Ljs: US suspected Stanford long before ECB deal

American diplomats told to avoid contacting or being photographed with billionaire two years before his fall from grace

More than two years before he touched down in a helicopter at Lord's cricket ground bearing $20m, US diplomats were so concerned about rumours of "bribery, money-laundering and political manipulation" surrounding Allen Stanford that they avoided contacting him or being photographed with him.

The extent of the widespread concern among embassy staff in Bridgetown, Barbados, where Stanford invested millions of dollars in Caribbean cricket before his empire came crashing down after being accused of an $8bn fraud of "shocking magnitude" and arrested by the FBI, will raise fresh questions about the wisdom of the England and Wales Cricket Board in getting into bed with him in June 2008.

The concerns are revealed in a cable dated 3 May 2006, detailing the first meeting between Stanford and the US ambassador at a breakfast meeting in Barbados which was also attended by the Barbados prime minister and cricket legends signed up by Stanford to push his idea for a series of Twenty20 competitions.

Emphasising the chance nature of the encounter, the cable notes: "Allen Stanford is a controversial Texan billionaire who has made significant investments in offshore finance, aviation, and property development in Antigua and throughout the region. His companies are rumoured to engage in bribery, money-laundering and political manipulation."

According to the cable, Stanford outlined his ambitious property development plans for the region and talked about his investment in a new airline.

In a comment appended to the cable, the author makes clear that embassy staff have been told to steer clear of Stanford, who had a huge profile in the Caribbean as a result of his investments in the area and the millions ploughed into the glitzy Twenty20 cricket matches, at which he was always a highly visible presence.

"Embassy officers do not reach out to Stanford because of the allegations of bribery and money-laundering. The ambassador managed to stay out of any one-on-one photos with Stanford during the breakfast," it said.

"For his part, Stanford said he preferred to conduct his business without contacting the embassy, resolving any investment disputes directly with local governments. It is whispered in the region that Stanford facilitates resolution with significant cash contributions."

When the scale of Stanford's alleged fraud came to light, the ECB initially insisted it had completed sufficient due diligence. But it later admitted this was conducted on the basis simply of whether Stanford had the money to pay, rather than any assessment of his activities.

The episode was hugely embarrassing for the ECB, which welcomed Stanford with open arms amid fears that it would be fatally undermined by the growth of the Indian Premier League. Even as it considered downgrading the partnership, the ECB chief executive, David Collier, spoke of a "treasured relationship" that would continue for "years to come".

It was only when the Securities and Exchange Commission (SEC) filed charges that the contract was cancelled, although the ECB continued to argue it could not have been expected to know about the concerns surrounding Stanford's business operations and could only conduct due diligence on the basis of information in the public domain.

While a handful of financial analysts asked questions about the suspiciously high returns offered by Stanford's investment schemes a few months earlier, it was not until February 2009 that reports first surfaced that Stanford's investment bank was being investigated by the SEC.

Initially, the bank tried to pass them off as "routine" inquiries and blamed disgruntled ex-employees. But Stanford's empire crumbled as the SEC charged Stanford and three of his companies with a "fraud of shocking magnitude". He was arrested by the FBI in June 2009 and has remained in custody ever since. Stanford has pleaded not guilty and will stand trial early next year.

Last week, it emerged that US regulators had widened their investigation to include brokers who sold financial products on behalf of the Stanford Investment Bank.

In a later cable, dated 18 February 2009, Bridgetown embassy officials detail the fallout from Stanford's indictment: "Local fears over the Stanford indictment have led to a run on the Stanford Financial Group's subsidiary the Bank of Antigua, with depositors lining up for over an hour to withdraw their money ? In a country already burdened with headline-grabbing rising crime and a tight economy, the pre-election landscape is suddenly quite rocky and unpredictable."