I wasn't exactly surprised when I saw news reports over the weekend concerning the Stanford International Bank located on the West Indies island of Antigua and its owner, Robert Allen Stanford, (left) the chief of the Stanford Financial Group of Houston, Texas.
Over the last few years several Sovereign Society members have asked our advice about the unusually high returns Stanford International Bank "guaranteed" for CDs and deposits.
I did some due diligence and discovered enough disturbing information about both Stanford and his offshore bank that I recommended that our members stay away from the bank.
Let's hope they took my advice.
On Tuesday the U.S. Securities and Exchange Commission accused Stanford of conducting "a massive ongoing fraud" in the sale of about $8 billion of high yielding certificates of deposit held in the firm’s bank in Antigua. Also named in the suit were two other executives and some affiliates of the financial group, all charged with misrepresenting the safety and liquidity of the uninsured CD’s.
Island Banking Turmoil
Fifteen hundred miles to the south, Antiguan Prime Minister Winston Baldwin Spencer (left) addressed the nation on live television Tuesday night, saying the Eastern Caribbean Central Bank is working with the Bank of Antigua "to put together a contingency plan" to deal with the fallout from the U.S. charges.
He urged residents not to panic, but acknowledged that the charges against Mr. Stanford, the largest investor and private employer in the island nation of 80,000 people, could have "profound serious implications for Antigua and Barbuda." The Bank of Antigua may not be much help since it also is a member of Stanford Financial Group.
The CD’s were sold by Stanford International Bank through the firm’s registered broker-dealer and investment adviser in Houston. Both the bank, which claims $8.5 billion in assets and 30,000 clients in 131 countries, and the brokerage unit, which operates about 30 offices in the United States, were named in the SEC. suit. Stanford Financial claims to manage about $50 billion in assets.
Two Island Country
Antigua is an island in the West Indies in the Leeward Islands in the Caribbean region, the main island of the country of Antigua and Barbuda. Independent from the United Kingdom since 1981, concerns over the lack of adequate regulation of the financial services sector prompted the U.S. government to issue a "financial advisory warning" about the islands in 1999 which was lifted in 2001.
My initial judgment about the Standford Bank a few years ago was based on a very simple, yet basic axiom of wealth protection and investment: "If it sounds too good to be true, it probably isn't true."
Indeed, Too Good To Be True
Yes, it's an old saying, but too many people considering offshore banking and investing seem tempted to ignore it -- at their own peril.
Sadly, many investors, wanting to believe promises of unrealistically high returns, surrender their cash to charlatans who don't deliver -- and never intend to. This same pattern occurs repeatedly as Internet "offshore" web sites beckon visitors to send them cash so they can "get rich quick." (The promoters that is, not the depositors). Similar fraudulent sales of second passports are also common.
Long before anyone heard of Bernie Madoff and his $500 billion rip-off, many other Madoff types have been operating, especially in the offshore area. Stricter offshore regulation in recent years has curbed these frauds, but unfortunately they'll continue as long as human nature, greed and gullibility exist.
Follow Basic Good Sense Rules
There are certain fundamental principles that govern offshore financial activities, in addition to life's verities -- honesty, truthfulness and generally moral conduct.
Unfortunately, many people who look offshore do so for very wrong reasons, including misplaced hopes for unreasonable profits. Many usually cautious people seem to suspend their good judgment when it comes to offshore business, banking or investments.
So keep these offshore (and onshore) rules in mind for your future actions:
1) a U.S. person must pay income tax annually on all income earned, without regard to where earned, and regardless of where in the world that U.S. person lives.
2) The law requires reporting to the IRS of offshore financial accounts over which a U.S. person has control; some reports must be more detailed than others.
3) U.S. courts have made clear that taxpayers cannot hide behind offshore trusts, corporations, foundations or other legal entities that are claimed to be recipients of income that actually goes into that U.S. person's pocket.
4) Claims of fabulous returns on investments that sound too good to be true are just that -- untrue, and such claims are a hallmark of financial fraud.
5) Always do a thorough due diligence investigation -- and ask for references.
6) Get good, reliable offshore advice and professional help, before you agree to anything.
*** Sovereign Society members are provided reliable information about sound offshore investments, banking and foreign residence and citizenship. We can put you in touch with experienced professional in most offshore havens. All you need to do is -- join us.
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