WHEN: TODAY, MONDAY, APRIL 20TH
WHERE: "CNBC REPORTS"
FOLLOWING IS THE UNOFFICIAL TRANSCRIPT OF A CNBC EXCLUSIVE INTERVIEW WITH ALLEN STANFORD, STANFORD FINANCIAL GROUP, TODAY ON "CNBC REPORTS."
ALL REFERENCES MUST SOURCE CNBC
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SCOTT COHN: OK. AS YOU KNOW, I DON'T HAVE TO TELL YOU, YOU WERE SUED BY THE SECURITIES AND EXCHANGE COMMISSION, YOU'RE BEING INVESTIGATED BY THE JUSTICE DEPARTMENT,AND A LOT OF OTHER JURISDICTIONS, PROBABLY. WHAT MADE YOU DECIDE TO TALK TODAY?
ALLEN STANFORD: WELL, I WANTED TO TALK EARLIER, SCOTT, BUT I WAS TOLD NOT TO. AND I THINK NOW IS THE RIGHT TIME TO TALK, I'VE BEEN ADVISED BY COUNSEL THAT IT IS NOW THE RIGHT TIME TO TALK.
COHN: AND WHAT IS IT THAT YOU WANT PEOPLE TO KNOW?
ALLEN: WELL, FIRST OF ALL, THIS WAS NOT ANY KIND OF PONZI SCHEME WHATSOEVER, THERE WAS NEVER ANY INTENT OR PLAN TO DEFRAUD ANYBODY, THAT WE HAD, THE STANFORD ORGANIZATION HAD A GROUP OF GLOBAL, SOLID, SOLVENT, GREAT COMPANIES WHO EMPLOYED THE BEST PEOPLE IN THE WORLD, WHO ARE LIKE MY FAMILY. AND THIS THING HAS JUST DEVASTATED ME, WHAT'S HAPPENED. THE FAR, OVERREACHING ACTIONS OF THE SEC AND THEN THE AFTER-EFFECT, RIPPLE AND KNEE-JERK EFFECT OF VARIOUS JURISDICTIONS AROUND THE WORLD THAT TOOK OVER ENTITIES THAT WERE SOLID, SOLVENT, PROFITABLE ENTITIES IS--WELL, I CAN'T EVEN DESCRIBE TO YOU WHAT IT'S BEEN LIKE. A MULTIBILLION-DOLLAR ORGANIZATION BASICALLY WIPED OFF THE PLANET IN A MATTER OF A COUPLE OF DAYS AND RENDERED ALMOST WORTHLESS.
COHN: LET'S TALK ABOUT THAT ORGANIZATION. WHAT WAS--IS STANFORD FINANCIAL GROUP OR WAS STANFORD FINANCIAL GROUP? HOW DID IT WORK? WHAT WAS YOUR ROLE?
HOW DID IT FUNCTION?
ALLEN: WELL, STANFORD FINANCIAL GROUP WAS A GROUP OF GLOBAL INDEPENDENT AFFILIATE COMPANIES IN THE FINANCIAL SERVICES BUSINESS PRIMARILY, ALL OPERATING ON THEIR OWN PLATFORM, IN THEIR OWN COUNTRY OF DOMICILE, AND DOING THEIR OWN THING WITH THEIR OWN LEADER, BUT CONNECTED TOGETHER THROUGH THE STANFORD FINANCIAL GROUP AFFILIATE, WHOLLY OWNED, ME BEING THE SOLE SHAREHOLDER OVER TIME. AND EVERYBODY WHO WORE THIS EAGLE, WHICH I'M STILL WEARING, AND OTHERS ARE STILL WEARING, WORE IT WITH PRIDE. WE HAD 3,500 EMPLOYEES GLOBALLY IN THE FINANCIAL SERVICES SIDE AND ANOTHER CLOSE TO 2,000 IN OTHER COMPANIES THAT WE OWNED GLOBALLY.
COHN: AT THE HEART OF THE ALLEGATIONS FROM THE SEC ARE RETURNS THAT YOU CLAIMED AND THE INTEREST THAT YOU PAID ON THE CDS, 7.45 IN 2005, 7.87 PERCENT OF 2006, 5.375 PERCENT LAST YEAR WHEN PREVAILING INTEREST RATES WERE A WHOLE LOT LOWER, AND YOU COULDN'T GET A CD IN THIS COUNTRY FOR--PAYING MORE THAN ABOUT 2 PERCENT. HOW DID YOU DO IT IF IT WASN'T A PONZI SCHEME?
ALLEN: WELL, FIRST OF ALL, HOW DID WE PAY $2 BILLION IN EARLY REDEMPTION OF CDS DURING OCTOBER, NOVEMBER, DECEMBER, EARLY JANUARY OF THIS YEAR WITHOUT HAVING A FIT WINDOW TO GO TO LIKE THE BIG BANKS HERE? CITIBANK AND BANK OF AMERICA AND WACHOVIA AND GOING DOWN THE LINE RAN OUT OF MONEY, AND THEY HAD TO GO TO THE FEDERAL RESERVE TO GET MONEY TO PAY THEIR DEPOSITORS OR THEY WOULDN'T HAVE HAD ANY MONEY. WE WITHSTOOD THAT ON OUR OWN TWO FEET WITH NO FIT WINDOW TO GO TO, AND THAT RIGHT THERE TELLS YOU IT'S NO PONZI SCHEME.
COHN: WELL, DOESN'T IT--DOESN'T IT ALSO TELL YOU IF YOU'RE SUSPECT THAT MAYBE THERE'S SOMETHING FRAUDULENT GOING ON IF THOSE BANKS COULDN'T SURVIVE AND YOU COULD STILL PAY THESE HIGH RATES OF RETURN? HOW COULD YOU POSSIBLY DO IT?
ALLEN: WELL, YOU'RE TALKING ABOUT TWO DIFFERENT THINGS. I'M TALKING ABOUT PAYING CLIENTS THEIR MONEY THAT WANTED EARLY REDEMPTIONS AND HAD TWO, THREE, FOUR, FIVE-YEAR CDS IN TERMS OF MATURITY AND NEEDED THE MONEY.
COHN: BUT YOU COULD PAY THESE REDEMPTIONS EVEN THOUGH YOU DIDN'T CONTRACTUALLY HAVE TO, YOU WERE IN THAT GOOD OF SHAPE...
ALLEN: YES.
COHN: ...WHEN EVERYBODY ELSE WASN'T. AND SO IT CERTAINLY MAKES PEOPLE SUSPECT, SHOULDN'T IT?
ALLEN: HOW ARE YOU--HOW ARE YOU SUSPECT WHEN YOU PAY THE MONEY? HOW ARE YOU SUSPECT WHEN YOU DIDN'T HAVE ANY MONEY INVESTED IN SECURITIZED SUBPRIME TOXIC DEBT, WHICH WE DID NOT. PLUS THE FACT WE ARE NOT A PUBLICLY-HELD COMPANY, THEREFORE WE DON'T HAVE ACCESS TO THE CREDIT MARKETS LIKE OTHERS HAD AND USED THOSE CREDIT MARKETS AND LEVERAGED THEM TOO TO BASICALLY GET THEMSELVES IN TROUBLE. WE RAN A VERY TIGHT SHIP. HISTORICALLY, WE HAVE BEEN ABLE TO PAY MORE THAN A COMPETITIVE COMMERCIAL US BANK. WE'VE DONE IT THROUGH DECADES NOW, NOT JUST THROUGH THE PAST COUPLE OF YEARS. BUT THESE AREN'T ASTRONOMICAL RETURNS. WE'RE TALKING MAYBE TWO TO THREE POINTS MORE, SOMETIMES ONLY A HALF A POINT MORE THAN A US BANK. BUT IF YOU LOOK AT OUR COMPETITORS ON A--ON A GLOBAL SCALE, MANY TIMES THEY WERE PAYING MUCH MORE THAN WE WERE IN DIFFERENT--NOT JUST US DOLLARS BUT IN EUROS, STERLING OR OTHER CURRENCIES. OUR OPERATING MODEL WAS SO FAR DIFFERENT. WE HAD ONE HEAD OFFICE AND ONE REPRESENTATIVE OFFICE. WHEREAS A BANK OF OUR SIZE IN THE STATES, A COMMERCIAL BANK, WOULD HAVE HAD 100 BRANCHES AROUND THE DIFFERENT PARTS OF THE REGION WHERE IT DID ITS WORK AND THE FIXED COSTS ASSOCIATED WITH THAT. ALSO, THEY WOULD HAVE BEEN PAYING A LOT OF TIMES FOR THINGS THAT WERE NOT NECESSARILY MAKING MONEY. WE HAD FOUR PRODUCTS--A FIXED CD, FLEX CD, INDEX LINKED CD AND AN EA ACCOUNT--AND THAT WAS BASICALLY IT. OUR CASH-SECURED--EXCUSE ME--OUR LOANS WERE CASH-SECURED, OUR CREDIT CARDS WERE CASH-SECURED, THEREFORE WE HAD NO CREDIT EXPOSURE THERE. AND WE DID SOMETHING VERY GOOD FOR A LONG TIME, THAT'S MANAGE OUR MONEY, MANAGE IT CAREFULLY, LOOK AT WHERE WE'RE PLACING OUR MONEY, AND STAYED VERY LIQUID. AND WE WERE ABLE TO WEATHER THE STORM IN OCTOBER, NOVEMBER, DECEMBER WHEN US BANKS COULDN'T. WE GOT OVERRIDDEN BY TWO THINGS; POST-MADOFF, EVERYBODY PANICKED AGAIN AND WE HAD ANOTHER $500 MILLION HIT ON US, WHICH WE TOOK, BECAUSE PEOPLE PANICKED AND THEY'VE GOT TO HAVE THEIR MONEY, AND THEN THE SEC CAME AT US AND OTHERS WITH A LOT OF THINGS. AND THEN THEY ULTIMATELY CAME IN AND DID THE SHUTDOWN OF ALL OUR BUSINESSES.
COHN: YOU MENTIONED MADOFF. CAN YOU CLEAR UP--DID YOU HAVE INVESTMENTS WITH MADOFF? BECAUSE THAT'S ANOTHER ISSUE IN THE SEC COMPLAINT?
ALLEN: WELL, I ASKED OUR CHIEF FINANCIAL OFFICER DID WE HAVE ANY EXPOSURE TO MADOFF? HE SAID NO. LATER ON I FOUND OUT WE HAD A $400,000 EXPOSURE. SO IN THE SCOPE OF THINGS, I GUESS IT WAS MINIMAL, BUT THE ANSWER WOULD HAVE BEEN YES, WE DID HAVE EXPOSURE TO THE TUNE OF $400,000 IS WHAT I WAS TOLD LATER. BUT THAT'S--IN TERMS OF OUR INVESTMENT SIDE, THAT WAS NOTHING. SO THERE'S YOUR ANSWER.
COHN: SO TELL ME MORE ABOUT WHAT THESE FUNDS WERE INVESTING IN THAT ALLOWED YOU TO PERFORM WELL. I MEAN, YOU TALKED ABOUT THAT YOU DIDN'T HAVE THE OVERHEAD OF SOME US-BASED BANKS. THAT WOULD ONLY GET YOU SO FAR. SO WHAT WAS THIS INVESTMENT STRATEGY THAT WAS DOING SO WELL OVER TIME, SO MUCH BETTER, IT SEEMS, THAN EVERYBODY ELSE, AT LEAST IN THE LAST YEARS?
ALLEN: WELL, YOU KNOW, IT'S ALL RELATIVE, HOW MUCH BETTER WERE WE DOING? A COUPLE OF POINTS BETTER. WE WEREN'T DOING 10, 20, WE WEREN'T MAKING 20 AND 30 AND 40 PERCENT FOR OUR INVESTORS, WE WERE MAKING MAYBE 3 TO 5 TO 6 PERCENT FOR THEM SOMETIMES. AND COMPOUNDED ON A LONG-TERM INVESTMENT, MAYBE IT WAS A LITTLE MORE THAN THAT. BUT WE WEREN'T DOING ANY DOUBLE-DIGIT RETURNS FOR THEM. THAT'S--THAT HAS--IT'S A MISNOMER PUT OUT THERE. BUT YOU GOT TO LOOK AT OUR STRUCTURE. WE WERE IN A LOW-TAX JURISDICTION, YOU HAD ONE SOLE SHAREHOLDER, MYSELF, WHO WAS NOT LOOKING TO SEE THE BENEFITS FOR HIMSELF; IN OTHER WORDS, SHAREHOLDERS WERE NOT THE PRIMARY DRIVING BUSINESS MODUS OPERANDI. IT WAS TO GET THE CLIENT THE MOST MONEY, AND THAT'S OUR MODUS OPERANDI. WE OPERATED A VERY LEAN MACHINE AND WE DID IT VERY EFFICIENTLY AND WE ONLY PAID FOR PRODUCTION WHEN WE HAD PRODUCTION. IN OTHER WORDS, WHEN WE GOT BUSINESS, WE PAID FOR THAT BUSINESS, WE DIDN'T PAY FOR AN OFFICE TO BE NONPRODUCTIVE OR WE DIDN'T HAVE PEOPLE SITTING AROUND DOING NOTHING AND BEING PAID FOR IT. YOU GOT PAID IF YOU PRODUCED; IF YOU DIDN'T, YOU DIDN'T GET PAID. SO IT WAS ALL BASED ON A--ON A VERY COST-SENSITIVE AND PRODUCTION-SENSITIVE BASIS. AND MY PHILOSOPHY HAS ALWAYS BEEN THAT YOU HIRE THREE PEOPLE, THEY DO THE WORK OF FIVE, AND YOU PAY THEM FOR FOUR. SO EVERYBODY WINS.
COHN: SO THESE WEREN'T FICTITIOUS RETURNS AS THE SEC CLAIMS.
ALLEN: NO.
COHN: YOU DIDN'T REVERSE ANY YOUR THINGS, COME UP WITH A RATE OF RETURN AND THEN PAY THAT OUT TO INVESTORS?
ALLEN: WELL, THERE ARE SOME THINGS THAT I FOUND OUT IN A FEBRUARY MEETING IN MIAMI THAT I'M NOT REALLY GOING TO--AND I'VE BEEN INSTRUCTED BY MY LEGAL COUNSEL--TO GO INTO. BUT MYSELF AS CHAIRMAN--YOU ASKED EARLY ON WHAT MY JOB WAS--MYSELF AS CHAIRMAN AND SHAREHOLDER OF 42 OPERATING ENTITIES AROUND THE WORLD EMPLOYING 5,000 PEOPLE MANAGING BILLIONS AND BILLIONS OF DOLLARS, IT'S IMPOSSIBLE FOR ME TO MACRO MUCH LESS MICRO MANAGE THIS. NOW, I DEPEND ON PEOPLE TO DO THEIR JOBS. IT'S ALWAYS BEEN MY PHILOSOPHY AS AN ENTREPRENEUR, AND THE REASON I'VE BEEN SUCCESSFUL IS TO ALLOW PEOPLE TO DO THEIR JOB. I STAY OUT OF THEIR HAIR. I SET THE VISION AND THE GOAL. THEY OPERATE WITHIN CERTAIN PARAMETERS, BUT THEY RUN THE SHOP. I GET QUARTERLY REPORTS AND THOSE QUARTERLY REPORTS I TRUST TO BE TRUE. AND--OH, ENOUGH SAID THERE.
COHN: DID YOU TAKE $1.6 BILLION IN LOANS, PERSONAL LOANS OUT OF THE COMPANY THAT WEREN'T DISCLOSED TO THE SHAREHOLDERS?
ALLEN: NO.
COHN: SO WHERE DOES THAT COME FROM?
ALLEN: WELL, WHAT YOU'RE TALKING ABOUT, THE 1.6 BILLION SHAREHOLDER LOAN, THAT WAS NOT A LOAN TO ALLEN STANFORD, THOSE WERE MONIES THAT WERE INVESTED THROUGH, FOR EXAMPLE, STANFORD VENTURE CAPITAL OR OTHER STANFORD ENTITIES. THE BANK WOULD PLACE THE MONEY WITH THEM, INVESTMENTS WOULD BE MADE. FOR EXAMPLE, WE OWNED PART OF OR OUTRIGHT 29 DIFFERENT ENTITIES, 13 DIFFERENT INVESTMENT FUNDS. THE LOANS WERE BASICALLY BACKED BY THOSE INVESTMENTS, BUT THEY WERE NOT BOOKED ON THE BOOKS OF THE BANK UNTIL LATER. AND IN THE INTERIM, SINCE I'M THE SOLE SHAREHOLDER, I WOULD GUARANTEE THAT THOSE ASSETS WOULD BE RETURNED TO THE BANK, AND THAT'S HOW THAT ALL CAME ABOUT. ALLEN STANFORD DID NOT--DID NOT GET--EVER GET ONE DOLLAR OF THAT SHAREHOLDER LOAN MONEY, DIDN'T COME TO ME PERSONALLY. THEY WERE INVESTMENTS. ALL THAT MONEY WAS BEING USED TO BE INVESTED, AND THAT'S VERY--IT'S ON MY TAX RETURNS. A SLEW OF ACCOUNTANTS OVERSAW THIS, YOU KNOW, SO IT WAS RECOMMENDED YEARS AGO THIS WAS THE RIGHT APPROACH TO DO, AND SO WE FOLLOWED IT. AND THERE WAS NO SHAREHOLDER LOAN TO ME. THAT'S A MISNOMER.
COHN: I'M MINDFUL OF NOT WANTING TO GET PUNCHED IN THE MOUTH HERE, BUT IF I WERE SOMEONE WHO WANTED TO LAUNDER MONEY AND I SAW A BANK THAT IS DOING A LOW-TAX JURISDICTION LIKE ANTIGUA, THE MAN WHO RUNS THE BANK HELPED WRITE THE REGULATIONS IN ANTIGUA, THE RATES OF RETURN ARE GOOD, YOU THINK THAT'D BE PLACE WHERE I MIGHT WANT TO LAUNDER SOME MONEY?
ALLEN: SCOTT, FIRST OF ALL, I DON'T RUN THE BANK. I'M THE CHAIRMAN. I HAVE NOTHING TO DO WITH THE DAY-TO-DAY OPERATIONS OF THE BANK. NUMBER TWO, I DID NOT WRITE THE REGULATIONS FOR THE BANKING LAW IN ANTIGUA. BACK IN THE EARLY '90S I WAS ASKED BY THE THEN-GOVERNMENT IF I WOULD PUT TOGETHER A CIVILIAN TEAM OF PROFESSIONALS, WHICH I GOT, EX-FBI, EX-DEA, AN EX-US ATTORNEY, AN EX PERSON WHO WAS THE HEAD OF THE COMMONWEALTH OF FINANCE IN PUERTO RICO, A MAJOR ACCOUNTING FIRM AND OTHERS TO COME UP WITH A STRONG, IF NOT THE STRONGEST PLATFORM FOR INTERNATIONAL BANKING THAT WOULD MEET ALL OF THE THEN-KNOW YOUR CUSTOMER AND OTHER THINGS THAT WE WERE CONCERNED ABOUT LONG BEFORE THE PATRIOT ACT WAS PASSED. AND THOSE SUGGESTIONS WERE GIVEN TO THE GOVERNMENT. I DID NOT WRITE ANY LEGISLATION, THAT'S ANOTHER MISNOMER. I DIDN'T EVEN SIT ON THE DAMN COMMITTEE. I INITIATED IT AND STARTED IT AND THEN I LET THOSE GUYS DO THEIR WORK. AND THESE WERE ALL EX-GOVERNMENT OFFICIALS OR PROFESSIONALLY-EMPLOYED PEOPLE IN LAW FIRMS, ETC., THAT DID THIS.
COHN: SO YOU'RE CONFIDENT THAT MONEY WAS NOT LAUNDERED THROUGH YOUR BANK?
ALLEN: WELL, YOU CAN NEVER...
COHN: OR THROUGH YOUR COMPANIES?
ALLEN: YOU CAN NEVER SAY NEVER WHEN YOU'RE HANDLING BILLIONS OF DOLLARS AND YOU'RE DOING THIS ON A ROUTINE BASIS, OF COURSE YOU'RE PROBABLY GOING TO HAVE SOMETHING. WE HAD AN OCCASION OR TWO TO SEE SOMETHING HAPPEN THAT WAS UNFORTUNATE, BUT VERY, VERY, VERY MINUTE AMOUNT OF BUSINESS THAT WE WERE DOING. AND COMPARED TO OTHER INSTITUTIONS ON A PROPORTIONATE-SIZED BASIS, I WOULD SAY THAT OUR TRACK RECORD WAS OUTSTANDING. WE HAVE TO DO, OR HAD TO DO, A BETTER JOB THAN A CITIBANK OR A UBS SIMPLY BECAUSE THEY'RE CITIBANK AND UBS. WHAT IS A FLY LANDING ON THEIR KNUCKLE IS A MAJOR ARTERY CUT TO US. SO WE HAD TO BE VERY CAREFUL WITH EVERYTHING WE DID. OUR KNOW-YOUR-CUSTOMER POLICY I'M CONFIDENT WAS THE BEST IN THE INDUSTRY. AND OUR OTHER POLICIES IN PLACE, ANTI-TERRORISM AND THE POST-911 PATRIOT ACT, WE COMPLIED WITH THAT FULLY AND ALL THE OTHER THINGS THAT WERE SO DIFFERENT AFTER THAT POINT IN TIME. SO WE WERE NOT AND NEVER WOULD HAVE BEEN A, THROUGH ANY OF THE STANFORD COMPANIES, A FAVORED VEHICLE TO LAUNDER MONEY. WE WOULD HAVE BEEN IN MOST CASES A VERY UNFAVORED VEHICLE TO LAUNDER MONEY. IN FACT, STANFORD INTERNATIONAL BANK NEVER TOOK CASH NOR DID IT TAKE TRAVELER'S CHECKS OR ANY OTHER CONVERTIBLE INSTRUMENT OR VERIFORM INSTRUMENT INTO CASH. WE ONLY TOOK MONEY FROM THIRD-PARTY BANKS IN THE FORM OF A CHECK OR A WIRE-TRANSFER FROM A THIRD-PARTY BANK OR BROKERAGE OR OTHER HOUSE--INVESTMENT HOUSE AFTER WE DID THE DUE DILIGENCE AND ASCERTAINED THE VALIDITY OF THE PERSON WE'RE DEALING WITH.
COHN: YOU JUST BY NATURE OF YOUR POSITION AND WHERE YOU WERE GOT TO KNOW A LOT OF PEOPLE IN LATIN AMERICA, IN AFRICA, IN EUROPE, AROUND THE WORLD, AND IT STRIKES ME THAT SOMEBODY IN YOUR POSITION WOULD BE USEFUL TO AUTHORITIES IN THE US TRYING TO FIND OUT WHAT WAS GOING ON THERE, WHAT WAS GOING ON IN PLACES LIKE VENEZUELA, THINGS LIKE THAT. CAN YOU TELL ME ABOUT ANY SORT OF ROLE THAT YOU PLAYED THAT WAY, WERE YOU HELPFUL TO THE AUTHORITIES IN THE US?
ALLEN: YOU TALKING ABOUT THE CIA?
COHN: WELL, YOU TELL ME.
ALLEN: I'M NOT GOING TO TALK ABOUT THAT.
COHN: WHY NOT?
ALLEN: I'M JUST NOT GOING TO TALK ABOUT THAT.
COHN: WELL, I MEAN, AM I--IS MY PREMISE CORRECT THAT SOMEBODY IN YOUR POSITION WOULD BE HELPFUL TO THOSE WHO WANTED TO KNOW WHAT WAS GOING ON?
ALLEN: I REALLY DON'T HAVE ANYTHING TO ADD TO THAT THAT WOULD BE OF ANY VALUE, SO.
COHN: THE SEQUENCE OF EVENTS HERE WITH THE SEC SUING YOU TWO MONTHS AGO AND THE FEDERAL AUTHORITIES KIND OF LOOMING OVER YOUR HEAD AS YOU HAVE YOUR ASSETS FROZEN HERE AND ELSEWHERE, YOU TALKED A LITTLE BIT AT THE OUTSET ABOUT WHAT THAT WAS LIKE, BUT WHAT'S YOUR SENSE OF WHAT'S GOING ON HERE? WHY HAVEN'T THE FEDS--WHY HASN'T THE JUSTICE DEPARTMENT CHARGED YOU YET?
ALLEN: WELL, I THINK THEY PROBABLY WILL. THEY'RE LOOKING AS HARD AND AS DEEP IN EVERY CREVICE AS THEY CAN TO FIND IF SOMETHING--ANYTHING THAT WOULD REMOTELY TIE ME TO ANYTHING ANYWHERE. IF THEY DON'T, THEY'LL END UP WITH THE PROVERBIAL EGG ON THEIR FACE. SO THEY'RE GOING TO, I'M SURE, COME TO ME WITH SOMETHING, I'M PREPARED FOR THAT. I'M PREPARED TO FIGHT THIS THING, TOO, AND I'M GOING TO WIN. WHAT THE SEC DID WAS TOO FAR OVERREACHING BY AMOUNTS THAT IS--IT'S JUST UNCONSTITUTIONAL, IT'S NOT RIGHT WHAT THEY DID. THEY TOOK A GOING GLOBAL GROUP OF GREAT COMPANIES WITH THE BEST PEOPLE IN THE WORLD--WHO I LOVE DEARLY, AND IT'S BROKEN MY HEART TO SEE WHAT'S HAPPENED TO THEM--AND THEY DECIMATED THIS THING, THEY DECIMATED. THEY CAME IN AND THEY TURNED WHAT WAS A WONDERFUL ORGANIZATION--EVEN IF THEY WANTED TO CARVE ALLEN STANFORD OUT, EVEN IF THEY WANTED TO PUT A CEASE-AND-DESIST AND DEAL WITH ME AS AN INDIVIDUAL SEPARATELY, THEY SHOULD HAVE KEPT THESE COMPANIES OPERATING. THAT'S WHERE THE VALUE WAS. WE HAD FORENSIC AUDITORS GO IN AND VALUE THE STANFORD ORGANIZATION, AND WE GOT THAT VALUATION AS IT WOULD BE LITERALLY THE DAY BEFORE ALL THIS HAPPENED, AND THEY PUT OUR NORTH AMERICAN OPERATION ALONE WORTH AT LEAST 1.2 BILLION TO MAYBE 3 BILLION. THEY PUT THE GLOBAL GROUP OF THE COMPANIES WORTH AT LEAST 3 1/2 BILLION TO 5 BILLION, NET VALUE OVER AND ABOVE ALL LIABILITIES. AND THEN THEY, THE SEC, COME IN AND TAKE SOMETHING THAT HAS THAT KIND OF VALUE, AND THEY LITERALLY DISMEMBER IT, THEY DEBOWEL IT. AND THE KNEE-JERK EFFECT BECAUSE OF REGULATORY ENVIRONMENT THAT WE ARE IN NOW AND THE WHOLE WORLD THAT WE'RE IN NOW WITH THE THINGS THAT HAVE HAPPENED AND THE CRASHES OF THE MARKETS AND THE--AND THE WHOLE PRECARIOUS STATE OF THE ECONOMY, AND MADOFF COMES ALONG, WELL, THEY NEED SOMEBODY TO MAKE AN EXAMPLE OUT OF. IN THIS CASE, THE HELL WITH THE INVESTOR, LET'S GO AFTER THIS THING, LET'S JUST CARVE IT TO PIECES, BLUDGEONED IT AND LEAVE IT WORTHLESS.
COHN: SO THEY SCREWED UP WITH MADOFF SO THEY CAME AFTER YOU, IS THAT WHAT YOU'RE SAYING?
ALLEN: YOU MAKE YOUR OWN JUDGMENT THERE. YOU MAKE YOUR OWN JUDGMENT THERE. MADOFF WAS A TRUE PONZI SCHEME. WE HAVE REAL ASSETS, REAL PEOPLE, A REAL GROUP OF COMPANIES, AND THIS WAS NO PONZI SCHEME.
COHN: I GUESS THEY COULD ARGUE THAT MADOFF HAD REAL ASSETS AT SOME POINT, TOO, AND THEY MISSED THAT. THEY CAME AFTER YOU WITH INFORMATION THEY SAY THAT THERE WAS A PONZI SCHEME, SO THEY WERE CATCHING IT BEFORE IT COLLAPSED. SIR ALLEN: MY QUESTION TO YOU, AND I DON'T WANT TO GO IN THE MADOFF ROUTE TOO MUCH, BECAUSE PEOPLE KEEP TALKING MADOFF AND MENTION MY NAME WITH THAT, AND I'M NOT TOO FOND OF THAT AT ALL. BUT HOW MUCH HAS MADOFF PAID BACK TO HIS
CLIENTS. DO YOU KNOW HOW MUCH?
COHN: VIRTUALLY NOTHING. A BILLION DOLLARS OUT OF...
ALLEN: HOW MUCH?
COHN: ABOUT A BILLION DOLLARS. VIRTUALLY NOTHING.
ALLEN: HM, THAT'S FUNNY. PERSHING, WHO HELD SOME OF OUR MONEY, AS DID JPMORGAN HELD SOME OF OUR MONEY, TURNED OUT TO BE SEVERAL BILLIONS OF DOLLARS. OPPENHEIMER, IT TURNS OUT, WAS GIVEN AT LEAST 10 OF OUR OFFICES IN THE US, AND $5 BILLION OF OUR ASSETS. WE PAID OUT, STANFORD INTERNATIONAL BANK, DURING THE COURSE OF OCTOBER, NOVEMBER, DECEMBER, EARLY JANUARY, AS I TOLD YOU, $2 BILLION IN EARLY REDEMPTIONS, TWO, THREE, FOUR, FIVE YEAR CD MATURITIES. THE PEOPLE CAME AND NEEDED TO CASH IN BECAUSE THEY COULDN'T GET LIQUIDITY AT US BANKS OR BROKERAGES AND THE CREDIT MARKETS HAD DRIED UP. WE HELPED THEM THROUGH SOME VERY TOUGH TIMES MAKE MARGIN CALLS AND MEET THEIR LIQUIDITY NEEDS DURING THOSE TIMES, WHICH WAS TO OUR DETRIMENT. DOES THAT SOUND LIKE A PONZI SCHEME.
COHN: I TAKE IT YOU'RE SAYING IT'S NOT.
ALLEN: IT IS ABSOLUTELY NOT. AND I'M ALSO SAYING THAT SOME PREFERENCE WAS GIVEN, I THINK, TO PEOPLE BEING GIVEN ASSETS THAT WERE FORMALLY STANFORD ASSETS, FOR NOTHING, LITERALLY NOTHING, THAT WERE WORTH HUNDREDS OF MILLIONS OF DOLLARS, HUNDRED OF MILLIONS OF DOLLARS. AND WE'RE GOING TO FIGHT THIS. THERE'S GOING TO BE A LOT OF OFFENSE FROM OUR END GOING FORWARD. I'VE SAT BACK AND I'VE TAKEN IT. IT'S BEEN THE HARDEST THING I'VE EVER HAD TO DEAL WITH IN MY LIFE. IT'S BEEN LIKE A NIGHTMARE AND A DEBILITATING NIGHTMARE. I'M BARELY BACK TO BEING MYSELF NOW. BUT FOR THE CLIENTS AND EMPLOYEES, MY OWN CHILDREN, MY FIANCÉE, AND OTHERS WHO I DARE CARE ABOUT IN MY FAMILY, I'M GONG TO FIGHT THIS THING WITH EVERYTHING IN MY BODY.
COHN: WE WERE TALKING FOR ABOUT WHAT THIS HAS BEEN LIKE ,AND YOU'RE LITERALLY GOING UP AGAINST SOME PRETTY POWERFUL ADVERSARIES IN THE SEC AND POTENTIALLY IN THE JUSTICE DEPARTMENT OVER SOMETHING THAT YOU, AS YOU SAID, HAVE TAKEN...(UNINTELLIGIBLE). AND I'M WONDERING WHAT THAT'S LIKE.
ALLEN: WHAT IT'S LIKE TO SEE IT ALL GO AWAY? WELL, LET ME ASK YOU THIS,SCOTT, ARE YOU MARRIED?
COHN: YEAH.
ALLEN: DO YOU HAVE KIDS?
COHN: YEAH.
ALLEN: YOU GOT A HOUSE?
COHN: YEAH.
ALLEN: YOU GOT A JOB WITH CNBC.
COHN: RIGHT.
ALLEN: YOU GOT A CAR, CREDIT CARDS, CHECKING ACCOUNT. HOW WOULD YOU LIKE TO WALK OUT THE FRONT DOOR OF YOUR HOUSE WITH YOUR WIFE AND KIDS IN TOW AND HAVE US MARSHALS COME UP AND SAY YOU'RE NOT GOING BACK IN YOUR HOUSE, YOU'VE LOST YOUR JOB, ALL YOUR CREDIT CARDS HAVE BEEN CANCELED, ALL THE MONEY THAT YOU HAVE IN YOUR BANK, WE'VE FROZEN, IF NOT TAKEN, THAT YOU HAVE NOT--YOU WILL NOT HAVE ACCESS TO IT. AND WHAT YOU'RE GOING TO WALK AWAY WITH ARE THE CLOTHES ON YOUR BACK. BEST OF LUCK. AND BY THE WAY, WE'RE GOING TO SUE YOU. GO FIND SOME LEGAL COUNSEL.
COHN: I DON'T IMAGINE I'D LIKE THAT AT ALL.
ALLEN: OK. WELL, THEN THAT'S THE ONLY WAY I CAN COMPARE YOUR QUESTION TO WITH AN ANSWER. IT HAS BEEN UNBELIEVABLE. FORGET MY POSITION OF WEALTH AND WHERE I ONCE WAS. THAT REALLY IS NOT EVEN IMPORTANT TO ME ANYMORE, AND HONEST TO GOD, I'VE LEARNED A LOT IN PAST COUPLE OF MONTHS ABOUT PEOPLE WHO STAND BY YOU AND BELIEVE IN YOU AND THOSE THAT ARE THE PROVERBIAL FAIR-WEATHER FRIEND AND THOSE WHO, YOU KNOW, I MIGHT HAVE AND OTHERS MIGHT HAVE DONE A LOT...(AUDIO DIFFICULTIES)...THROUGH THE POSITIONS THAT THEY HAD AND WHERE PEOPLE STAND. PEOPLE ARE--PEOPLE ARE SOMEWHAT DISAPPOINTING AT TIMES BUT OTHER TIMES ARE VERY INSPIRING. AND THE INSPIRING ONES ARE KEEPING ME GOING AND IT'S WHAT'S CAUSING ME TO FIGHT. AND THE OTHERS REASONS I TOLD YOU ALL AGO. BUT THE QUESTION YOU ASKED ME IS THERE'S NO WAY I CAN EXPLAIN IT TO YOU. IT'S UNBELIEVABLY HORRIFIC. I'M NOT ASKING ANYBODY TO FEEL SORRY FOR ME. I WAS ONE OF THE WEALTHIEST MEN IN THE WORLD AND I ENJOYED A LIFESTYLE, NOT AN EXTRAVAGANT LIFESTYLE, BUT A LIFESTYLE THAT ONLY A HANDFUL OF PEOPLE ON THIS PLANET HAVE EVER AND WILL EVER EXPERIENCE. AND THAT'S NOT EVEN IMPORTANT TO MY ANY MORE. AND I'M TELLING YOU FROM THE BOTTOM OF MY HEART, TWO THINGS ARE IMPORTANT TO ME, AND THAT IS TO GIVE THE MONEY, ALL MONEY, BACK TO THE INVESTORS AND THE CLIENTS THAT THIS FAR-OVERREACHING SEC ACTION HAS CAUSED, TO THEIR DETRIMENT, AND TO RESTORE MY NAME AND MAKE THOSE I LOVE AND CARE ABOUT PROUD AGAIN AND WANTS TO BE PART OF SOMETHING THAT I'M DOING.
COHN: I WANT TO TALK A LITTLE BIT ABOUT ANTIGUA BECAUSE YOU PUT A LOT INTO THAT COUNTRY. AS I UNDERSTAND IT, YOU BASICALLY BUILT A FINANCIAL SERVICES INDUSTRY THERE. YOUR COMPANIES WERE MAJOR EMPLOYERS THERE. AND THEY'VE SEIZED EVERYTHING THAT YOU HAD THERE.
ALLEN: NOT YET.
COHN: WELL, TELL ME WHAT--TELL ME WHAT THAT HAS BEEN LIKE.
ALLEN: WELL, ANTIGUA'S BEEN A VERY IMPORTANT PART OF MY LIFE, ALSO, FOR THE PAST 25 YEARS. I LOVE THE COUNTRY, I LOVE THE PEOPLE, I'M A CITIZEN OF THE COUNTRY. THEY'RE NEAR AND DEAR TO MY HEART. THE EMPLOYEES THERE ARE LIKE MY FAMILY. I MEAN, I CARE FOR THAT COUNTRY MORE THAN I CAN TELL YOU. IT'S JUST LIKE I ALWAYS SAY, TEXAS AND ANTIGUA, WEST INDIANS, HAVE A VERY CLOSE RELATIONSHIP IN TERMS OF HOW THEY VIEW LIFE AND JUST HOW THEY CARRY ON THEIR VALUE SYSTEM. IT DOESN'T MATTER WHO YOU ARE, WHAT YOU HAVE. IT'S PEOPLE JUDGE YOU FOR, YOU KNOW, FOR WHAT'S INSIDE THIS HEART OF YOURS. AND I ALWAYS FELT A REAL KINSHIP THERE, BEING FROM TEXAS, AND BEING IN THE WEST INDIES, PARTICULARLY ANTIGUA. I PUT MY HEART AND SOUL INTO THAT PLACE. I'VE DONE THINGS NOBODY ELSE WOULD EVER DO. I'VE TAKEN RISKS, I'VE INVESTED THERE AND BUILT THINGS THERE THAT ARE WORLD CLASS THAT I'VE BEEN SO PROUD OF, AND I LOVE THE PLACE, I LOVE THE PEOPLE AND THE COUNTRY, AND I'M VERY SAD RIGHT NOW ABOUT NOT BEING ABLE TO GO BACK THERE. AND I'M VERY SAD RIGHT NOW ABOUT WHAT THE CURRENT GOVERNMENT IS TRYING TO DO IN ANTIGUA, WHICH IS BASICALLY TAKE OVER--TAKE OVER WHAT I HAVE PUT MY LIFE'S WORK INTO, BASICALLY, FOR NOTHING, CARVE IT UP AND TO GIVE IT TO SOME POLITICAL CRONY FRIENDS. THAT'S EXACTLY WHAT THEY'RE TRYING TO DO.
COHN: DO YOU FEEL BETRAYED?
ALLEN: OH, I'M BEYOND BEING BETRAYED AND I'M GOING TO FIGHT THAT TOOTH AND NAIL, TOO.
COHN: I ASKED YOU EARLIER ABOUT WHAT IT WAS THAT YOU INVESTED IN TO PRODUCE THE KINDS OF RETURNS THAT YOU'RE ABLE TO PRODUCE. AND YOU NEVER REALLY TOLD ME WHAT IT WAS. SO I WANT TO COME BACK TO THAT. WHAT WAS IT? WHAT WAS YOUR SECRET?
ALLEN: THERE WASN'T ANY SECRET. THE SECRET WAS HARD WORK, DOING THINGS THAT OTHERS MAY NOT TAKE THE EFFORT OF THE TIME TO DO. EXAMPLE BEING, WHY WEREN'T WE IN SECURITIZED DEBT? WHY DIDN'T WE BUY INTO THE CDO/SUBPRIME STUFF? IT'S REALLY EASY WAY TO MAKE MONEY, SUPPOSEDLY, BUT WE LIFTED UP THE HOOD, LOOKED AT IT AND DISCOVERED THAT THOSE REALLY WERE NOT VERY RISKLESS, THEY WERE VERY RISKY INVESTMENTS. AND THERE'S NO MAGIC TO INVESTING. IT'S JUST HARD WORK, IT'S A LOT OF DILIGENCE AND IT'S JUST STAYING THE COURSE. AND THE RETURNS WE'VE MADE OVER THE YEARS WERE NOT THROUGH THE ROOF. IN GOOD TIME, WE BASICALLY UNDERPERFORMED. IN BAD TIMES, WE PERFORMED A LITTLE BETTER. BUT I LET OUR CFO AND HIS INVESTMENT TEAM, LED BY OUR CIO AND OTHERS, PUT TOGETHER A GROUP OF PEOPLE THAT I HAD TOTAL CONFIDENCE IN TO EXECUTE ON WHAT WE CALL THE STANFORD INVESTMENT MODEL, WHICH WAS A MODEL THAT WE GO OUT AND WE FIRSTHAND EXAMINE WHERE WE'RE GOING TO INVEST. AND SOMETIMES WE GO AGAINST THE GRAIN, SOMETIMES WE GO INTO SMALLER MID-CAP OR LOWER-CAP COMPANIES WE THINK HAVE GREAT GROWTH POTENTIAL, AND THEY WOULD INVEST IN THOSE. AND I WOULD GET A REPORT EVERY QUARTER AND A LOT OF TIMES WE DID VERY WELL, SOMETIMES WE DIDN'T DO QUITE AS WELL. BUT EVERYTHING WE INVESTED IN HAD, WHETHER IT'S REAL ESTATE, WHETHER IT WAS AN EQUITY PLAY OR AN FX PLAY, OR WHATEVER IT MAY BE, WAS REAL. THERE WAS NO HOCUS POCUS, THERE'S NO FUNNY STUFF GOING ON. AND IF ANYTHING WAS GOING ON THAT WASN'T CORRECT, I DIDN'T KNOW ABOUT IT. LET'S PUT IT THAT WAY. I DIDN'T KNOW ABOUT IT.
COHN: BUT REAL ESTATE EQUITIES...(UNINTELLIGIBLE)...CHANGE. PEOPLE WERE LOSING THEIR SHIRTS ON THOSE INVESTMENTS IN THE LAST YEAR, AND YOU WEREN'T. AND THAT'S WHY--ISN'T THAT WHY THE AUTHORITIES ARE SUSPICIOUS?
ALLEN: WE DID LOSE MONEY. WE DID LOSE MONEY.
COHN: HOW MUCH? HOW BADLY?
ALLEN: I DON'T KNOW. I DON'T HAVE ACCESS TO MY RECORDS.
COHN: YOU'RE--AS YOU SAY, YOU TRUSTED YOUR CHIEF FINANCIAL OFFICER, YOUR CHIEF INVESTMENT OFFICER. YOUR CHIEF FINANCIAL OFFICER, WHO'S A LONGTIME--WAS A LONGTIME FRIEND OF YOURS, IS COOPERATING WITH THE AUTHORITIES RIGHT NOW. WHAT ARE YOUR THOUGHTS AND FEELINGS ABOUT THAT?
ALLEN: I REALLY DON'T HAVE ANY. I DON'T KNOW WHAT HE'S SAYING OR WHAT HE'S DOING. I HAVEN'T SEEN HIM IN A COUPLE OF MONTHS. I REALLY DON'T HAVE ANY COMMENTS ON THAT. I DON'T KNOW WHAT HE'S DOING.
COHN: YOU SAID THAT YOU WEREN'T INVOLVED IN A LOT OF THE NUTS AND BOLTS, BUT CLEARLY, SOMEONE IN HIS POSITION WOULD HAVE BEEN?
ALLEN: CLEARLY. THE INVESTMENT COMMITTEE REPORTED TO HIM, THE AUDIT COMMITTEE REPORTED TO HIM. THE INSURANCE AND RISK SIDE REPORTED TO HIM. AND THE REPORTING OF THE BANK NUMBERS AND ALL OF THAT, HE WAS RESPONSIBLE FOR. AND HE LIAISED WITH THE EXTERNAL AUDITORS. THOSE WERE ALL HIS RESPONSIBILITY AND HIS THINGS, AND I WOULD GET REPORTS THEREAFTER. SO THAT'S HIS RESPONSIBILITY AND I TRUSTED HIM TO DO HIS JOB.
COHN: SO IF JIM DAVIS CUTS A DEAL, PLEADS GUILTY TO SOMETHING AND COOPERATES AGAINST YOU, IS HE TO BE BELIEVED?
ALLEN: WELL, I DON'T KNOW WHAT JIM DAVIS IS SAYING. ALL I CAN TELL YOU IS THAT ALLEN STANFORD HAS RUN NO PONZI SCHEME. ALLEN STANFORD HAS SET OUT TO DEFRAUD NO ONE. ALLEN STANFORD HAS WORKED HIS BEHIND OFF, MY BUTT OFF, FOR 25 YEARS, TO BUILD A CREDIBLE, REAL, SOLID, SOLVENT GROUP OF COMPANIES. I HAVE NEVER DONE ANYTHING TO DO ANYTHING TO REMOTELY, AND I MEAN REMOTELY SUGGEST THAT I WOULD DEFRAUD ANYBODY, SWINDLE ANYBODY OR RUN ANY TYPE OF PONZI SCHEME, PERIOD, THE END.
COHN: AND THE FIGHT IT BACK. YOU WERE KNOCKED ON YOUR HEELS FOR A LITTLE BIT AT TIMES, BUT YOU'RE CLEARLY FIGHTING NOW.
ALLEN: SCOTT, I WASN'T KNOCKED ON MY HEELS, I WAS KNOCKED OUT. NOBODY COULD BE IN THE POSITION I WAS IN AND TO HAVE THIS HAPPEN TO THEM LITERALLY OVER A COUPLE OF DAYS, AND SEE YOUR WHOLE LIFE'S WORK JUST BASICALLY VAPORIZE IN FRONT OF YOU, AND THEN TO BE PUT IN THE POSITION WHERE YOU DON'T HAVE ACCESS TO RECORDS, YOUR OWN CLOTHES, ALL YOUR MONEY'S FROZEN, AND THEN YOU'RE SUPPOSED TO FIGHT. I'M GOING TO FIGHT. I'M DAMN GOING TO FIGHT.
COHN: MR.. STANFORD, THANK YOU VERY MUCH.
ALLEN: OK. THANK YOU.
***
COHN: IS THERE ANY WAY--I MEAN, IF THIS ALL MAGICALLY WENT AWAY TOMORROW, IS THE DAMAGE ALREADY DONE TO THE COMPANIES? IS THERE ANY WAY THAT YOU COULD SALVAGE ANYTHING OUT OF THIS AT THIS POINT OR IS IT...
ALLEN: I DON'T KNOW. THERE'S A WHOLE 'NOTHER MANY CHAPTERS LEFT TO TELL IN THIS. THIS IS GOING TO BE A LONG PROCESS. I CANNOT BELIEVE I'M EVEN HAVING THIS INTERVIEW. IT'S UNBELIEVABLE.
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