Stanford's Failed Health Club

Posted by: Matthew Goldstein on February 13

Texas-born billionaire R. Allen Stanford likes to portray himself as having been born into success.

For years, he talked about being a distant relative of the founder of Stanford University—something that the university says isn’t true. And he talks about the 77-year history of the Stanford family being in the finacial services business. Stanford Financial’s website says:

The first Stanford company was founded by his grandfather, Lodis B. Stanford in 1932.

But what Allen Stanford doesn’t like to talk about is one of the failed businesses he was involved with before getting into the financial services industry. And what was that business: a Waco, Tx. health club called Total Fitness of Temple Inc.

Court documents reveal that in 1983, Allen Stanford was slapped with a default judgment for failing to pay back rent on the lease for the health club. The judge in the case signed an order permitting the landlord, Allied Development Co., to collect some $31,800 in unpaid rent plus interest from the man who reportedly now has $2.2 billion in wealth.

That’s quite a humble start for man who now is the sole shareholder of one of the fastest-growing financial services firms.

Update

A little more about Allen Stanford’s early days. Stanford International Bank, the offshore bank in Antigua got its start in 1986 in Montserrat, another Caribbean island nation. Back then the bank was called Guardian International Bank. Eventually, Stanford reloacted his operation to Antigua and the rest is history.

Here’s a ruling from a US Court of Appeals for the Fifth Circuit, affirming much of a US Tax Court’s ruling on a dispute emanating from Stanford’s days of running the bank in Montserrat. In short, the court found that Stanford and his wife, Susan, under reported their 1990 federal taxes by $423,531.36.

Reader Comments

Pellucid

February 13, 2009 09:58 PM

So now all visitors to Antigua can enjoy a little bit of irony as they enter and leave Antigua as they pass the completely over-the-top health club that Stanford has built right at the airport entrance.

between the lines

February 14, 2009 12:48 AM

Smart people learn for mistakes!.


joe

February 14, 2009 10:29 PM

To the author: He didn't pay $31,800 in rent, so what? Cheap shot, Matthew Goldstein, cheap shot! Put something big on the webside. Don't waste your reader's time.

What's in a name

February 14, 2009 10:48 PM

Maybe that explains why Robert A. became R. Allen.

Carib

February 15, 2009 08:02 AM

Hey Matt,
Dig into the Shell pension plan that Allen and Franz used to originally fund Guardian. Much more interesting that $31k of back rent...

Leo

February 15, 2009 11:51 AM

What a ridiculous way of trying to put dirt on someone else´s name, he didn´t pay 31.800 once in the past, I guess the author has a financial flawless life.

Mr Goldstein, any thougths on W Buffet´s past may be, no comparison... no ofence...

EL Fudge

February 16, 2009 08:55 PM

Lodis Stanford, his grandfather, had a small insurance agency in Mexia, Texas, home of Anna Nicole Smith incidentally. He eventually sold the agency to a slightly larger one that was gobbled up by another one that eventually merged with another one to become one of the larger insurance companies today. And while they might milk that "70 plus year history" every which way, Allen Stanford did in fact succeed in many ways and collected a nauseating group of asskissers along the way. If I were you Matthew, I would look more closely at some of them - a truly terrifying group.

Bette

February 17, 2009 01:22 PM

Allen and Susan Stanford were my neighbors in 1986. Susan and I had children the same age were good friends. They were renting their house and drove a beatup car. One day Allen had a meeting with some Columbians in Florida. Next, they bought a STREET of Dreams house furnished, A few months later they bought a complex of condos and renamed it Stanford Arms. Moved and change phone numbers, unlisted. Bought a highrise in downtown Houston and the rest is history.

ridiculous

February 17, 2009 01:43 PM

Maybe about 5 years ago Stanford Financial was looking to add to its legal team in Houston. They were offering a lot of money. Being very careful about who I get involved with--I don't care how much of a household name someone might have--I did a lot of due diligence. In addition to coming up with the failed fitness club as a corporate filing in Texas, the overwhelmingly disturbing factor was the unimpressive credentials of everyone who worked for the organization. This was a qualitative assessment on my part. I classed them generally as a handful of 2nd-stringers, with a larger number of 3rd-stringers. They were also all terribly young--the oldest being just over 40, compared to Stanford at the time being about 52 or 53. The President of the Antiguan bank was a guy with a handful of years at what I think was PWC, but he was in his late thirties. They were doing all sorts of offshore financial work, but they had no compliance team to speak of--that was just inconceivable--and the legal positions they were hiring for weren't for that. Their website at the time used to list all their people and give bios. I remember vividly the bit about how they drew professionals from all over, and then named a bunch of podunk cities across the U.S.! It was as if they had created an organization that lacked the people who (1) could recognize what was going on, (2) could ever find equally lucrative positions or (3) both, all with Allen Stanford sitting at the top. I thought both. Less than a year ago, I tossed in the trash the inch-thick research folder I had put together--wish I handn't, but apart from the print-outs of their amusing website, there's nothing in there that couldn't be reproduced (perhaps the Way Back Machine on the website?). When Madoff happened, I told several colleagues here at my private equity firm about what I had encountered in looking at Stanford Financial--and, lo, these handful of weeks later, here we are! It's been years in the making and, somehow, "no one knew".

Ridiculous

February 18, 2009 01:01 AM

Took some digging and finally resorted to Westlaw, but I figured out that one of the defendants, Laura Pendergest-Holt--she's the one with no investment or securities industry experience that is also the "chief investment officer"--is only 35 years old. That (carefully cultivated by Sir Stanford) youth / inexperience is consistent with what I saw in their organization when I diligenced their people a handful of years back. Other than an M.S. in Mathematics in 1997 from Mississippi State University, and guessing that she married a guy named Jim Holt perhaps sometime in 2008, I couldn't otherwise find a thing about her! I wonder what she did before getting swept up with Sir Stanford? What were those (no doubt less lucrative) jobs she had held before Stanford and his magical "CD" marketing machine became part of her equation. For a while, whisked around in one of the firm's three G-5s, she must have felt like one of the Masters of the Universe, wondering how a girl like herself had . . . That would be good stuff. Write the article, Matt--a lot of people will read it.

Burt

February 19, 2009 12:38 AM

Someone should investgate the deal Allen had with none other than Houston's own, Mel Powers. They put together a health club in Houston, The Greenspoint Club. Not sure who got the better end of it or who just walked away from it. It was all Allen and Mel, first class all the way.

20th Century Wall Streeter

February 20, 2009 07:20 AM

Laura Pendergest may have had no financial experience, but she is also not unattractive. Since investment ability isn't necessary to perpetrate a scam, Stanford got himself a spokeswoman instead of a CIO. Take a look at her husband's investment firm, CMSU, run by Jim Holt and a guy named...wait for it...C.M. Su. Bet some of the CD money may have ended up in their AUM.

Johnny

June 21, 2009 03:15 PM

I worked for Allen between 83-85. I was there for the "failed" fitness club in Temple. I was there for the Greenspoint club in Houston. There were also clubs in Waco, Killeen, and Austin.

Regarding the lady who knew them in 86--I remember that, too. It was right after Allen had finished "shutting down" the fitness clubs--leaving his partners holding the bag. All the money was gone, so when they came after him, there was nothing to get. I saw the beatup car, too. I also saw suitcases full of money, and a girlfriend who took frequent trips out of the country with the suitcases.

I was young and stupid, but even I could see how he did business. He's a dangerous man with dangerous friends.

Burt

July 18, 2009 12:57 AM

Johnny, I bet I know you. I worked w/ Allen at the Houston club from the very beginning of construction to over a year after it opened. I remember that girlfriend. According to some reports she is living in Florida with a son or daughter she had with Allen. Allen seemed bigger than life back then. He had a loud, look at me personality. He pushed us hard to make sales. I always wondered what his deal with Powers was.

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BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.

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