Extreme prejudice

Business | A culture of too much trust may have contributed to the Stanford financial scandal | Warren Cole Smith

Associated Press/Photo by Carlos Hernandez

Number 205. That's what some of Texas billionaire Allen Stanford's colleagues and friends started calling him when he was named No. 205 on Forbes magazine's list of the 400 richest people in the world.

Soon after he was named to the list, he appeared on CNBC, the financial network, and was asked by anchor Carl Quintanilla, "Is it fun being a billionaire?" Stanford, 58, laughed and answered, "Well, uh, yes, yes. I have to say it is fun being a billionaire."

But it got a whole lot less fun on Feb. 17. That was when the Securities and Exchange Commission (SEC) said that Stanford and his accomplices had been operating a "massive Ponzi scheme," had misappropriated billions of investors' money, and had falsified the Stanford International Bank's records to hide their fraud. The SEC was blunt in its assessment: "Stanford International Bank's financial statements, including its investment income, are fictional." Also named in the complaint were Laura Pendergest-Holt, Stanford's Chief Investment Officer, and James Davis, Stanford's Chief Financial Officer.