Is Sir Allen Stanford the New Bernie Madoff?
He appears to have even caught Vice President Biden's family in his web of fraud.
I could not discern how the Stanford International Bank was able to pay a higher interest rate than everyone else unless they were investing the proceeds long term while promising investors short-term liquidity. The bank thought that they could get away with investing for the long term because they were counting on the investors to not withdraw their money. A mismatch of the duration assets and liabilities may work for a time, but it always proves to be a recipe for financial disaster. The bankruptcy of Drexel Burnham Lambert in the 1990s is the most obvious example.
After the Madoff Ponzi scheme was disclosed, the SEC, already under fire for ignoring the signs of the Madoff fraud, began visibly investigating the Stanford Group. The startling combination of learning about Madoff and the SEC investigation understandably made investors nervous. There was an immediate run on the bank which forced the closure of the bank in Antigua. It has been put in receivership by the authorities.
The SEC now alleges that Stanford deceived investors about the safety of the certificates of deposit that he sold through his bank, while the federal authorities are investigating a possible Ponzi scheme at the bank. Once again, the SEC, the Financial Industry Regulatory Authority (FINRA), and its predecessor, the National Association of Securities Dealers (NASD), were AWOL. According to the Financial Times, both the SEC and NASD received a credible allegation from a former employee that Stanford might be running a Ponzi scheme as early as 2003.
The SEC was apparently investigating him for three years, but could not seem to pull the trigger on a fraud indictment. I am at a loss to understand why the investigation should have taken that long. It should have jumped out at the SEC that he is paying twice the going rate on CDs. My own questions to the SEC were answered by the baffling, “We do not have jurisdiction over an Antiguan bank.” They seemed to forget the Stanford Group’s offices in Houston, Texas.
It is obvious that the $5 million that the Stanford Group spent on lobbying fees and the $2 million in political donations kept the regulators at bay. The pictures of Stanford with Nancy Pelosi or then-President Bush (take your pick) were a successful talisman that warded off the regulatory spirits.
FINRA managed to fine the Stanford Group a grand total $70,000 for a series of serious securities laws infractions. The puny amount of fines is not even a rounding error for a multi-billionaire such as Stanford. Incredibly, they were only fined $10,000 for the failure to properly disclose the risks of the certificates of deposit, which is now at the heart of the SEC indictment of fraud.
While the MSM is castigating the SEC and FINRA, they should also be casting blame on themselves. Since Forbes knew enough to place Stanford number 205 on their list of richest 400 Americans, they should have been able to discern how he was making his fortune.
Besides the depositors in Stanford’s Antigua bank, Beau Biden, the vice president’s other son, might be a big loser. Is the questionable business deal between the Biden family and Stanford enough to derail his presumptive bid to follow his father into the Senate?
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Laura Goldman worked on Wall Street for 25 years for such firms as Merrill Lynch and Paine Webber. She now owns her own money management firm, LSG capital, in Tel Aviv, Israel.
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5 Comments
1. marlenestarr:it is not difficult for one to belive these daft schemes when you are offered such high returns and you get them for a while, unfortunately it
Mar 2, 2009 - 5:22 am 2. glenn:started the ball rolling with northern rock and they were quite safe as it so
happens. women empowering women pyramid selling i saw 24grand change hands
this night at a meeting and was sorley tempted to put 3grand in as it was
a close freind of mine asking me but something said no. the people will
never get their money back, its possible bin laden is behind all this he said
would ruin the world. Marlene Starr.
Interestingly, the Women Helping Women scheme that operated in my town several years ago was run largely by wives and significant others of senior law enforcment people, Many of those involved have been promoted. Nobody went to jail.
Mar 2, 2009 - 7:58 am 3. Rodger Harris:I think we should tar & feather these guys and run them out on a rail. Madoff should be dragged out of his 5th Ave. apartment and hung in the nearest square. In China he would all ready have been brought to justice – trial – then hung! Perhaps the Chinese have something!
Mar 2, 2009 - 7:30 pm 4. Nzewi uchenna osita:The money a master gave to his three servants were payments made to Dim Ohachi by alqueda to purchase from jordan wedding sucide bomb attack to repeat the african culture of cannibalism in the time of hixikiah king of isreal when it was re echoed by prophet isah about one of the servants that hide his own shekel and the most succeful one from tjhe proceed of human bein he sold sale the portion of the person that refused to invest in human trafficking and gave the commision to the second our that made interest.in The time madeba alzaqawi slaughtered a journalist before the northern king set a polish man up in afghanistan who want to translate the hoolywood film twins through other peoples money paid to Dim ohachi to give arms to the 13th cventury africans through achinese film called two snake in monkey shadow that represents King songhai as the monkey anmd the two sons of assyria king the snakes in black forest.
Mar 4, 2009 - 5:57 am 5. Paul Daniels:If the SECOND alledges Stanford stole all this money from investors, then where is all the billions being ‘unfrozen’ coming from? Unless the SECOND was wrong all along and under pressure from Stanfords competion, stole his Co. And put 3000 employees out of work. Its interesting how their rhetoric sure has backed WAY off since they have found all the money that was never missing in the first place. The feds are certainly doing a great job of destroying the free market economy. If history of Russia in 1917 is any indicator, we are all in for the great change Comrade Obama promised.
Mar 19, 2009 - 8:35 pm