2016-01-29 How TD banked the 2nd-largest Ponzi scheme in U.S. history. (And they’re the largest banker for the tar sands and pipeline expansions.)
I was curious about which Canadian banks have been payrolling the expansions of the Tar Sands (Ft McMurray, AB) and Kinder Morgan, especially after the largest international bank, HSBC, pulled out? The data is in another posting.
TD Bank is the largest, with more than $700 million in loans and commitments to Tar Sands and Kinder Morgan.
Thoroughly reckless behavior of TD Bank is recorded below in How TD banked the 2nd-largest Ponzi scheme in U.S. history, (thanks to Global News).
I am wondering whether the purchase of Kinder Morgan by Tax-payers is as much a Bank Bail-Out as anything – – – can’t allow them to go belly up, same as the Wall Street Banksters? I have noticed the term “bailout” used, but haven’t dug deeper into it. Will find out for sure, soon enough.
Allen Stanford’s house of cards: How TD banked the 2nd-largest Ponzi scheme in U.S. history
(Another story with video at https://globalnews.ca/news/2485794/the-biggest-ponzi-schemes-stanford-vs-madoff/)
By Gil Shochat and Francesca Fionda
(Video “The Billionaire and the Bank”)
Allen Stanford’s con was epic. He was responsible for the second biggest Ponzi scheme in U.S. history outdone only by Bernie Madoff.
With a silver tongue and endless charisma, the brash Texan built a multi-billion dollar bank on the island of Antigua. By the late 2000s Stanford Financial Group had grown into an empire with over 21,000 clients throughout the U.S. and South America.
When it collapsed in 2009, over $7 billion in investments disappeared in what one U.S. judge would call “one of the most egregious criminal frauds ever presented to a trial jury in federal court.”
To pull off that massive scam, Stanford needed help and he found it in the most unlikely of places – the Toronto Dominion Bank in Canada.
TD banked Stanford and his Antiguan bank for 18 years, starting in 1991, helping him move money from his clients in the U.S. and South America – to accounts he controlled in Toronto.
“[In] the approximate last 12 months almost $3 billion went through the correspondent account [in Toronto],” said Lincoln Caylor, whose firm Bennett Jones is suing TD. “Without external set up banks that have access to the U.S. market financial system, he couldn’t have done what he did.”
According to Caylor, Stanford used TD to move billions. Much of that money came from investors who put their cash into Stanford’s certificates of deposit. These were advertised as ultra-safe investments promising returns that were roughly three per cent higher than similar investments sold by his competitors.
In reality, the crooked banker “sat atop a massive Ponzi scheme” a U.S. court of appeals would later say. According to the court, by 2008 he bilked approximately $1 million per day from investors to finance his “personal endeavors.”
WATCH: Lincoln Caylor is a Toronto lawyer whose firm is suing TD over its involvement with Allen Stanford. He tells 16×9 why one of Canada’s biggest banks was important for Stanford.
Lifestyle. From big boats to a fleet of private jets, and mansions including an 18,000 square foot castle in Florida.
In one instance, according to prosecutors, from 2000 to 2002 he spent more than $400,000 on suits from “a private Beverly Hills clothier that advertised itself as the world’s ‘most expensive’ men’s clothing store.”
A major money laundering bank?
Before the fancy suits and mansions, Stanford started small. In the mid-1980s he set up a bank on the island of Montserrat, considered the Wild West of banking at the time. But by 1990, things were changing as Monserrat authorities decided to crack down on shady operators.
According to one former FBI official, Stanford left in a hurry before the government had a chance to shut him down.
“He realised the handwriting was on the wall that the British government was going to revoke his license and …he saw an opportunity to buy a bank very cheaply in Antigua,” said Ross Gaffney who ran the white collar crime squad for the Miami FBI.
In the early 1990’s, Stanford set up Stanford International Bank in Antigua. According to Caylor, TD was crucial in giving that bank access to U.S. dollar accounts.
Gaffney says Stanford ran a major money laundering operation in Antigua and the FBI moved to take him down.
“We set up a sting operation based on actionable intelligence,” Gaffney said. “We recorded conversations with Stanford in which he very candidly laid out what he charged to launder money, who he paid off. He was very boastful that he was a major money laundering bank.”
But the FBI could not make a case against Stanford stick. Gaffney says drug kingpins were good at hiding their tracks and investigators couldn’t conduct extensive covert operations in Antigua because of tough jurisdictional rules.
However, the U.S. government did keep a close watch as Stanford’s operation expanded.
According to prosecutors Stanford bribed Antiguan officials with money, free flights and “expensive Super Bowl tickets” to run interference and keep his operation from being disclosed to U.S. regulators.
By 1999, the U.S. government was fed up with Antigua and Stanford’s relationship. One State Department wire obtained by 16×9 said that “the Antiguan government has effectively ceded oversight of its offshore sector to an offshore banker and his minions.”
Around the same time, one TD official became nervous with the bank’s continued relationship with Stanford International Bank, according to a court document filed by Lincoln Caylor.
After taking a due-diligence trip to Stanford’s operation in Houston, Stephen Cullen, one of the TD personnel responsible for handling the Stanford account, told another TD official that he was uncomfortable with TD Bank’s continued correspondent banking relationship with Stanford International Bank.
According to the court document, Cullen said that the bank needed to conduct a due diligence investigation of SIB, as “something did not seem right.”
Cullen, who is now retired, refused to speak with 16×9.
Over the next decade, TD officials took due diligence trips to look at Stanford’s operations.
But while Stanford was looting his own bank, Caylor says, TD was doing next to nothing.
“The content of the presentations that we’ve found given by SIB to the TD bankers were very superficial,” he said. “We know other bankers who asked the tough questions didn’t get the answers and stopped banking them.”
According to internal documents obtained by 16×9, there was also socializing between TD and Stanford officials. One TD official participated in the Stanford-sponsored St. Jude PGA Pro-Am golf tournament, and Stanford staff and TD bankers ate together at Spuntini Italian Restaurant, an upscale Toronto eatery.
By 2003, at least one of Stanford’s employees was asking hard questions.
“You know I was questioning…questioning the godfather if you will,” said Charles Hazlett, a former broker, who worked in Stanford’s Miami office.
“All they told me was something like it’s 20 per cent stocks, 15 per cent bonds, 10 per cent..but they didn’t give me enough. My client wanted more information. My client wanted to see the portfolio basically and they claimed it was proprietary,” he said. “Banks here …aren’t allowed to do that. Banks show their balance sheet.”
Hazlett eventually quit.
“I was ruffling too many feathers, I wasn’t a team player, I wasn’t a family. It was almost like Mafia. I wasn’t family member.”
Stanford ended up coming after Hazlett for the bonus money he got when he joined, and Hazlett says he lost hundreds of thousands of dollars in fees and legal costs.
Stanford may have won that fight, but by 2008 his bank was facing big problems. Wall Street and the big banks were collapsing around him.
By 2009, Stanford’s problems got even bigger. The bank was raided by the Securities and Exchange Commission. He would eventually be convicted and sentenced to 110 years in a U.S. penitentiary.
“It was at night when it came on the evening news,” Mier says. “Louis had already gone to bed. And it said, ‘The SEC had shut the Stanford entity down,’ and I went and woke Louis up and I said, ‘Baby, we may have lost our money with Stanford.’”
Kathleen Mier is still angry at Stanford and his lies.
“Shame on you! That’s what I’d tell him. Poor people, who trusted … shame. For the lives you’ve ruined.”
In a statement to 16×9, Stanford said “Without exception everyone in the media has lied to [him], and swallowed hook, line and sinker the government propaganda.”
Stanford maintains his innocence and says he plans to continue his legal fight. He will “walk out of prison a free man…[and] will lead the way for full restitution to…depositors who were financially harmed, all caused by the illegal and unconstitutional actions of the SEC…and DOJ.”
16×9 made repeated requests to speak with TD. In a statement the bank said “it is TD policy to not comment on matters before the courts.”
TD has in the past denied any knowledge of Stanford’s “fraudulent or illegal activities” and said it was neither reckless or willfully blind as Stanford’s correspondent bankers.
With rumours of money laundering, red flags about Antigua, the payment of bribes, and persistent questions about Stanford’s credibility, Caylor says TD should have been a lot more careful.
“There’s a level of due diligence they’re supposed to go and keep doing over the time of the relationship,” Caylor said. “It’s our client’s position that they fell below that standard when they dealt with Allen Stanford and his bank.”
16×9’s “The Billionaire and the Bank” airs Saturday, Jan 30, 2016 at 7pm.
© 2016 Shaw Media
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TD missed ‘warning signs’ about notorious fraudster, lawsuit alleges
Jeff Gray Toronto City Hall Reporter
Published January 29, 2016
Updated June 19, 2017
Allen Stanford, the Texas-born ex-billionaire responsible for one of the world’s largest Ponzi schemes, is serving a 110-year sentence in a Florida prison. But outside those walls, other legal battles over his massive fraud are still being waged and involve one of Canada’s largest financial institutions: Toronto-Dominion Bank.
Mr. Stanford, now 65, was once known as Sir Allen, after he was knighted in his adopted home of Antigua and Barbuda, before his title was revoked. He was supposed to be running what appeared to be a staggeringly successful private offshore bank. But in fact, he and a small group at the top of his organization were looting his Stanford International Bank Ltd., using some new investors’ money to pay returns to previous ones and living large on much of the rest.
His empire came crashing down in 2009, when his bank was exposed as a massive fraud that cost his 21,000 investors at least $5.5-billion (U.S.). But until then, he enjoyed a lifestyle worthy of a Bond villain, acquiring his own small Caribbean island for $63-million, a fleet of private jets and helicopters, and a handful of luxurious mansions that included a 57-room “castle” in South Florida, complete with a moat.
And according to allegations contained in court documents and an investigation by the Global News television program 16×9, Mr. Stanford’s fraudulent business was made possible, in part, by his lengthy relationship with TD Bank.
Watch a clip from 16×9’s ‘The Billionaire and the Bank,’ on the rise and fall of Allen Stanford
It’s a story that illustrates the risks domestic banks face in the sometimes murky world of “correspondent banking” – the practice of offering accounts and services to offshore financial institutions. Because of increasing concerns over money laundering, it’s a line of business that has recently been facing increased scrutiny from large banks around the world.
A lawsuit filed in Ontario Superior Court by the liquidators of Stanford International Bank, who are seeking to recoup the losses for Mr. Stanford’s victims, alleges that TD Bank was Mr. Stanford’s prime correspondent bank, providing him crucial access to the U.S. financial system and accepting U.S. wire transfers on his behalf from his investors all over the world.
The statement of claim demands that TD cover the $5.5-billion, plus hand over any profit it made from handling the Stanford accounts. The claim alleges that TD was negligent and failed to perform the due diligence required by Canadian law and international banking standards on its offshore client.
TD declined to comment for this story. The allegations have not been proved in court. In a related case launched against TD on behalf of Canadians who invested in Mr. Stanford’s bank, TD filed a statement of defence in 2010 in which it denied any knowledge of the fraud until a freeze order was issued on Mr. Stanford’s accounts in February, 2009. TD said it did “ordinary and routine monitoring” of Stanford International Bank as it would have for any other correspondent banking customer.
In just the last year of Mr. Stanford’s scheme, more than $2.5-billion flowed through his offshore bank’s TD account in Toronto, according to the liquidators’ lawsuit, making Stanford International Bank TD’s single-largest correspondent-banking customer.
It’s not known how much in fees TD made from Mr. Stanford, but revenue for the division that included correspondent banking shot upward in 2006 and 2007, when Mr. Stanford’s operations grew rapidly.
Without TD, the lawsuit says, Mr. Stanford’s business would have been paralyzed. No U.S. bank would agree to accept U.S.-dollar wire transfers from Mr. Stanford’s customers around the world, the lawsuit alleges. Banks in the United States and elsewhere either cancelled his accounts or declined to do business with him, the lawsuit alleges.
“If Allen Stanford did not have access to the U.S. dollar, he could not have carried out the Ponzi scheme,” Lincoln Caylor, a Toronto lawyer with Bennett Jones LLP acting for the liquidators in the lawsuit against TD, told The Globe and Mail. “And as it turns out, the financial institution that gave him the access to the highest volume of U.S. dollars was TD Bank.”
TD was providing correspondent banking to entities owned by Mr. Stanford as far back as 1990, the lawsuit says.
Long before any word of a Ponzi scheme, the lawsuit alleges, there were plenty of “clear warning signs,” including the mere fact that Mr. Stanford was based in Antigua. TD was well aware of the money-laundering risks there: In 1996, TD shut down correspondent bank accounts held by another Antiguan-based offshore bank, because the amounts involved were “too large for a legitimate bank in Antigua,” the lawsuit says. And in 1999, U.S. officials issued a warning about the risks of money laundering in Antigua.
Plus, Mr. Stanford, before he went into offshore banking, when bankrupt while running a gym chain in Texas in 1984, and a bankruptcy generally disqualifies someone from running a bank, the lawsuit says.
Court documents and the investigation by 16×9 also allege that as far back as the late 1980s, Mr. Stanford had been under investigation by the FBI, suspected of laundering drug money for Colombian cartels.
Ross Gaffney, a retired FBI agent who ran a Miami-based anti-money-laundering squad, told 16×9 in an interview that the probes never resulted in charges against Mr. Stanford, who had immense influence with Antigua’s government and even ran “counterintelligence” to keep tabs on U.S. law-enforcement actions against him.
“He was a cat with more than nine lives,” Mr. Gaffney said.
Mr. Stanford has denied he ever knowingly laundered drug money.
It’s not known precisely what inquiries TD made about its offshore account holder. But at various times over the nearly two-decade relationship, some inside TD did raise concerns.
In 2000, one TD Bank executive said “something did not seem right” with Mr. Stanford’s business, which he said TD did not understand, and urged a review, the lawsuit alleges. And in July, 2008, other executives at TD became “nervous“ about the bank’s relationship with Mr. Stanford.
According to the lawsuit and to e-mails obtained by 16×9, over the years the Canadian bank sent staff to Mr. Stanford’s offices in Antigua and in the United States, where they watched presentations about Stanford International Bank’s compliance.
But Mr. Caylor, the lawyer on the lawsuit in Ontario Superior Court, said the PowerPoint presentations he has seen that were allegedly shown to TD staff were “very superficial,” containing innocuous facts about Antigua and little about the bank’s business or underlying assets.
In e-mails obtained by 16×9 that date from 2006, TD officials ask Mr. Stanford’s people to complete a “know your client” compliance questionnaire. Stanford International Bank’s answers to at least part of TD’s request included a long list of other correspondent banks around the world with which Mr. Stanford’s enterprise said it did business.
In August, 2008, the e-mails show, a TD employee asked contacts at Stanford International Bank about a Bloomberg News story that reported the U.S. Securities and Exchange Commission was investigating Mr. Stanford’s operations.
Mr. Stanford’s chief financial officer Jim Davis – Mr. Stanford’s college roommate who would later plead guilty to his role in the fraudulent scheme – blamed the story on two disgruntled employees in his operation’s Houston office, saying in his e-mailed response that his organization was unaware of any SEC investigation.
“That’s perfect,” the TD employee replies. “Thank you for taking the time and interest into addressing this matter.”
Stanford staff also arranged a visit with TD officials in Toronto in October, 2008, dining at a Yorkville restaurant.
By December of that year, the global financial crisis was putting immense pressure on Stanford International Bank, as investors sought to pull their money out and new investors were harder to come by. Stanford International Bank was taking millions out of its TD account to try to make up the difference.
TD says in its statement of defence in the other related case that it started monitoring Stanford International Bank’s account more closely at that time, but still had no reason to suspect fraud. Many banks were facing similar pressures, TD says.
Just a few months later, on Feb. 17, 2009, the SEC announced charges against Mr. Stanford. TD would only drop their customer when the allegations became public and a U.S. court issued a freeze order, the lawsuit says.
The truth about the massive Ponzi scheme, second in size only to Bernie Madoff’s iconic fraud, was not just kept from TD. Only a small group of Stanford insiders were in on the secret, and the real financial numbers were contained on a hard drive called “the football” they kept with them at all times, court documents say.
At the end of an interview on CNBC in 2008, in which he discussed how he managed to completely avoid the U.S. subprime mortgage meltdown, Mr. Stanford was asked whether it’s fun being a billionaire. He pauses, smiles and replies: “Well, yes, yes, I have to say it’s fun being a billionaire. But it’s hard work.”
You can watch the complete story, entitled The Billionaire and the Bank, Saturday at 7 p.m. on Global’s 16×9.