VZCZCXRO5263
RR RUEHGR
DE RUEHWN #0136/01 0581721
ZNR UUUUU ZZH
R 271721Z FEB 09
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC 7173
INFO RUCNCOM/EC CARICOM COLLECTIVE

UNCLAS SECTION 01 OF 02 BRIDGETOWN 000136 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: ECON KCRM EFIN XL
SUBJECT: THE STANFORD SAGA: IMPLICATIONS FOR THE EASTERN CARIBBEAN 
 
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SUMMARY 
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¶1. (SBU) The Eastern Caribbean is still bracing itself for the full 
impact of fraud allegations against Texas billionaire and financier, 
¶R. Allen Stanford.  Some effects from the fall-out have already been 
felt across the region, most notably in Antigua and Barbuda, where 
Stanford was the largest private-sector employer and one of the most 
generous philanthropists.  Broader uncertainties are starting to 
surface over the impact this case might have on the region's 
offshore banking sector, with unwanted extra scrutiny falling on 
these island nations at the same moment that they are looking 
nervously over their shoulder at a Capitol Hill they see as poised 
and eager to slap sanctions on so-called Caribbean "tax havens." 
End summary. 
 
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IMMEDIATE EFFECTS FELT IN ANTIGUA AND BARBUDA 
--------------------------------------------- 
 
¶2. (U) The disclosure that the Securities Exchange Commission (SEC) 
had brought fraud charges against Antigua resident and regional 
financier, R. Allen Stanford had immediate effects in the twin 
island state of Antigua and Barbuda where the Stanford Group of 
Companies is based. Hundreds of Antiguans descended on the offices 
of the Stanford's domestic Antiguan bank -- the Bank of Antigua -- 
to withdraw their savings.  In addition, many investors travelled 
into Antigua in a futile attempt to reclaim their investments in 
Stanford International Bank (SIB), whose assets had been frozen. 
 
¶3. (U) The run on the Bank of Antigua and efforts of foreign SIB 
investors prompted immediate action by both the Antigua Government 
and the Eastern Caribbean Central Bank (ECCB).  The Government of 
Antigua appointed a receiver to take control of Stanford 
International Bank Ltd and Stanford Trust Company Ltd., while the 
ECCB seized control of Bank of Antigua to insure the remaining 
domestic deposits. 
 
¶4. (U) The uncertainty surrounding Stanford's businesses and 
investments in the island state has left the Antiguan economy 
enveloped in uncertainty with many jobs in jeopardy.  Stanford is 
omnipresent in Antigua, with an estimated one billion dollars 
invested in banking, real estate development, tourism, and even an 
ownership stake in the country's biggest newspaper, the Antigua Sun. 
 With some 4,000 people employed in his business concerns on the 
island, Stanford is the second largest employer in Antigua -- 
trailing only the public sector in jobs created.  Just three weeks 
before the SEC's announcement, Stanford had announced the 
elimination of 200 jobs at the Stanford Development Company Ltd., 
the Group's land development company.  There was little prior 
evidence that the global economic crisis was having a significant 
impact on real estate development or investment-led growth, 
according to a local real estate developer.  Now, however, many in 
the business community have told us that the economy is 
deteriorating rapidly. 
 
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ELECTION FALLOUT UNCERTAIN 
-------------------------- 
 
¶5. (SBU) The allegations surrounding Stanford and his dealings in 
the twin island state has cast a dark shadow over the upcoming 
general elections, which are slated for March 12. Both the incumbent 
United Progressive Party (UPP) and the opposition Antigua Labour 
Party (ALP) have tried to distance themselves from Stanford. 
Economic woes in Antigua and Barbuda are a critical issue in the 
election campaign.  The UPP government recently recalled Parliament 
after it was dissolved in preparations of the elections to discuss 
the economic impact of allegations against Stanford, and is 
proposing, inter alia, the expropriation of all of Stanford's real 
assets in the country, amounting to some 250 acres of land and 45 
properties. 
 
¶6. (SBU) According to some Embassy contacts, the prevailing opinion 
that Stanford's close ties to the opposition ALP would lead to an 
electoral boost for the UPP has so far not materialized.  Stanford's 
largesse over many years has endeared him to many Antiguans, who 
hope he is cleared of all charges so the gravy train can continue. 
Many other Antiguans have long resented Stanford's deep pocketed 
efforts to curry favor and see the SEC case as a long overdue 
comeuppance for a non-Antiguan with a domineering reputation. 
Stanford has always been close to the ALP, and it is likely that any 
negative fallout against Stanford would likely hurt the ALP's 
chances at the polls in the March 12 elections. 
 
¶7. (SBU) The ALP has most recently attempted to mount a defense for 
Stanford in parliament, accusing the UPP of denying him due process 
and of acting precipitously to expropriate his property before all 
the facts are in.  ALP leader Lester Bird has cast this as a 
sovereignty issue, claiming to be defending Antigua's land from 
encroachment by U.S. authorities and as the first salvo in an 
 
BRIDGETOWN 00000136  002 OF 002 
 
 
all-out war against Antigua's offshore banking sector. 
 
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REGIONAL ECONOMIC FALL-OUT 
-------------------------- 
 
¶8. (U) Stanford's investments and financing stretched into the 
Eastern Caribbean, and beyond.  Governments in the region, 
especially those in the Leeward Islands, have been caught up in the 
tsunami of Stanford's financial problems. Regional institutions such 
as the regional airline, LIAT, and regional cricket governing body, 
West Indies Cricket Board (WICB), have not been immune to the 
fall-out since the allegations against Stanford were disclosed.  In 
a press statement, LIAT CEO Mark Darby sought to underscore that 
Stanford has never had any interest or stake in the regional 
airline.  Similarly, the WICB has announced that it does not stand 
to lose any financing or investment, as it tried immediately to 
distance itself from Stanford.  This announcement came as a surprise 
to many given a five year agreement which was signed between the 
WICB and the Stanford organization and the staging and payout from 
last year's Stanford 20/20 cricket tournament. 
 
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RENEWED FOCUS ON CARIBBEAN FINANCIAL SYSTEM 
------------------------------------------- 
 
¶9. (SBU) Looking at the long term, the Stanford case has once again 
brought scrutiny on the Caribbean offshore financial system.  Some 
in the region have voiced concern that the case will strengthen 
arguments they fear are being made on Capitol Hill to take action 
against so-called "tax havens" in the Caribbean.  These fears were 
intensified by recent reports that many U.S. institutions receiving 
federal bailout money, including many major U.S. banks, maintain 
subsidiaries in the Caribbean (notably the Cayman Islands) 
specifically to avoid U.S. taxation.  This unwanted attention comes 
at a particularly bad time for Caribbean economies, many of which 
rely on offshore services as economic drivers. 
 
¶10. (SBU) The sole bright spot in the Stanford episode has been the 
performance of the Eastern Caribbean Central Bank and its widely 
respected Governor, Sir Dwight Venner.  The ECCB's quick action to 
send liquidity to the Bank of Antigua in the initial hours of the 
panicked run on the bank, and the institution's deft and expeditious 
establishment of a receivership of the bank to restore depositor 
confidence, was a tough test well met by Venner.  Such responsible, 
level-headed action should prove a long-term plus for the Eastern 
Caribbean financial and investment climate, and proves there is a 
solid basis for regional integration at least at the OECS level. 
 
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COMMENT 
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¶11. (SBU) As many Eastern Caribbean countries already battle high 
unemployment, decreases in remittances, increased prices and other 
effects from the current global economic slowdown, the allegations 
of fraud against Stanford have exacerbated a feeling of economic 
uncertainty in the region. The economic effects from the Stanford 
saga will be far-reaching, especially in Antigua and Barbuda where 
the Stanford Group played an integral role in its economy. 
Depending on how the case against Stanford progresses, the prospect 
of the GoAB expropriating his holdings could make remuneration of 
his previous investors a tricky issue in our bilateral relationship 
down the road. 
 
HARDT