The Rise and Fall of the Stanford Financial Group

Castles and corruption lead to criminal charges.

There were bizarre rituals, such as the ­heraldic gold eagle that the company plastered on nearly every surface (the doors, the elevators, even the toilet seats) and sent employees home for forgetting to wear on their lapels.

And he couldn't figure out what was going on with those certificates of deposit in the company's offshore bank — the managers were relentless about those CDs, asking how many he had sold that week. Nothing else seemed to matter.

As Hazlett discovered in his nine months at Stanford, these were all reflections of the firm's quirky founder. Stanford flew the world on private jets, lived in a palatial Miami estate with its own moat and at times adopted a faux British accent. In Antigua, where he has been knighted, he attained an almost godlike status. He owned a daily newspaper and the Bank of Antigua, and he sat on the board regulating the island's banks — a board he also helped to create.

James Davis, Allen Stanford's No. 2, is now cooperating with the SEC against the empire he helped build.
AP/C. Todd Sherman
James Davis, Allen Stanford's No. 2, is now cooperating with the SEC against the empire he helped build.
Laura Pendergest-Holt, pictured here with her attorney Dan Cogdell, is the only Stanford exec who faces criminal charges for allegedly lying to SEC investigators.
AP/Pat Sullivan
Laura Pendergest-Holt, pictured here with her attorney Dan Cogdell, is the only Stanford exec who faces criminal charges for allegedly lying to SEC investigators.

Hazlett was successful and very busy at his job, selling more than $10 million in certificates of deposit to the firm's offshore bank, which made him one of the company's top producers and earned him a $100,000 BMW as a bonus.

But then he started asking questions. Why were the CDs performing so well? What was the explanation for the incredible returns? And where were the deposits invested? The more Hazlett pressed his managers for an explanation, the more he was stonewalled.

He finally maneuvered his way into a meeting with Laura Pendergest, the company's chief investment officer. His biggest client, a Curaçao native with a $5 million stake, was going to pull out his cash unless Pendergest told Hazlett how the deposits were being invested.

According to Hazlett, she refused to give him any answers, saying, "It's proprietary information." She asked him to control his client. Hazlett said when he told ­Pendergest he wanted answers himself, she burst into tears and left the room.

Fifteen minutes later, the company's number two executive — a Mississippi native named James Davis — phoned Hazlett from Memphis.

"Do you believe in God?" Davis asked in a dry drawl, his voice rising with passion. "Do you fear God, Chuck?"

It took Hazlett another four months to leave the company and level an accusation in arbitration court of fraudulent practices, but from his meeting with Pendergest and followup phone call from Davis, he knew for a fact that he was down the rabbit hole and that something was very rotten at the Stanford Group.

Today, Stanford, Laura Pendergest-Holt (who got married since their first meeting) and ­Davis face federal charges that they swindled investors out of $8 billion in a massive Ponzi scheme run out of Houston, Miami and the Caribbean, taking money for supposed certificates of deposit and then simply paying off old customers with the new cash. The question remains why it took regulators six more years to catch on, especially when Hazlett's cries were far from isolated to South Florida.

The fallout in Miami, Latin America and the Caribbean has been devastating. More than 300 Stanford employees in Texas have lost jobs, thousands of investors have had accounts frozen and about 30,000 worldwide allegedly have lost a total of $8 billion in life savings to the giant house of cards. And each allegation has dealt another body blow to America's already teetering confidence in government safeguards and the economy.

Even more than Bernie Madoff's tale, Allen Stanford's rise and fall is the story of the past decade in America, where greed mixed with cynical politics birthed a perfect storm for accused hucksters such as Stanford to bring the global economy to its knees. And as Stanford's story shows, the warning signs were there. They were simply ignored.

When the elevator doors open to the posh Stanford offices in Miami, the wealth and vision once synonymous with the fallen firm are glaringly obvious.

Well-worn, brass-studded leather couches rest on rich Oriental rugs, conjuring images of an old-money British banker in his study. Leather-bound volumes and yellowed globes line polished mahogany bookshelves next to huge impressionist oil paintings.

For a time, these three floors seemed like the center of a new investment empire, built by a man who did everything in his power to change his origins.

Robert Allen Stanford, in fact, was born in 1950 in Mexia, an oil boomtown on the endless plains of central Texas about 85 miles south of Dallas.

He lived in Mexia (pronounced muh-HAY-uh) until the fourth grade, when his parents separated and he moved with his mother to Fort Worth. But those who remember him from that young age say that even then, he was famous for trying to make a buck.

"He was always known as an entrepreneur," says Bob Wright, editor of the Mexia Daily News and a family acquaintance. "He liked to make money, and he always seemed to have a few things going."

Childhood friend Jo Bennett recalled to the Houston Chronicle that as a boy, Stanford tried to sell her his bike for a profit when he got a new one as a gift. In high school, Stanford played football, and at Baylor University, he taught scuba lessons to make extra money. His roommate at Baylor was James Davis, who became a lifelong friend.

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