An Essay: On the Second Day of Christmas ... by gimleteye

(Part 10)  The international law firm, Greenberg Traurig, deserves its own niche in the 12 Days of Christmas. Greenberg is one of the largest and most sophisticated law firms in the nation. Locally it is the black hat operator of what is known to insiders as the practice of "environmental land use law". The firm was ubiquitous in zoning changes and permitting issues during the building boom, with local attorneys as familiar in the hallways and offices of city and county government in Miami as the staff who worked there.

Greenberg's most famous corrupt associate was lobbyist Jack Abramoff, who now agrees that the hammer and anvil style lobbying he deployed to such effectiveness has destroyed Congress. There are no similar apologies by the law firm that employed Abramoff for the bread-and-butter business lines of the housing boom in South Florida and elsewhere, based on the relentless conversion of farmland and wetlands to suburban sprawl in Miami-Dade County. During the 1980’s and 1990’s, Bob Traurig—one of the firm’s founding partners—regularly appeared at local legislative meetings, often taking a prominent seat in the back while younger attorneys, like Miguel de Grandy and Lucia Dougherty, finessed rezoning approvals on behalf of sprawl and condo clients, speaking from the speaker’s podium in the well of the county commission. 

Sifting through the cinders of the housing crash ... by gimleteye

In the run up to the biggest collapse of construction, development and housing in South Florida history, I often railed that The Miami Herald was failing its responsibility to readers by deliberately avoiding the extent of the growing bubble. My point of view was informed by the lopsided battle to protect the Everglades from predators. It was also informed by awareness that Herald executives had killed important stories: like the massive conversion of farmland in Homestead and South Dade to tract housing. It seemed possible, at the time, that an informed electorate might make other choices and that the Herald could play an important role. But the more I learned about the Herald, the more clear it was that the Herald had a very, very limited interest in any exposure of the fraudulent underpinnings of the South Florida real estate conflagration.

It was obvious at the time that Miami real estate had run so far out of control that the aftermath would bestow a number of dismal "firsts" on our region, including the latest; that Miami leads the nation in homeowners with mortgages under water. What we know today is that an economic recovery will take a very long time, during which-- as economist Robert Shiller noted recently-- "bouncing along the bottom" is the best we can expect. But we might have known yesterday and exercised precaution, had we been better informed. If there had been comprehensive reporting by the Herald, Miami Dade taxpayers might not be saddled with such a sad sack cast of elected leaders at county hall.

Today, the extent to which banks and mortgage companies made outrageous loans to financially unqualified individuals is coming out in dribs and drabs: hairdressers, policemen, and even "the highest ranking female firefighter" in Miami, recently charged with four others by a federal grand jury with taking part in an $11 million mortgage fraud scheme. But the latest news that caught my attention was in Miami Today and it was about the Miami Herald parking lot fiasco; a story EOM can't let go. "McClatchy Co., owner of the publication The Miami Herald, reported that 10 acres west of the newspaper building it had been under negotiation to sell for five years for $190 million is now valued at $49.6 million."

There is a bigger story that EOM can't write because we aren't paid journalists and research is expensive, but if any journalists are reading, this story goes along the following line: that the Herald's intense interest in land speculation at the time, put the paper on the same side as the fraudsters and elements of the Growth Machine who drove the economy into the ground. That's why readers weren't getting fair and accurate news about the housing bubble in Miami. The paper's executives were protecting their own pensions and compensation packages.

As Knight Ridder was marketing itself to McClatchy in 2005, the question arises: what role did inflated real estate values play in the compensation formula of top executives at the Herald when the transaction closed. Wikipedia offers of McClatchy: "The company's biggest acquisition occurred on June 27, 2006 when McClatchy purchased Knight Ridder. Because McClatchy was so much smaller than Knight Ridder at the time, one observer equated the deal as "a dolphin swallowing a small whale."[3] The purchase price of $40 per share and 0.5118 shares of McClatchy Class A stock was valued at about $4 billion in cash and stock. The company also assumed $2 billion in debt."

One can't blame former newspaper executives at Knight Ridder from over-selling its properties or blame them for earning tens of millions in compensation for embracing the dictum of PT Barnum, but a good forensic exploration should be able to determine the extent to which the collaboration between the Herald and downtown land use lawyers like Greenberg Traurig overvalued the parking lot and contributed to the sales price of the Herald to McClatchy. Readers, then, could have an assessment of how well they were served by subscribing to The Miami Herald during the biggest looting of the economy since the Great Depression.

Let Us Now Praise Famous Parking Lots ... by gimleteye

News arrives in the Herald of the latest but not last blow to the $190 million deal-- struck by Greenberg Traurig and its Herald executive pals-- at the height of the building boom to convert 10 acres of Herald real estate to condos/retail/parking. The busted deal to create a Times Square, squarely in the middle of nothing, stands for the hubris of the boom in more ways than one, but the one we have focused on at Eyeonmiami is how the parking lot deal distorted the editorial view from One Herald Square-- stripping from the city's only daily newspaper critical analysis of the housing asset bubble that might have tempered the boundless enthusiasms related to the boom that took root first, then rotted.

Credit the Herald for reporting its own embarrassing embrace, if not detailing who got paid how much and how many millions in compensation were distributed long ago to Herald executives based, in part, on benefits to shareholders of the imagined deal. That would make a far more interesting story than a collapsed promise. But the parking lot is also emblematic of a city that can't plan its infrastructure to save its life, and, a newspaper that can't report it because of internal conflicts.

Herald founders were right to place the newspaper's view and operations at the intersection of the main route from Miami to Miami Beach. At the time, Miami was a small city. Despite its ambitions, Miami in the mid 20th century was small minded and mean, with its share of bigots and racism. All that traffic flowed past the Herald, across the causeway to island homes; from which one could hop on a boat at lunchtime and return with a locker full of fish for dinner a few hours later. That Miami-- the Miami of John and James Knight and the rod and reel club-- is gone and vanished. All that remains are a few fish docks with cleaning tables whose purpose is all but forgotten.

The way the city filled in leaves another kind of view; a city cut off from itself. The tragedy of privatizing waterfront in downtown Miami cannot be rectified without tearing down Bayside Marketplace and refocusing the attention back to the bay. In the meantime, civic structures, a private arena, and condos have filled in; from the Miami Heat to the Performing Arsht Center and the empty Herald parking lot. Nothing on this stretch of Biscayne Boulevard makes sense. It is an unworkable landscape created with glad-handing, and former bubbly and coke in the VIP rooms of condo openings. The Herald sits, resolute, in the midst of this history and this disconnected landscape.

On evenings when the Performing Arsht Center is scheduled at the same time as the Miami Heat and the circus, the pathetic single lane Biscayne Boulevard exit from 395 causes traffic to backfill all the way to 95. I know it is easier to get downtown, if you live downtown or mid-town or uptown; but what the city fathers allowed to be built (and now we will have a science museum and art museum, in the same traffic vector) is an infrastructure mess no tout or public relations megaphone can explain away.

I know: Miami is a fantastic place to live and the winter weather makes the rest of the nation yearn to be in our shoes. This is the finest city in the world. It is the best place on earth. The water is clean and the Everglades are saved. And the Miami Herald also has a parking lot to sell you.

Memo to Democrats: use financial levers and taxation to stop suburban sprawl ... by gimleteye

Over the holiday I met a young analyst who works at one of the top bond rating agencies, analyzing collateralized mortgage debt. These derivatives, in many different forms, were weapons of mass financial destruction that detonated the economy. The cozy relationship between originators, like Goldman Sachs and other investment banks, accountants and ratings agencies are components of fraudulent wealth creation that blinded government, the media and the public. Trillions of taxpayer obligations have been created to paper over the banking and financial crisis that still threatens a second Great Depression.

Today, the issue of job creation dominates every area of economic policy. But "jobs, jobs, jobs" is just whistling by the graveyard containing the remnants of so much economic carnage. Most decision makers are waiting for the miracle to come; that an economy based on construction and development will rise Phoenix-like from the ashes of the housing crash and excess of commercial real estate. There is very little critical thinking applied to what kinds of growth might be sustainable, as opposed to the addictions of the mortgage pools where everything and anything that fogs the cash flow mirror is suitable to be collateralized.

My analyst friend confirmed what we know to be true about the production housing markets for instance: that there is only a tiny fraction of bond business going through the Wall Street mills today. I had a specific and different question: how would he, if he had the chance, impose financial costs to prevent the proliferation of suburban sprawl that has lead to both so much crappy, fetid overdevelopment in the fast growing regions of the nation, like Florida, and destruction of quality of life and the environment, too.

By the time that bond rating agencies in downtown Manhattan set ratings for a mortgage pool, there is nothing vaguely resembling scrutiny of underlying environmental value. The pressure to rate mortgage pools, comprising hundreds of individual properties, results in scrutiny of only a percentage of properties within the pools. A small strip mall, for instance, built over citizen objections in a neighborhood wetland would never rise to the point of review by the bond rating agency and the mortgage pool originator. That is not to say there is no environmental impact statement associated with the bond documentation. But these statements never given more than a once-over glance. They are throw-away fine print.

I'd wager, furthermore, that the engineering cartel-- formed of the array of consultants feeding from the Growth Machine-- is paid handsomely to conform environmental statements in mortgage backed derivatives through the happy, mutual fluffing in the revolving door between regulators and the regulated communities. Simply, Wall Street is agnostic to the outcome of debt underlying America's environmental crises so long as the cash flow is positive and within the parameters of obligations.

"How would you impose costs on mortgage origination to stop suburban sprawl?" His frank answer was no surprise: impose financial penalties as close as possible to the developer, itself.

Comprehensive growth plans, like those required by the state of Florida, are not enough to discourage growth and development where it should not occur, to protect the health, safety and public welfare. The power of campaign contributions and corruption overwhelms the intent of laws and regulations.

Higher costs -- yes, a form of taxation-- could steer development away from speculation that has demonstrably harmed our environment and quality of life. There are many forms of taxation that are used to incentivize development, and many-- like tax increment financing-- are used to specifically encourage the kinds of suburban sprawl that ought to be condemned. But imposing financial costs to discourage suburban sprawl is not even on the radar.

There is too much sense in that, and of course, it doesn't fit in the profit models of big downtown law firms or campaign contributors who run production home builders, trade associations and other components of the Growth Machine. But if Democrats wanted to differentiate themselves from the economic catastrophe imposed on taxpayers by unsustainable growth, they would pay attention to more than the outrage of Wall Street executive compensation packages. Certain forms of economic development are toxic to the public interest. Tax policy as a financial lever should be used to stop the madness.

Open the windows: why not free wireless in government chambers? ... by gimleteye

Last week I live blogged in real time during a Public Workshop on the Urban Development Boundary. The public meeting was hosted by the US Environmental Protection Agency, Office of Smart Growth. I live blogged because the meeting was held at the Miami Dade Public Library which has free wireless. There is nothing unique about live blogging. But as far as I know, it has never been done before in Miami in a government sponsored forum. Within this coincidence, Eyeonmiami had an noticeable spike in readers. It seems like a lot of readers passed along the news to colleagues and friends. So the question arises: why not free wireless in government chambers?

The way we get our news of government is limited by scarce resources of the mainstream press. They decide who and what should be published or broadcast. There is no scarcity of bandwidth in wireless communication: why accept the judgment of what is newsworthy from budget-strapped and advertiser-challenged news executives when wireless could let a thousand voices bloom?

As Eyeonmiami approaches one million page views, we prove every day that a small mesh net captures interesting creatures.

Consider: The Miami Herald is so stretched thin, with a handful of reporters covering local politics, that public meetings often don't make the B section. Interested citizens are left to watch on the government channel on cable TV or internet webcasts. Usually, news of these meetings is limited to those who can afford the time or are paid to attend on behalf of one employer or another. Our taxes pay for their privileges: maybe live blogging will never rise to the standards of professional journalism, but isn't some news worth more than none. Isn't Eyeonmiami's blog better for the public than a blackout imposed by someone else's profit motive?

It is easy to anticipate where this call for free, open wireless in government chambers will be resisted. In Miami-Dade County, for example, the unreformable majority of the county commission was so incensed by print media initiatives of a citizen's initiative to protect the Urban Development Boundary called Hold The Line, that made up Spanish language broadsides and gave them away freely in coffee shops in Hialeah and on Calle Ocho, that commissioners Diaz, Moss, Seijas, and Martinez resolved to spend county funds on an officially sponsored news organ "to get the truth out".

Let the corporate citizens live blog too: Lowe's, FPL, and Lennar. 95 percent of the time, voters have little idea what their elected officials do. For people who don't have the time to watch cable TV, or the endurance to cope with archived webcasts, or the scrim that passes for local news, citizens might be energized by reports and feeds on particular subjects from government chambers using free wireless.

Democracy thrives in the sunshine, and on that basis alone there is no reasonable argument to oppose free wireless signals in government chambers. At County Hall, although cell phone use is prohibited in the Chamber, everyone is text messaging or reading emails. Why not blogs?

Greenberg Traurig and R. Allen Stanford: no more Teflon shields? ... by gimleteye

When Brickell Avenue was hit by Hurricane Wilma in 2005, the Greenberg Traurig marquee took the hardest hit. But that was just an act of God, not R. Allen Stanford. From its modest beginnings pushing zoning changes in Miami-Dade farmland, Greenberg Traurig grew to a major U.S. law firm. Back in the day that Bob Traurig was collecting sand in his shoes, re-zoning open land for development from one classification to another was its bread and butter. Something new began to emerge out of the regulatory structures in banking and environmental land use law beginning in the 1980's when obscure financial instruments allowed institutions to fundamentally change the balance of debt to equity by relying increasingly on derivatives: all legal and all dependent on smudging calculations of risk.

Highly paid lawyers helped turn plain vanilla, stodgy banks into go-go institutions turbocharged with toxic junk. Over time, the business of concealing, altering, and dressing up risk became huge profit centers for law firms and reflected in all kinds of schemes that also relied on converting natural resources into "derivatives". The best example in Florida: mitigation banking of wetlands. (cf. "Paving Paradise", by Craig Pittman and Matthew Wald) Strange creatures emerged from that swamp, including R. Allen Stanford.

For most of the time I lead opposition to the Homestead Air Force Base scam-- also on the edge of Biscayne National Park-- through which private developers assembled from the board of directors of the Latin Builders Association had prematurely secured a plan to convert the air base to a major, private commercial airport; Greenberg Traurig was on the other side, putting everything in legal wrapping for its clients. Beyond the matter of the law, what I learned was that in relation to land use law, its lobbyists have the equivalent of American Express "black cards"; allowing first and earliest entrance to politicians and their appointees.

When the Stanford story broke in The Miami Herald, I was surprised that Greenberg Traurig was even mentioned. That changed over the past weekend when the Stanford story and Greenberg's likely involvement appeared above the fold, front page. It would snow in Miami, I used to believe, before Greenberg Traurig would appear in a negative light in the Herald. Then I had never heard of R. Allen Stanford whose office was filled with photos showing him arm in arm with top politicians like former Governor Jeb Bush.

Earlier this year, in "Attorney’s involvement for R. Allen Stanford an unlucky coincidence", Miami attorney Alan Greer knocked the Miami Daily Business Review for its portrayal of his client: banking attorney Carlos Loumiet who handled the R. Allen Stanford business as partner with Greenberg Traurig. Greer was referring to a federal lawsuit charging Loumiet with violating banking laws while representing failed Hamilton Bank when he said, "You picked on Mr. Loumiet because he had a problem in the past." (Feb 25, 2009)

It looks like Mr. Loumiet and Greenberg Traurig have a problem, now, in the present. Loumiet took his practice to the law firm, Hunt and Williams, after his work for Stanford at Greenberg. In the November 2003 edition of South Florida CEO, Hunt and Williams managing partner Marty Steinberg gushed, "International has been great... The guys we recruited from Greenberg... Carlos Loumiet ... (his) partners and associates are, I think, some of the top international business lawyers I've ever been associated with." Likely, Steinberg would have no comment now just like Caesar Alvarez, managing partner of Greenberg Traurig, had no comment last weekend for The Miami Herald.

Miami Daily Business Review
February 25, 2009

Attorney’s involvement for R. Allen Stanford an unlucky coincidence


Miami banking transaction lawyer Carlos Loumiet, who faced regulatory enforcement action over his work for the defunct Hamilton Bank, has represented accused swindler Robert Allen Stanford at least since the late 1990s, sources say.

Loumiet is the managing member and registered agent of a Stanford company that bought an exclusive three-acre Gables Estates retreat for $10.5 million in 2003 and helped in Stanford’s effort to revise banking laws in Antigua, a Caribbean banking haven.

Stanford still owns the Coral Gables property through a limited liability company, Casuarina 20, using the property’s address, said Carlos Justo, a Miami real estate broker.

The estate was formerly known as the Tyecliffe castle and later the Wackenhut castle for previous owners George and Ruth Wackenhut of the Wackenhut Corp. Stanford lived in the mansion before demolishing it.

Stanford is accused in a civil action brought by the Securities and Exchange Commission of running a massive scam through his Stanford Group by selling $8 billion in certificates of deposit issued by a bank in Antigua bearing the name, Stanford International Bank. A court-appointed receiver is sorting out his fallen empire. Stanford has not been charged criminally.

A call to Loumiet’s office at Hunton & Williams was forwarded to a spokeswoman. Eleanor Kerlow, senior public relations manager at the firm, wouldn’t confirm whether Stanford is a client but said, "Right now, Hunton & Williams is not representing Stanford Group or Robert Allen Stanford in connection with the SEC matter."

Alan Greer, Loumiet’s lawyer in the Hamilton Bank case and a partner in the Miami office of Richman Greer, said Loumiet’s representation of Stanford shouldn’t reflect badly on him.

"Carlos Loumiet represents hundreds of banks," Greer said. "The fact that he may have done some discrete work for Stanford is of no big moment as far as I know."

Download AlanGreer
This is the second time Loumiet has represented a high-profile client who ended up in trouble with regulators.

He faced potentially career-ending civil penalties when the U.S. Office of the Comptroller of the Currency accused him of concealing fraudulent actions by several Hamilton Bank executives. An administrative law judge recommended dropping the OCC charges last year, and

Greer said a new comptroller in the Obama administration may render the decision.

Hunton & Williams issued a statement Tuesday, saying, "Carlos Loumiet, a longstanding and distinguished member of the Bar, was cleared of all charges in the administrative proceedings related to two six-year-old reports he coauthored as a partner at another firm prior to joining Hunton & Williams."

Greer said no attorney who accepts work on a client’s behalf can know what will occur in the future.

"You have someone who wants to employ you on an attorney-client basis," Greer said. "Lawyers do their due diligence, and the entity or the individual appears to be reputable, and the thing you’re being asked to do is a legitimate business matter. You handle it."

But Miami attorney Warren Trazenfeld, who sues attorneys for malpractice, said when regulatory enforcement matters arise, lawyers generally know if a client was involved in risky or illegal activities.

"There are always red flags with what are sometimes called toxic clients," he said. "Invariably, when I take the depositions of lawyers who got caught up, intuitively they know there was a problem."

The OCC’s case against Loumiet alleged he hid illegal actions to protect Hamilton Bank executives while with Greenberg Traurig. Hamilton Bank was shuttered in 2002 in one of the largest bank failures in Miami history. The shutdown cost the federal government $127 million, and investors lost all of their holdings.

The OCC is seeking a $250,000 fine and an order barring Loumiet from representing financial institutions.

Even if the administrative law judge’s recommendations are upheld, Greer said Loumiet isn’t likely to live down the taint of the OCC complaint.

"People have read and heard bad things, and that sticks," Greer said. "Even though he’s innocent, it created a mindset in you. You picked on Mr. Loumiet because he had a problem in the past."

The Miami Herald and Greenberg Traurig: if you can't find the laugh track, read here ... by gimleteye

"Miami-Dade taps part-time comedian to run housing agency--seriously" is the headline story. But it is not as funny as the Herald weekend story on my desktop, "Florida regulators never acted on troubling findings regarding banker Allen Stanford."

In the first case, Joe Martinez, county commissioner, is credited by the Herald for "googling". (Joe should google Eyeonmiami and his own name: some funny stuff here, too!) Anyhow, what Joe sussed out was that San Francisco's ousted housing director does stand-up comedy on the side. Now if you tend towards a jaundiced view, you might be inclined to read between the lines. The Miami-Dade Housing Agency was already a joke shop. Disclosing the serious side of corruption there garnered the Herald a Pulitzer Prize. But I'm always more interested in the Big Thieves, not the Little Ones. I think there are more Pulitzers out there, if the Herald chose to follow the humor up the political food chain.

For my subscription price, the better joke is that Miami law firm Greenberg Traurig appears to have been involved in helping Allen Stanford secure the legal foothold to open a Miami office that fleeced billions from investors, with piles of cash in duffle bags moving from Miami to Antigua, unquestioned by regulators. The most popular office activity at the Stanford office? (Drum roll!) Shredding papers.

But if I'm right, the real humor is what happened in 1998 when the Stanford office succeeded in gaining approval from regulators to set up it's Big Shop of Fraud. An earlier Herald report notes, " "There was no lawful way that office should have been opened,'' said Richard Donelan, the state's chief banking counsel who opposed the deal." Hmm. So here is the punchline that had me chuckling, ROFL, this weekend even if it was buried deep in the story:

"To this day, Florida regulators claim they don't know why Stanford -- aided by powerful Miami law firm Greenberg Traurig -- was given the right to move money." Greenberg Traurig, of course!

There is a motherlode of humor, if the Herald editors want to dig, finding out who did what in 1998 to get Stanford his deal to set up one of the biggest financial frauds in US history right here. As Stanford employees were shredding paperwork and moving cash in duffle bags, they had reason to believe they had bought protection from banking regulators. And if not for the housing market crash, they'd still be doing it! Now THAT's funny!


Posted on Sat, Jul. 18, 2009
Florida regulators never acted on troubling findings regarding banker Allen Stanford

BY MICHAEL SALLAH AND ROB BARRY
rbarry@MiamiHerald.com

When Florida regulator Keith Jasper arrived at the opulent Miami trust offices of billionaire banker Allen Stanford in 2001, he expected to see records showing that money turned over to the company was safely invested.
But when the veteran bank examiner asked for the reports, he was told there were none.

In fact, records of the millions of dollars that flowed through the office had been shredded.

State regulators could have demanded the documents, or even taken steps to shut down the office to protect investors.

None of that happened.

Over the next eight years, Stanford's offices were allowed to continue selling investments, destroying records and sending money overseas on private jets in what prosecutors are now calling an enormous Ponzi scheme.

Twice, Florida regulators visited the office after it opened in 1998, but state supervisors never acted on the troubling findings, records show.

''I tried to write it plain enough so they could see what was going on,'' said Jasper, 65, now retired from the state Department of Banking and Finance. ``More should have been done.''

The destruction of records -- and the state's failure to stop it -- created crucial gaps that allowed the Miami office to sell millions in controversial securities without regulators questioning where the money was invested, The Miami Herald found.

Prosecutors say the investments -- certificates of deposit -- were supposed to go to Stanford's Antiguan bank to generate hefty profits for customers.

But once in the bank, the money was secretly diverted to pay for Stanford's personal expenses, including sports sponsorships, private mansions and a fleet of private jets.

Stanford and his lieutenants kept the scheme going for years by paying off earlier investors with the money coming from new ones, prosecutors say.

Now indicted on federal fraud charges, Stanford and his assistants are accused of siphoning $7 billion over the past decade.

MONEY EXCHANGES

During the years he ran Stanford Financial Group, the Miami office overlooking Biscayne Bay was among the most productive in his banking empire.

Created as a foreign trust company -- the only one of its kind in Florida -- the office operated under a unique agreement with the state.

From the moment Jasper arrived, he said he found employees funneling hundreds of thousands of dollars to Stanford's bank in Antigua.

They weren't wiring the money -- like most financial institutions -- but stuffing checks in bags to send overseas.

''They had these pouches that were going back and forth by courier in airplanes, and we had no access to them,'' he said. ``I had never seen anything like it.''

He reported his findings to supervisors, but they never responded. ''It was there for them to read,'' Jasper said.

In the ensuing years, the office went on to sell hundreds of millions in CDs -- following the same routine -- with the state never questioning the money's source or destination.

Money-laundering experts question Florida's decision a decage ago to permit a Caribbean bank to have such freedoms on U.S. soil.

''It's absolutely insane,'' said Bill Branscum, a former U.S. Treasury agent. ``That money could have been coming from anyone and going to anyone -- like narco-traffickers or terrorists -- and you never would have known.''

Florida bank regulators said agents didn't find enough evidence to initiate an investigation or try to close the office.

''We didn't find red flags,'' said Linda Charity, a director of the same agency where Jasper worked.

But the shredding of records alone was enough for the state to launch an investigation into the Miami operation.

Under the state's agreement, state agents had the right to ask for all records of money transfers. If they had, state agents could have discovered that customers were buying CDs from office employees -- in violation of the agreement. In addition, state agents could have found employees were giving financial advice -- another violation.

''All they had to do was ask for the documents,'' said Mark Tepper, a former prosecutor for the New York attorney general's office. ``That's the one thing they had the power to do.''

Because the state let Stanford open a foreign trust office -- an entity created only to promote services -- employees were not bound by federal currency laws.

But when the state allowed the transfer of money -- an unprecedented freedom -- it created a completely new enterprise, say experts.

To this day, Florida regulators claim they don't know why Stanford -- aided by powerful Miami law firm Greenberg Traurig -- was given the right to move money.

Art Simon, the state banking director who approved the 1998 deal over objection of his own counsel, said he didn't recall his agency granting that power.

''I would have to go back to the attorneys because this was prepared by the attorneys,'' said Simon, a former state representative and now a UM political science professor.

But Simon, who is an attorney, signed the seven-page agreement.

In an interview with The Miami Herald, Simon defended his actions, saying he made sure the state could visit the office to enforce the deal -- including the ban on securities sales.

But records show that inspectors went to the office only three times in 10 years -- and never filed enforcement actions.

FRUITLESS INSPECTIONS

When Jasper showed up at the office in 2001, he said he was unclear over what to inspect.

Though he had been examining banks and trust offices since 1969, the Stanford office was like ''no other place I had ever been before,'' he said.

When he arrived, he was led down a hallway with ornate wood walls and expensive artwork to a waterfront room to see a promotional video. It was a ''dog and pony show,'' said Jasper. ``They showed us the film about how Stanford got started, and we sat and watched it.''

He said he asked to look into pouches going overseas, but was told there were none that day.

Jasper said he then asked for any other records. ''We found nothing,'' he said. ``I think they told us something about officers keeping papers in their desks, and we asked to see that, and of course that wasn't available.''

After 2001, the state didn't return until four years later.

When state agents did go back, they ran into the same scenario: money sent to Antigua -- and no supporting documents. But this time, Stanford's Miami office turned over a list of 46 employees -- 16 licensed as stock brokers.

By then, the office was a powerhouse, generating $600 million in CD sales -- one in every five dollars of Stanford's worldwide operations, records show.

After both visits, state agents sent their findings to supervisors, including David Burgess, a senior analyst who helped negotiate the deal with Stanford.

At the time of the proposal in 1998, Burgess wrote a crucial memo that helped find a legal justification for Stanford to create his ambitious center.

Burgess said a foreign trust office was not supported by Florida law, but said if ''the definition of a trust company can be stretched,'' the office could open ``pursuant to the laws of another country.''

He also wrote in his report that Stanford had been ``active in cleaning up the Antiguan banking laws.''

But federal records show that six months after Burgess wrote his memo, the U.S. Treasury put Antigua on a money-laundering alert list, saying the new laws pushed by Stanford actually weakened enforcement efforts.

Burgess, who still works for the state, did not return calls.

Linda Charity insisted that a third state visit in 2007 turned up ''red flags,'' but said her agency took no action. The state would not release results, citing an ongoing investigation.

The office was finally shut down in February, when federal agents froze Stanford's assets.

While victims now say federal regulators should have challenged Stanford's claims of consistently high returns on his CDs, Florida was also in a key position to investigate the bank network.

Branscum said Florida agents had a right to challenge Stanford on how the money was invested, especially since licensed brokers worked in the Miami office.

''They were selling securities. You don't just ignore something like that. You get in there to see what they're doing,'' he said, including demanding to inspect the bank's investment portfolio.

He said agents should have tried to stop the destruction of records, particularly since money was going to Antigua. ``I was a treasury agent. Antigua was one of the centers of money laundering in the Caribbean. On top of that, they're shredding records. It doesn't take a genius to figure out that someone needed to be asking questions.''