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The fate of a local subsidiary of the Stanford Group Company is up in the air after Texan financier Robert Allen Stanford and three of his companies were yesterday charged with $US9.2 billion in fraud.
Yesterday morning federal agents raided the Stanford Group’s US headquarters in Houston, alleging Stanford International Bank has issued $8 billion in fraudulent certificates of deposit, as well as a further scheme relating to $1.2 billion in sales.
As part of its elaborate structure, The Stanford Group Company, under its wealth management operations, directed clients to the Stanford Trust Company, which has subsidiary offices in New Zealand and Columbia.
Stanford Trust Company appears to be an advisory business.
According to Stanford Trust’s own website the Stanford Trust Company (New Zealand) provides access to the New Zealand offshore trust through its connections with the Stanford Financial Group global network of companies.
“New Zealand offers an attractive jurisdiction for the establishment of trusts as tax planning vehicles,” the website says.
“Stanford professionals can help in the creation and administration of numerous trust structures which provide benefits under the country’s tax laws, such as asset-protection trusts and pre-migration trusts.”
And page 30 of this document says:
“Stanford Trust Company (New Zealand) allows assets to be owned and managed by a company in a reputable, relatively high-tax-paying jurisdiction without tax because of a significant network of tax treaties.
“New Zealand does not tax assets held in New Zealand by nonresident
settlers, nor is tax collected on proceeds placed into a trust, except on income with a New Zealand source, again providing that the settlers are not resident in New Zealand.”
Stanford Trust Company (NZ) was registered with the New Zealand Companies Office in February 2006.
Its sole director is Gordon Stewart, a Wellington based lawyer. Mr Stewart could not be reached for contact last night.
As for Robert Stanford, the now elusive 58-year old cricket-loving tycoon featured on the Forbes rich list last year, with his personal wealth estimated at $2.2 billion.
Mr Stanford has denied any wrongdoing, and has endorsement relationships with golfer Vijay Singh and England soccer star Michael Owen as well as involvement in polo.
The bank boasted a “unique” investment strategy that it said allowed it to receive double-digit returns on its investments for the past 15 years, the US Securities and Exchange Commission said.
"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," Rose Romero, director of the SEC's Fort Worth regional office, said in the statement.
Portfolio blogger Felix Salmon issued a heads up on Stanford exactly one week ago in the wake of the Bernie Maddoff Ponzi scheme imploding, and now points to a number of highlights in the 25-page SEC complaint, including Stanford's portfolio impossibly managing to rack up identical 15.71% back-to-back returns in 1995 and 1996 - implying the fraud has been going on for at least 13 years.
The SEC charges Stanford's investment companies were exposed to losses from the alleged Ponzi scheme run by Madoff despite claims to the contrary, which falsely reassured investors otherwise, CNBC reported.
Stanford is a self-confessed cricket fan who created the one-off US$20 million cricket match between England the West Indies last year.
New Zealand was due to play in a similar high-cash four team tournament in the West Indies this year which included England, but the tournament is now unlikely to proceed.
NZ Cricket spokesman Stephen Hill said “As far as I’m aware the England Cricket Board has put all the planning for that on hold until there’s any further information.
“But I believe there’s a reasonable expectation that the tournament won’t go ahead.”