ST. CROIX, U.S. Virgin Islands -- With federal agents mounting a probe into his offshore bank, billionaire Allen Stanford drove up a dirt road, hauling records from his headquarters to the top of a lush, tropical mountain.
As the sun set over the island, the banker stuffed the papers into a steel drum, poured gasoline over the top and sparked a fire -- the flames rising into the sky.
Months before his businesses exploded in February in a $7 billion fraud case, Stanford embarked on a mission to hide his financial records while trying to raise money to keep his banking empire alive.
He would jet off to Libya to try to convince government leaders to invest in his offshore institution.
He would even buy two Caribbean islands -- flipping the properties four times to inflate the value of the land and pump up the bank's assets.
``He was desperate,'' said Jonas Hagg, a longtime Fort Lauderdale executive chef who lived on Stanford's yacht. ``You never knew from day to day what was going to happen. He was flying by the seat of his pants.''
Details of the final days of Stanford's banking network, from court filings and interviews with a dozen staff members, offer the most complete picture so far of how he plundered his customers' accounts, pouring the money into failing stocks and botched real-estate deals.
He destroyed key records, creating gaps that continue to stymie federal agents trying to recover money for 21,500 fleeced investors.
As his financial network was collapsing, the once gregarious banker was turning into an angry employer, drinking heavily and bickering with his top officers, say staff members.
During a fight with the Antiguan government, he smashed bottles and his fists against the mahogany walls of his 112-foot yacht, Sea Eagle.
After spending nearly $20 million on two luxury estates in Miami and St. Croix -- pouring hundreds of thousands into renovations -- Stanford tore both houses to the ground within months of each other, making a one-bedroom apartment his only home.
By the time federal agents shut down his operations in February, the 59-year-old banker was in Washington, D.C., on his private jet with just one suit to wear and a credit card that had already been canceled.
Stanford's efforts to hide what prosecutors are calling one of the nation's largest Ponzi schemes began just as he was losing money from his failed deals.
The initial pressure didn't come from regulators, but from a paternity case in 2007 that evolved into a fight over keeping the banker's finances secret.
Onetime girlfriend Louise Sage would demand that Stanford -- the father of her two children -- reveal his sources of income, saying he was making more than the $5 million he claimed on his taxes.
Though he managed to keep his records concealed, the case marked the beginning of a two-year battle to shield his finances from public view.
For a decade, Stanford had been secretly drawing on his bank reserves -- the money belonging to investors -- to the tune of $1.8 billion, court records show.
Because so many people were buying his prize investments -- certificates of deposit -- there was always enough money to keep his bank going.
But after diverting money into numerous real-estate developments and pet projects, including a five-star restaurant with a $4 million wine cellar, the deals began collapsing in a remarkable string of failures.
It started with his Caribbean Star Airlines, a regional carrier he purchased in 2000 with great fanfare. He boasted that the airline was going to put his offshore bank on the map, but the company was bleeding at least $1 million a year by 2007, employees said.
Then, he spent at least $10 million trying to develop his dream real-estate project, Maiden Island in Antigua -- a retreat for Stanford and other wealthy homebuyers -- but it was scuttled after years of haggling with politicians.
Despite the failures, records show that he didn't stop spending vast sums of money.
He decided to move his headquarters from Houston to St. Croix, dipping into the bank's reserves to come up with money to buy land on the island.
By 2007, he had purchased a dozen properties, including an $8.3 million mansion, complete with four pools and tennis courts. He also unveiled plans to build an eco-friendly business park with a 45,000-square-foot hangar for his world headquarters.
Then, the stock market began a painful descent in December 2007 that would take an enormous toll on his bank's investments. At the same time, the U.S. Securities and Exchange Commission was pressing for details about his bank's dealings.
With pressure mounting, Stanford began drinking heavily and fighting with employees and his 31-year-old girlfriend, Andrea Stoelker, staff members said.
``It was getting to the point where he would take it out on others,'' said Hagg. ``The feeling was you could always expect the worst.''
He began spending more time on the yacht, which he had renovated for $16 million, working the phones and firing off e-mails at all hours, employees say.
Carrie Freyn, a chef and personal assistant, said Stanford was constantly sending out new directives and changing plans. ``He was very erratic,'' she said. ``We had to just be able to roll with it.''
After hiring nine people to tend to his sprawling mountaintop estate, he ordered it torn down in 2008 -- just months after doing the same to his $10.5 million home in Miami-Dade's Gables Estates.
Employees at both estates said they were stunned. ``I kept asking the question, `Why? Why knock the houses down?' '' asked St. Croix housekeeper Hyacinth Walters. ``Nobody knew anything.''
With both estates demolished, Stanford and his girlfriend began dividing their time between the one-bedroom apartment in St. Croix and his yacht.
Though St. Croix was home, Stanford made frequent trips to Antigua, where he was trying to land one major deal he predicted would reap billions.
He proposed one of the most lavish developments in the Caribbean, a luxury enclave with private hangars and beach homes on Antigua's Guiana Island. But the government refused to approve it.
``They were not giving him permits or cooperating with him,'' said his political consultant Ben Barnes, former Texas lieutenant governor. ``Allen lost his temper.''
Staff members recall how he flew into a tirade, pounding his fists into the woodwork on his yacht and throwing bottles into the walls.
On three occasions, the boat staff had to hire the same Coral Springs craftsman to repair the cabin after Stanford's outbursts, totaling $45,000 in costs.
While Stanford was hosting his annual 20/20 Cricket Tournament on the island in October 2008 -- the $20 million in prize money skimmed from client funds -- his bank's investments were continuing to plummet.
In just one week in early October, the stock market plunged by 18 percent in a spiral that would continue through the end of the year.
Stanford's assets were set up in three groups, but records now show that only one held significant value -- and it was in serious trouble. Less than a year earlier, the fund contained $889 million, mostly in securities, and was now about to drop to $316 million.
With the market falling, the bank was hit by a problem it had never confronted: hordes of fearful investors wanting to cash out, and a steep drop in new customers.
For Stanford, this was a bad combination. With no real reserves, the bank was hopelessly dependent on fresh money to pay off old investors.
With his employees fearing for their futures, Stanford flew to Miami in October and addressed brokers at his office on Biscayne Boulevard, assuring them the company was strong.
``We've got a lot of cash,'' said Stanford, boasting of a sweeping plan to invest in local real estate.
``You can go downtown on Brickell, and you can see 10,000 condo units coming on stream in the next few months. . . . I've seen it, I've been there, I've done it. . . . this is going to be a long-term play. We're going to make a huge amount of money off it.''
He also told the group he could cure the nation's economic woes. ``I have an answer to solve all this,'' he said. ``If I was president, you give me one term, we wouldn't be in this mess. We'd be back on the road to prosperity.''
While Stanford was speaking to the brokers, he and his top lieutenants were carrying out a scheme to stem the bank's massive losses -- at least on paper, court records show.
By turning to a practice known as flipping, the group was able to inflate the value of two tiny Caribbean islands 50-fold.
From an investment of $63.5 million in May, Pelican Island and Asian Village were deeded back and forth between several companies under Stanford's control -- increasing their value to $3.2 billion in just six months.
With the fabricated profits, Stanford was able to claim he had returned the $1.8 billion he had siphoned from the bank over the years.
Meanwhile, he was moving money out of his clients' accounts just to pay operational costs, payroll and to keep up with people cashing in CDs.
Funds were so short in his main bank in Antigua -- the balance just $872,557 in October -- that bank employee Patricia Maldonado pleaded in an e-mail to CFO Jim Davis: ``When can we get some relief?'' The next day, Davis approved $6 million from an account in a Houston bank to shore up the balance.
By November 2008, as Stanford traveled the country in his private jet meeting with top officers, he demanded that no one -- including his employees -- know his whereabouts.
``We weren't supposed to speak to the airline staff, but that didn't make any sense because we had to make the food,'' said Freyn. ``We all had this underground communication.''
He began drinking before noon and continued late into the night. ``It went from one bottle a night to two and three and four,'' Freyn said.
By the end of the year, his businesses were losing $33.3 million a month in operating costs alone, records show. With dwindling cash, staff members were forced to put expenses on their personal credit cards.
By Jan. 14, 2009, the SEC was now ordering Stanford and two of his top officers, CFO Davis and chief investment officer Laura Pendergest-Holt, to talk to investigators.
That month, Freyn and others recall Stanford driving up the dirt road on Mount Welcome in St. Croix, hauling a box stuffed with documents from his office.
After dumping the papers in a steel drum, Stanford and a handyman doused the top with gas and lit the contents. ``We thought it was crazy,'' Freyn recalled. ``You don't just go up there and light a bonfire without a permit.''
The records, which included Stanford's bank and credit-card statements, were torched at the same time Davis was ordering an employee to destroy bank records in Antigua, federal court records state.
In the days that followed, Stanford scrambled to find new investors to stop the bank's bleeding as his top officers tried to fend off federal agents.
During a crucial meeting in the company hangar at Miami International Airport on Jan. 21, Stanford and others decided to send two officers to meet with federal regulators: Pendergest-Holt, 36, and bank president Juan Rodriguez-Tolentino, 46, according to court records and interviews.
The move allowed Stanford to continue selling CDs while seeking help thousands of miles away from an unlikely ally: the government of Libya.
On Jan. 25, he flew to Tripoli to ask Libyan leaders, who had already invested $138.9 million from national reserves, for more money. But in the end, nothing came.
Days later, Stanford and others met in Miami to prep the two employees for their Feb. 10 showdown with the SEC. During the Miami meeting, Davis admitted that the bank's key asset -- the flipped Caribbean real estate -- was worth a fraction of what investors were told.
Nevertheless, Stanford assured his investors on Feb. 12 in a mass e-mail that rumors of an investigation were false and that recent visits to his offices by federal agents were routine. But within a week, he was flying to Washington, D.C., to plead for help from his lobbyist, Ben Barnes.
In Barnes' office, he huddled with white-collar criminal lawyer James Sharp. ``He was very worried,'' Barnes said.
But there was nothing Stanford could do: After federal agents met with Pendergest-Holt, they concluded that the banker's operation was a massive fraud.
On the morning of Feb. 17, agents shut down his companies, including 36 offices across the United States, and filed one of the nation's largest civil fraud suits against Stanford, Pendergest-Holt, Davis and other top lieutenants.
Cut off from his money, Stanford had nowhere to go: His apartments were seized, his jets grounded and his yacht impounded.
In the days to follow, more than 1,000 employees were laid off and his properties were taken over by the court-appointed receiver.
``We were stunned,'' Freyn said. ``I mean, they came in and shut down the office in St. Croix. They let people take out their belongings and told them to go in and take out your stuff because the feds are going to come in.''
Since then, Stanford, Pendergest-Holt, Davis and three others have been indicted on money-laundering and fraud charges. Davis, 61, has pleaded guilty and awaits sentencing, while Stanford is being held without bond in a federal facility in Texas.
With Stanford awaiting trial next year, federal agents are still trying to trace all of his movements during the final days.
Though agents say they have accounted for much of the money that flowed through his banking network, $1 billion is still missing, they say.
The inner workings of the bank were ``a closely guarded secret known only to Stanford, Davis and a few others,'' wrote an investigative accountant in a report.
The records that exist today ``do not begin to tell the story of what happened to all of the proceeds.''
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