Too many degrees of separation
from CNBC’s Stanford course

          Posted: Friday, May 15, 2009

The known facts on Allen Stanford, presented by CNBC correspondent Scott Cohn, are these:

He originally did banking in Montserrat, and when the British found too much general money-laundering issues on that island and clamped down, he moved to Antigua, also regarded as an offshore banking haven, where he wanted to build his own private airport with its own private customs. He bought a small island in 2008 for $63 million and marked it up to $3 billion by the end of the year. The SEC has been investigating for four years, admits inquiries since 2001. He puts his name on everything, sponsors all kinds of sports events, spends enormous amounts of money on his office. And a large amount of money invested in his company allegedly can't be found, and when the SEC lowered the boom, the man behind the bank couldn't be located for a couple of days.

Not all of this was known until recently. But the question is: How would anyone possibly let this guy handle their life savings in an offshore account?

That is the question Cohn virtually never explores in "Secrets of the Knight: Sir Allen Stanford & the Missing Billions," an hourlong CNBC original production that mars interesting material with an uneven, unfocused production.

Cohn spends much of the program detailing the financial problems of Troy Lillie — who at 59 is the same age as Stanford, Cohn tells us at least three times in an overbearing attempt at cleverness that doesn't work.

Lillie is a likable person, an ExxonMobil retiree. He and his wife, Melanie, are sympathetic figures. They apparently have lost $900,000 under some kind of alleged banking fraud that might be similar to a Ponzi scheme. This is not to blame them for whatever fraud occurred.

Rather, it is to wonder how educated people who have worked hard and saved well their whole lives would somehow put their entire life savings of $909,502.60 into offshore bank CDs? (The statement shown on the program shows the money in "fixed income" investments; according to Cohn, the SEC says the CDs were bogus.)

Cohn asks Lillie: "Why did you decide to, to, to let your money go into those CDs?"

Answer: "My main goal was that they be, that money be in something safe and I want it, wanted it in something that would, you know, would make me some money off of investments, you know, and they told me that this was the safest ... that they had ... in the bank."

"Something safe ... that would make me some money off of investments..." Or in other words: Someone with a lot of money who has no idea what he's doing with it (no shame there), highly susceptible to a sales pitch from a financial adviser such as Stanford's Michael Word, who according to Cohn collected $1.3 million over two years for landing accounts such as Lillie's.

Another couple, Mike Kogutt and Angie Shaw, who also seem like two fine, responsible, people, claim "We did three months of due diligence" before committing to Stanford. "Satisfied it was safe, they invested the entire $2 million there," Cohn says.

The entire $2 million.

In an offshore bank.

In a country with known money-laundering issues.

After three months of due diligence.

Other than citing a letter from George W. Bush — which is dubious enough — Cohn doesn't ask how three months of due diligence could result in the conclusion that someone should put their entire $2 million in offshore CDs in a nation known for money-laundering issues.

Isn't anyone familiar with their hometown bank?

Cohn's report has much in common with David Faber's "House of Cards," a recent CNBC documentary that traced how so many outrageous mortgages were given. Faber's report is two hours long and much more focused. But that one too glosses over how people could sign things involving huge amounts of money without understanding what they are signing.

Notice there are key differences with the CNBC hourlong program on Bernie Madoff, the "Scam of the Century." Madoff's investors were generally people who knew him — and his was at least a New York "enterprise," not an offshore operation. That is not to say one party of victims is any more blamable than another, only that the warning signs would be completely different. One was a secretive, but New York-based, hedge fund. Another was seemingly a regular bank, but offshore.

Cohn's production is choppy because the crown jewel is an interview with Stanford, and Cohn neither wants to cough it all up at the beginning, nor does he want to tease the whole thing to the end. So he intersperses stories of victims, Antigua and Stanford himself with snippets of the Stanford interview. At least the interviews provide fresh material, and Cohn doesn't have to use 30 — yes, 30, we counted — shots of Bernie Madoff walking to the courthouse in his baseball cap like producers did in "Scam," although that footage appeared twice during the Stanford report, once in the report and once in a CNBC promotional commercial. In "Secrets" the cricket shots are maybe a bit overused, but the only oddity is a shot that is apparently a 1970s college campus shown repeatedly when Stanford's Baylor background is mentioned.

The scattershot nature of "Secrets of the Knight" is disappointing, because there is a lot of interesting material here for an hourlong show. Few viewers probably even knew what Antigua was prior to a few months ago. The scenes of the island are all pretty favorable actually. The nation looks prosperous by Caribbean standards, the water is sky-blue, and the star guest, Attorney General Justin Simon, sounds like a credit to elective office anywhere. He works out of a non-descript office, is an honest broker, articulate, and his evaluation of the mess so far comes across as unimpeachable. (It's also amusing how he does the interview in a Hawaiian shirt and sandals.)

What does Allen Stanford actually tell Cohn? Not much, except the words "Allen Stanford." The man clearly prefers to discuss himself in third person. "Allen Stanford has worked his behind off ... my butt off ... for 25 years," is one of many such references.

Interestingly, Stanford does not look as well-groomed in the interview as he does in most of the other stock footage. His short hair looks a little rough. Evidently his handlers want him in a suit, but looking a bit more "everyman."

Cohn asked how the reported returns could be better than average. "We run a very tight ship" — same line used by the William H. Macy character in "Fargo" — said the guy with the outrageously luxurious office who sponsors sports events including $20 million cricket challenges. "There's no magic to investing."

He blamed government attention on Bernie Madoff.

"Madoff was a true Ponzi scheme ... We have real assets, real people." The government, he said, "they decimated this thing."

"Real people." "This thing."

Cohn asked him if he was an informant of the government for Caribbean money-laundering issues. "You mean CIA? ... I'm not gonna talk about that," he said, and oh, the mysterious nature of his persona is just so fascinating.

His response to what might happen if one of his top execs, James Davis, cuts a deal with prosecutors sounded like the same defense of every famous white-collar prosecutorial target this decade, which hasn't worked yet to anyone's knowledge: that the guys under him who are cooperating are the ones who cooked the books — if the books were even cooked at all.

Davis "liaised with the external auditors," Stanford said.

"Liaised." Good one.

But he also says it was the feds who "decimated this thing."

So either it was a government atrocity against a legit business, or it was fraud on the inside that Sir Allen didn't know about.


Note: CNBC has updated "Secrets of the Knight," since this review was originally posted, to include news of Stanford's indictment.

"Secrets of the Knight: Sir Allen Stanford and the Missing Billions" (2009)

Featuring: Allen Stanford, Troy Lillie, Melanie Lillie, Michael Word, Justin Simon, Mike Kogutt, Angie Shaw, Michael Stanley, James Davis, Laura Pendergest-Holt, Charles Rawl, Mark Tidwell

Correspondent: Scott Cohn
Executive producer: Sandy Cannold
Senior producer: Courtney Ford
Senior producer: Jeff Pohlman
Written by: Scott Cohn
Editor: David Lettieri
Editor: Richard Korn
Producer: Jamie Corsi
Producer: Tom Junod
Producer: Kevin Kane
Camera: Chris Balcom, Cliff Derbins, Jeff Duncan, Jerry Hattan, Jack Rayzor, Dwaine Scott, Joe Vasquez
Audio: Scott Anderson, Brian Peterson, Anthony Rowland, Bill Williams
Creative director: Victoria Todis
Graphics: Peter Kourkoumelis
Director of editing: Vito Tattoli
Antigua production assistant: Paul Christian
Additional video: ITV, ABS TV
Managing editor: Tyler Mathisen

Back to CNBCfix home

CNBCfix home

CNBCfix review:
David Faber’s
‘House of Cards’

CNBCfix review:
Regan the star
of ‘Marijuana Inc.’

CNBCfix review:
‘Untold Wealth’ a
bit soft for Faber

CNBCfix review:
‘Run for Roses’
a one-trick pony

CNBCfix review:
‘As Seen’ leaves us
waiting for more

CNBCfix review:
‘Cruise Inc.’ not just
for ‘nearly dead’

Fast Money review

Fast Money cliches
FM Viewers Guide

Why we don’t
review Mad Money

Movie review:
‘Wall Street’

Masterful Gordon Gekko

CNBC/cable TV
star bios

♦ Jim Cramer
♦ Dylan Ratigan
♦ Charles Gasparino
♦ Maria Bartiromo
♦ Lawrence Kudlow
♦ Michelle Caruso-Cabrera
♦ Jane Wells
♦ Erin Burnett
♦ David Faber
♦ Karen Finerman
♦ Guy Adami
♦ Jeff Macke
♦ Pete Najarian
♦ Jon Najarian
♦ Tim Seymour
♦ Becky Quick
♦ Joe Kernen
♦ John Harwood
♦ Steve Liesman
♦ Margaret Brennan
♦ Bertha Coombs
♦ Mary Thompson
♦ Trish Regan
♦ Melissa Francis
♦ Rebecca Jarvis
♦ Darren Rovell
♦ Carl Quintanilla
♦ Diana Olick
♦ Anderson Cooper
♦ Neil Cavuto
♦ Monica Crowley
♦ Bill O'Reilly
♦ Rachel Maddow
♦ Susie Gharib
♦ Jane Skinner
♦ Kimberly Guilfoyle
♦ Martha MacCallum
♦ Courtney Friel
♦ Uma Pemmaraju
♦ Joe Scarborough
♦ Terry Keenan
♦ Chrystia Freeland
♦ Christine Romans

CNBC guest bios

♦ Bill Gross
♦ Dennis Gartman
♦ Diane Swonk
♦ Meredith Whitney
♦ Richard X. Bove
♦ Arthur Laffer
♦ Jared Bernstein
♦ Doug Kass
♦ David Malpass
♦ Donald Luskin
♦ Herb Greenberg
♦ Robert Reich
♦ Steve Moore
♦ Vince Farrell
♦ Joe LaVorgna
♦ A. Gary Shilling
♦ Joe Battipaglia
♦ Addison Armstrong
♦ Jack Bouroudjian
♦ Stefan Abrams
♦ Warren Buffett