Allen Stanford: A Mini Madoff?

They're already calling him Mini-Madoff, but Allen Stanford, the Texas tycoon whose alleged "massive, ongoing fraud" was shut down last week by the SEC, is a different character than Bernie. Madoff kept his operation secret; Stanford is a flamboyant figure who has actively courted top U.S. politicians. How did he keep up the charade for so long?

For years, "Sir" Allen hired high-powered lawyers and lobbyists to influence legislation and help fend off federal regulators. In the mid-1990s he brought in a former top U.S. Customs investigator to help him in Antigua, where he had opened an offshore bank. More recently, he hired a former top DEA investigator as corporate security chief.

Stanford also bought breathing room by showering money on U.S. politicians—more than $2.4 million since 2000. After a 2002 news report raised questions about $90,350 that Stanford and his employees donated to a legal defense fund for former senator Robert Torricelli, some Democratic fundraisers began steering clear of him. "He didn't pass the vetting," said one party moneyman, who asked not to be identified discussing internal matters. But at last August's Democratic Convention in Denver, Stanford gave $150,000 to sponsor events thrown by the National Democratic Institute, which included a ceremony honoring Madeline Albright. In attendance: House Speaker Nancy Pelosi, who gave Stanford a public hug, and Bill Clinton, who plugged his company—two golden PR moments recorded by Stanford's own videographer.

Rivalries within the government may have delayed a crackdown on Stanford. According to a U.S. official, who also asked for anonymity, the Justice Department a few months ago asked the SEC to back off, apparently so the FBI could pursue its own investigation. But earlier this month, after the blogosphere began buzzing about how Stanford's promises to investors were strikingly similar to Madoff's, the SEC finally moved in. So far, Stanford is not facing any criminal charges, and a spokeswoman declined comment. A close associate, who also asked not to be identified, said he was distraught and "drowning his sorrows."