How much is left at Stanford International Bank?

Now that the initial storm has passed over the demise of Stanford International Bank (SIB), the question I get the most from readers , friends and yes, family, is how much will people will be able to recover from the bank once the dust settles and the assets can be compared to the liabilities?

First of all, you should read Alex’s post on Stanford versus Stanford, so that you have clear that the problem is with the depositors of Stanford International Bank and not with Stanford Group, Stanford Advisers and/or Stanford Asesores. The former is a bank that issued CD’s and opened accounts in Antigua, the latter is a network of advisors who opened accounts for clients as brokers, not as banks, even if these advisors would also sell their cleints CD’s at SIB.

The answer is that I don’t know how much people will be able to recover from deposits at SIB, but I am not too hopeful. Let’s see why:

Stanford used to tell people that it gave no loans, other than those 80-100% guaranteed by cash deposits and that it invested its portfolio in a variety of instruments. In the Dec. 2007 financial statement, SIB had assets of US$ 7.05 billion and deposits (the infamous CD’s and others) of US$  6.89 billion. In the same report, it claimed to have Cash and equivalents of roughly US$ 627 million and investments of US$ 6.347 billion, distributed like the following pie chart:

This portfolio was claimed to be at “fair market value” implying that it is mostly in liquid instruments traded in the market sufficiently often for you to obtain a price for it.

The first warning one gets, is that the receiver has only managed to find US$ 250 million in assets. That is bad, but the whole thing simply collapses when you learn that the Chief Investment Officer for SIB claimed to the SEC, that the investment portfolio had the following assets (using December’s numbers for the amount of dollars):

Tier I (Cash and cash equivalents)                            10%~US$ 800 million

Tier II (Portfolio run by others)                                   9%~US$ 765 million

Tier III ( Assets managed by Stanford Group)       81%~US$ 6.88 billion

The problem is that in the same testimony, the Chief Investment Officer says that those US$ 765 million have become in fact US$ 360 million, because oops, she lost over half of what she managed since April of last year and the US$ 6.88 billion included “over US$ 3 billion in real state and a US$ 1.6 billion loan” to none other than Allen Stanford. And then there is some private equity investments.

But remember that they claimed not give out loans unless it is collateralized, unless I guess you are the owner and order it. Thus, you can see the problem, there is no correspondence between the “investment portfolio” advertised by Stanford and reported in its financials and what the Chief investment officer claimed to know about to the SEC. (And she was charged with obstruction of justice anyway)

In fact, the infamous capital infusion by the “shareholders” (Stanford) of US$ 541, turned out to be not only not in cash, but in real estate for which Stanford had paid US$ 88.5 million. All smoke and mirrors!

Thus, you can see it is all a house of cards, a Ponzi scheme that collapsed and at this point all that the receiver has found is US$ 250 million in assets. (about 2.9% of deposits). As Alex notes, the sale of Stanford Group’s assets may not give much back to Antigua, so you may have some real estate, some private equity companies, some airplanes and that is that.

A true Ponzi scheme. People were paid with money from new depositors and I have little hope that a hidden account with investments will be found that could even double the 2.9% found so far. And least of all, you should not believe in the foolish Prime Ministers of Antigua and St. Vincent, each of which supposedy opened an account with US$ 8,000 at SIB to boost “consumer confidence” and rescue SIB. These guys appear to have no clue as to what 10^9 dollars really means…