to kill it.
The measure would have forced Stanford -- who was moving millions illegally through his Miami trust office -- to open his books to federal regulators.
``He wanted the complete freedom to move money offshore without any threat,'' said Jack Blum, a lawyer who testified before Congress supporting the legislation. ``He was cheerleading for the offshore tax havens.''
To combat the bill, Stanford launched a strategy he would use for the next eight years: He gave money to the party in power, including $40,000 to the Senate Republican Campaign Committee and $100,000 to the inaugural committee of George W. Bush, records show.
By summer of 2001, the bill was dead.
In the ensuing years, Stanford's banking empire flourished, with the Miami office generating hundreds of millions of dollars, records show.
In late 2001, Stanford confronted another threat: A bill allowing state and federal regulators to share details about fraud cases -- which would have brought Stanford's brokerages under closer scrutiny -- landed in the Senate Banking Committee.
Though the Senate was now controlled by Democrats, Stanford was prepared: He had given $500,000 to the Democratic Senatorial Campaign Committee in 2002 -- his largest-ever contribution.
``I told him that the Democrats were going to take over, and he needed to make friends with them,'' recalled his lobbyist Ben Barnes, once Texas' lieutenant governor.
Stanford also doled out $100,000 to a national lobbying group to fight the measure.
The bill, which sparked sweeping opposition from brokerages and insurers, never made it to a vote.
ACTION IN ANTIGUA
While he was scoring points in Washington, Stanford was squaring off for a crisis at his banking headquarters in Antigua.
In 2003, investors began questioning the legitimacy of his certificates of deposit, which generated higher returns than major U.S. banks, and articles began appearing in news magazines about money-laundering in Antigua.
In addition, Stanford was drawing the scrutiny of the SEC, which was demanding to know where his bank was investing customers' money.
In the ensuing years, Stanford would play a dual role of staving off regulators -- paying $200,000 in bribes to Antiguan banking chief Leroy King -- while forging ties with members of Congress, court records show.
Those connections deepened when Stanford started hosting a series of congressional visits to Antigua.
It began in 2003, when lawmakers including Sessions, Ney, Sweeney, Gregory Meeks, Donald Payne, Max Sandlin and Phil Crane arrived in Antigua on a mission to ``promote relations'' with the Caribbean nation.
The cost of the January trip -- including nights in luxury hotels and two Stanford jets for travel -- came to $39,500, records show.
For four days, they gathered for talks on business in the Caribbean, trading jokes with Prime Minister Lester Bird and touring the island.
In time, the group of lawmakers, which became known as the ``Caribbean Caucus,'' would take 11 more trips -- the costs picked up by the Inter-American Economic Council, a nonprofit funded by Stanford.
A total of $311,307 was spent on the trips to places like Montego Bay, St. Croix and Key Biscayne. ``We were rolling out food, caviar, wine, lobster,'' recalled Stanford's personal chef, Jonas Hagg.
During a 2004 Antiguan trip, Sweeney and his 34-year-old girlfriend were married, with Stanford hosting the ceremony and reception for the New York Republican at the famed Pavilion Restaurant.
``If it wasn't for Allen, I certainly would not be here today,'' Sweeney told Stanford's newspaper, The Antigua Sun. ``He has done a tremendous job of promoting and raising the awareness of Antigua in the United States, and people take notice of a man of his standing and stature in the halls of Washington.''
Photos of Stanford and caucus members were splashed in company publications and press releases. ``You looked and you saw all these important people,'' Riger said. ``That legitimacy allowed him to go out and collect a lot of money.''
Stanford was not only funding the trips -- the money looted from his customers -- but also staging fundraisers.
He held an event at his office on the 21st floor of the Miami Center for Ohio house member Ney, who was later sentenced to 30 months in prison after admitting to accepting gifts and money from clients of lobbyist Jack Abramoff.
He rallied his brokers when Sessions was in a tight race with Democrat Martin Frost in Texas in 2004.
``He got on the speakerphone and told everyone to give to Pete Sessions,'' said Riger. ``He said Sessions was good for our company and we needed to give to him.'' Stanford raised $38,875 in the final weeks of the campaign for Sessions, who defeated Frost.
While he was forging ties in Washington, he was getting into deeper trouble with the SEC. By 2006, the agency had sent two confidential letters to the Antiguan government demanding information about the solvency of Stanford's bank, records show.
Both times, Stanford was aided by lead regulator King, who managed to keep the bank's finances secret while accepting thousands in bribes from Stanford -- their pledge sealed in a blood oath in Stanford's airplane hangar in Antigua, according to court records and interviews.
With pressure mounting from the SEC, Stanford increased his lobbying in Washington.
In 2008, he started his own lobby firm on 14th Street and New York Avenue, spending $2.2 million -- more than he spent the previous four years combined, records show.
``He was spreading his money around,'' said Blum, the Washington expert on money-laundering.
``It was a way of gaining legitimacy and getting people to say, `Hey, I'm OK.' ''
Just one month before the FBI launched a criminal probe into his banking empire, Stanford hosted a lavish gathering of powerful Washington insiders, with keynote speeches from Madeleine Albright, former secretary of state, and Paul Wolfowitz, former deputy secretary of defense.
Also co-hosting the May event: Miami lawyer Yolanda Suarez, Stanford's longtime chief of staff.
The topic: the global financial crisis, and the private sector's need to work with government.
But Stanford's own crisis was about to explode.
On Feb. 17, armed with court orders, federal agents swarmed into his offices across the country, shutting down his operations and declaring that Stanford was running a massive fraud.
In his Houston headquarters, agents found reams of company documents, electronic records and e-mails received by Stanford in his final days, including the message from Sessions.
RUNNING FOR COVER
As the scandal unfolded, members of the Caribbean Caucus began returning their contributions.
Nineteen lawmakers gave back a total of $87,800 to the court-appointed receiver as of August. Others, including Meeks, Sessions, Sandlin, Sweeney and Crane, said they turned some of the money over to charities.
In addition, Democratic House member Charlie Rangel returned $11,800 to charities, and Democratic Florida Sen. Bill Nelson $45,000 to charities, half of which came from a fundraiser at Stanford's Miami office in 2006.
``Just like a number of people, [they] started to run for cover the minute Allen was under scrutiny,'' said Schaffer, Stanford's attorney.
``People he had been very close to -- and never asked anything of -- all of a sudden are distancing themselves. Whether he's innocent or guilty, they don't really care. They worry about how it affects their image.''
As federal agents examine Stanford's political contributions, victims' groups have criticized lawmakers for failing to vet Stanford before accepting his donations and trips.
The State Department had singled out Stanford in a 1999 report for using his influence to weaken the Antiguan banking laws, creating ``one of the most attractive financial centers in the Caribbean for money launderers.''
``None of this was difficult to ascertain,'' said Bill Branscum, a former U.S. Treasury agent who investigated laundering in the Caribbean. ``With the position of public trust comes a consummate responsibility. They should have made it their business to figure out what was going on.''
``You've got to give [Stanford] credit, he got the best bang for his buck.''
So, think he's bigger than Bernie?