Accused Antigua regulator gave Stanford clean bill

MIAMI (Reuters) - Days before Allen Stanford's business empire came crashing down in February, the top regulator in the Texas billionaire's Caribbean banking base of Antigua and Barbuda blithely declared that his flagship bank there had passed a "satisfactory" test.

Leroy King, head of the Antigua and Barbuda Financial Services Regulatory Commission (FSRC), now finds himself accused by U.S. authorities of being a key inside collaborator of the "massive Ponzi scheme" Stanford is charged with.

Stanford, several associates and King were indicted on fraud, conspiracy and obstruction charges over the $7 billion fraud, U.S. Justice Department officials said on Friday.

Asked about the charges, an employee at the Antiguan regulator's headquarters in the capital St. John's said King was "out of the office and on leave." Calls for comment to the Antiguan government were not immediately answered.

The sleepy twin-island state was at the heart of Stanford's business empire stretching from the Caribbean to the United States, Latin America and Europe. Antigua's biggest bank, Stanford International Bank Ltd (SIB), sold the certificates of deposit (CDs) which U.S. investigators say bilked thousands of investors out of billions of dollars.

The scandal surrounding Stanford, a flamboyant sports entrepreneur who was known as "Sir Allen" in Antigua after he was granted a knighthood by the government, has delivered another black eye to the image of the Caribbean offshore finance sector, which critics say lacks control and oversight.

In an amended complaint on Friday, the U.S. Securities and Exchange Commission alleged that Antigua regulator King got "thousands of dollars in bribes" from Stanford to ensure the FSRC "looked the other way" and conducted sham audits.

The SEC alleges that Stanford's "corrupt payments" to King totaled more than $100,000, and said King, acting as gamekeeper turned poacher, helped Stanford and his associates evade and obstruct U.S. probes into the Stanford business empire for several years.

As a reward, the SEC says, King received cash bribes, and other inducements, such as the use of Stanford's fleet of private jets, the use of a corporate car from Stanford's bank, and tickets to the 2004 Super Bowel.

Yet in an interview with Reuters on Friday, February 13, when media reports were swirling that Stanford's financial network was tottering and investigators were closing in, King insisted he had "no credible information" that SIB was not sound.

He said the last check on the bank had been "satisfactory."

"I'm sure we've asked the right questions ... It would break my heart to know it happened on my watch," he said.

"NOT A FRIDAY AFTERNOON COCKTAIL ANY MORE"

Reacting to the growing reports of alleged fraud, King earnestly promised in February to step up his checks: "No holds barred, that sort of thing. It's not a Friday afternoon cocktail any more. It's taking off the gloves. We have a job to do to protect our jurisdiction."

Only days later, angry and anxious investors were besieging Stanford banks and companies in Antigua, in Venezuela and in other Latin American capitals, desperately trying to recover funds from accounts which were quickly frozen by authorities.

The SEC indictment alleges that from at least February, 2005, King, "in exchange for the bribes ... facilitated SIB's fraud by obstructing the SEC's investigation into SIB and abdicating the FSRC's oversight responsibilities."

In February, one of Antigua and Barbuda's top diplomats, McChesney Emanuel, called on King to resign. But he still formally remained at the head of the regulatory commission, although he stayed out of the office on extended leave.

Soon after the initial SEC accusations against Stanford, Antigua and Barbuda appointed a receiver to take control of the bank and trust company he operated in the Caribbean nation.

Antigua and Barbuda lawmakers also approved a government takeover of land owned by Stanford, including plots housing his Antigua-based banks and companies, as well as beachside homes and multimillion dollar development projects.

Back in the 1990s, Antigua's financial sector came under scrutiny from U.S. authorities over Ukrainian banks there which investigators suspected were being used for money-laundering.

As leaders of the developed world call for closer oversight of tax havens, experts say small Caribbean states like Antigua and Barbuda must increase transparency and regulation of their offshore finance sectors to be able to attract investment.

(Additional reporting by Jim Loney; Editing by Vicki Allen)