Sir Allen Stanford. - FILE

Washington DC (AP):

By serving a select and wealthy clientele, employing top-flight talent and being "a privately held institution free to focus on our No. 1 priority, which is our clients", Stanford was able to earn "premium returns", his bank documents claimed.

But those profits may never have existed. Despite claiming to have made double-digit returns between 1993 and 2005, the company's annual returns hadn't reached 10 per cent since 1994, according to court papers.

Federal law enforcement officials raided Stanford's Houston offices Tuesday, seizing assets and shutting down operations. The action followed civil charges that Stanford had promised clients unrealistic returns on $8 billion in certificates of deposit and committed other financial fraud.

It was not the first time Stanford had attracted attention from the authorities. The jet-setting financier, who hobnobbed with lawmakers and had been knighted in the island nation of Antigua, had been under investigation by federal authorities for years, according to people familiar with the investigations and published reports. These people spoke on condition of anonymity because they were not authorised to discuss the case.

No 70-year tradition

Stanford lied about his bank and its history - not just its finances - to gain investors' trust, public records show. Company documents referred to a 70-year tradition of client relationships. Yet, there is no record of his bank having existed before the 1980s.

And while he told clients their money was guarded by a team of "20-plus analysts", court papers said he and James Davis, a college roommate, were the only ones familiar with the investment strategy.

The bank had been misrepresenting its performance since at least 2004, according to court papers.

The claims of inflated returns allowed the bank to plough more money into other parts of Stanford Financial Group, paying "disproportionately large commissions" to its affiliate Stanford Group Company, the documents say.

Even in 2008, a year when many stock market indexes lost around 40 per cent, the company claimed losses of only 1.3 per cent.

That's when Stanford's lies seem to have caught up with him - thanks in part to news about an alleged $50 billion pyramid scheme by New York financier Bernard Madoff.

The Securities and Exchange Commission's investigation of Stanford had been in the works before Madoff gave himself up in December, said a US official with knowledge of the probe, who spoke on condition of anonymity because he was not authorised to provide information about it.

But the agency stepped up enforcement efforts after embarrassing revelations that the SEC had cleared Madoff despite specific tips and multiple investigations, current and former SEC employees said. They said regional offices appeared to be fast-tracking the Stanford case and others with the potential to give the agency another black eye.

Trying to recover

One former employee said enforcement officials had told him they were trying to recover from the negative publicity surrounding the Madoff case. The sources spoke on condition of anonymity to preserve their relationships with the agency.

Attorney General Eric Holder said Wednesday he could not rule out more Stanford-sized or Madoff-sized fraud scandals.

"It's hard to say. I'd like to think that those things are going to be the largest," Holder told reporters in Washington. "The department will be vigilant in the detection of that kind of fraud. That's especially true, given the magnitude of the stimulus effort and the recovery effort. We want to make sure the money gets into the right hands for the right reasons."

SEC officials did not return calls seeking comment.

Ongoing investigation

Stanford's companies also had been under investigation by the Financial Industry Regulatory Authority, a self-regulatory body. FINRA spokeswoman Nancy Condon said the two investigations were operating in parallel "and at some point, both of us became aware of each other".

With SEC investigators and Florida regulators closing in, Stanford desperately sought to reassure employees, investors and the press that nothing was wrong. He told clients these were "routine examinations", court records show.

A February 12 company email told workers that "former disgruntled employees" had made complaints that could complicate an "otherwise routine examination".

And a Stanford spokesman denied there was anything unusual about a January visit to Stanford's Miami offices, telling The Associated Press, "We were informed by the three agencies that this was a routine examination."

But when one client tried to cash out a multimillion-dollar deposit on February 9, the bank told him the SEC had frozen the account.

Another client was told that Stanford personally had ordered a two-month moratorium on payouts, court records show.

Even after Tuesday's raid made international headlines and provoked bank runs in Antigua, some investors were still looking for answers.

At the Stanford Fiduciary Investor Services' office in a downtown Miami high-rise late Wednesday afternoon, a 64-year-old retired investor arrived in a motorcycle jacket and helmet.

The man said he had been told his account, totalling over US$1 million, was being transferred to another bank. He spoke on condition of anonymity to maintain the privacy of his investments.

He said he had called for more information Wednesday, but there was no one there to pick up.

Bank of Antigua's customers form a line outside the St John's branch in the Caribbean island of Antigua on Wednesday.