Huge shortfall found at Stanford Caribbean bank

The Caribbean offshore bank at the center of an alleged Ponzi scheme by a wealthy Texas businessman has a $6 billion shortfall between assets and liabilities, a court-appointed liquidator reported Friday, confirming fears that investors will likely get little of their money back.

Stanford International Bank Ltd. in Antigua, run by financier R. Allen Stanford, owed about $7.2 billion, including interest, when regulators closed it in February after the U.S. Securities and Exchange Commission alleged it was offering fraudulent certificates of deposit, the liquidators said in a letter to investors.

But the liquidators said they have found less than $1 billion in assets, including just $46 million in cash at accounts in Antigua, Canada, the U.S. and the United Kingdom.

The cause of the “very significant shortfall” is unknown at this time but the records “indicate that a Ponzi scheme … had been in operation,” the liquidators, Nigel Hamilton-Smith and Peter Wastell of Vantis Business Recovery Services, said in the report.

The SEC has accused Stanford and his top executives of conducting a massive fraud in which they claimed to offer certificates of deposit through the Antigua bank, touting them as a conservative investment.

Money poured in from around the world, with nearly 28,000 depositors from 113 countries investing in the CDs, according to the Vantis report.

SIB apparently had about $472 million invested in stocks, bonds and other securities at various financial institutions and another $470 million lent to corporations as equity investments. But the actual value of both is likely to be “significantly” less than reported in bank records, the liquidators said in their report.

Depositor Michael Kogutt, a business executive who lives near Dallas, Texas, said earlier that investors heard they might get back only about 5 cents of every dollar they had turned over to Stanford.

The new Vantis report said it is still too early to provide a specific figure.

“It is however clear that the assets of SIB are likely to be significantly less than the amounts owing to depositors and other creditors,” it said.

Steve Malouf, an attorney in Dallas who represents a group of Latin American investors, said most depositors are resigned to the fact that they will not see all of their money returned.

“The No. 1 concern, and it’s now almost a certainty, is that they will not recover all of their money,” Malouf said.

Malouf also criticized the Antiguan liquidators and Ralph Janvey, a Texas attorney appointed as a receiver in the case by a U.S. court, for failing to cooperate in the search for assets as they quarrel over who has jurisdiction. Hamilton-Smith and Wastell were appointed by Antiguan authorities over the objections of Janvey, who has also been identifying Stanford assets.

“These two court-appointed receivers … have decided to embark upon a territorial battle that is costing depositors hundreds of thousands of dollars, if not millions,” Malouf said.

On Friday, Janvey sought a judge’s approval for just under $20 million to pay for fees and expenses related to work done in the Stanford case. The money would come from funds formally controlled by Stanford’s companies.

Janvey said the fees come at a 20 percent discount, worth about $5 million, “for the benefit of Stanford investors and other claimants.”

Copyright 2009 The Associated Press.