Post I From the Devil:The Stanford International Bank Story: The duck spreads its wings…abroad

February 13, 2009

On Monday I was chatting via email with Duck-Tale extraordinaire, whistle blower, Caracas and Florida-based analyst and it turns out regular visitor Alex Dalmady and was telling him how surprised I was at the little impact in Venezuela of his piece in the monthly Veneconomy on Stanford International Bank, despite the fact that it was reprinted practically in its entirety by Descifrado.

He noted that we all have a friend, relative or acquaintance who has or had an account in it and thus this may be limiting the spreading of the news. And while we were watching inside Venezuela, the whole thing exploded outside. That night I finally wrote my piece on it, not because I was delaying it, but simply because I finally had the time to write it!

And then the whole thing exploded, not here, but abroad. What I had probably not understood is that while the victims of SIB may be located mostly in Latin America and the Caribbean, the wounds and noise of Madoff have set off a race to find new Ponzi/Pyramids/Madoffs wherever they may be. Funny, when Venepiramides first appeared I thought the topic was somewhat narrow, maybe its owners now regret not doing it Enlish rather than in Spanish. They were on the right track and have kept up their great job, but the Venezuelan blogosphere has yet to catch on to the subject.

My post was noted by Inca Kola News (hey! I don’t hate Chavez, I just don’t want him as President!). Soon after a post appeared in written by Feliz Salmon, which was clearly noticed as Seeking Alpha picked it up and then Business Week and the ball started to roll (and then gave Alex and Veneconomy credit).

But in some sense, it did, because Alex Dalmady had a very specific prediction or smoking gun to watch in his Duck Tales article: SIB was supposed to provide financing to Health System Solutions to acquire Emageon by Feb. 11th. and it just failed to do so, suggesting that SIB was indeed having liquidity problems if it was unable to come up with the funds and incurr in a US$ 9 million loss. And SIB failed to do so, pushing Emageon shares down as much as 56% that day. I had earlier found a similar failure for SBI to deliver financing to Elandia, which cost SBI control over the company. That makes two separate smoking guns that liquidity is just not well a the US$ 8.5 billion institution.

By now, the duck is spreading its wings far and wide. Bloomberg broke the story concentrating on the sale of SIB’s CD’s in the US, clearly a no-no. Caracas Gringo interviewed Dalmady, the Financial Times jumped on the story loving the cricket angle, a New York Times blog got into the story and by now the  Associated Press is also into it. (Only Forbes and the WSJ are missing now…)

But still, what the hell is going on at the Duck?

So far, responses to the criticism have been surprising to say the least. “It is just one analysts opinion” simply does not fly well. And then tonight we get a letter (see comments, its veracity ahs been confirmed) from none other than Sir Allen to its employees, which to me raises more questions than answers:

” Although we have not been the beneficiary of any taxpayer money, hard as we try, we are not immune from that crisis”

Funny, all the accusations by Dalmady are based on the Antigua based Stanford International Bank, why should that entity get anything?

“You have heard that regulators from different agencies have visited our offices in recent weeks, as they have been doing to many financial operations around the country.”

Visits all over the country have a different purpose than looking into the sale of CD’s issued by Antigua-based Stanford International Bank to US citizens.

“SIB remains a strong institution, and even without the benefit of billions in US taxpayer’s dollars we are taking a number of decisive steps to reinforce our financial strength. We will take the necessary actions to protect our depositors. I have already added two capital infusions into the bank and we are considering a number of other steps as needed.”

Once again, why should SIB even aspire to receive US taxpayers dollars?

And then, if as reported in the December 17th. letter in its website, things were peachy and the bank had not incurred in any losses, why did SIB had to inject US$ half a billion in capital and “is considering a number of other steps are needed”?

There were very simple questions which were not answered in this letter, like: Where are the assets that generated the wonderful results SBI claims in a year when equities were down 4-0-50% across the world and the bank claimed to have started the year with a 50%-plus allocation to Equities? Why did the bank fail to provide financing to Emageon and Elandia? Are withdrawals being promptly met? Or even why did Sir Allen really withdraw his funding from the 20/20 cricket challenge in December?

But in the end, the strangest aspect of the whole story is that there is total silence in Venezuela. Nothing in the news in the country that gave SIB its initial push, with as much as US$ 3 billion in deposits from Venezuelans. Stanford even purchased a local bank “Stanford Bank” to give some semblance of legality to the sale of SIB products, which is a gray area in my country. Stanford’s reach is so wide, that I am sure that many of the new Boli-bourgeois, have accounts there, after all, it was probably the bank with local presence with the lowest compliance requirements in the market and the most aggressive sales force.

As I said, everyone in Venezuela either knows or is related to someone with money at SIB. In fact, I have been warning people I knew about this for years. And I must say, while some listened to me partially, not a single one of them withdrew all of its savings from SIB. Not one.

Finally, I find it somewhat hilarious that when I wrote about this on Monday, the Duck Tales or El Pato write ups were nowhere on the web, so I decided to post them  at my usual location ( where I load up documents that I can’t find on the web. Everyone seems to be unloading it from there…You truly never know where your blog will take things…

But as you can see from the next post, Alex Dalmady is quite amazed…

One Response to “Post I From the Devil:The Stanford International Bank Story: The duck spreads its wings…abroad”

  1. Ken Price Says:

    There is an old rule in finance, as well as life: “If it seems too good to be true, it probably is”. The stories about Madoff and Stanford all seem to be repeats of the same story; and all such stories seem to end the same way- the investors/depositors get screwed.

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