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Monday, January 31, 2011

Damming Evidence from the Report into the SEC

From a report by the SEC’s Office of the Inspector General, into why the financial body didn’t expose the alleged $7bn Ponzi scheme operated by charismatic Texan, Sir Allen Stanford, earlier.

Of note is that the SEC was ‘on to’ Stanford as early as 1997:

The OIG investigation found that the SEC’s Fort Worth office was aware since 1997 that Robert Allen Stanford was likely operating a Ponzi scheme, having come to that conclusion a mere two years after Stanford Group Company (“SGC”), Stanford’s investment adviser, registered with the SEC in 1995. We found that over the next 8 years, the SEC’s Fort Worth Examination group conducted four examinations of Stanford’s operations, finding in each examination that the CDs could not have been “legitimate,” and that it was “highly unlikely” that the returns Stanford claimed to generate could have been achieved with the purported conservative investment approach. Fort Worth examiners dutifully conducted examinations of Stanford in 1997, 1998, 2002 and 2004, concluding in each case that Stanford’s CDs were likely a Ponzi scheme or a similar fraudulent scheme. The only significant difference in the Examination group’s findings over the years was that the potential fraud grew exponentially, from $250 million to $1.5 billion.

The report says pressure on SEC officials to look into certain types of fraud — in particular one’s that could be settled quickly and without much legal fuss — may have led to the scuppering of early attempts. But there was one added ‘difficulty’ in prosecuting Stanford in the late 1990s.

Stanford simply refused to cooperate:

Despite the examiners’ referral of their serious concern that SGC was part of a Ponzi scheme, the Enforcement staff did not open a matter under inquiry (“MUI”) into the Stanford case until eight months later, in May 1998, and did so only after learning that another federal agency suspected Stanford of money laundering. The OIG investigation further found the only evidence of any investigative action taken by Enforcement in connection with this MUI was a voluntary request for documents that the SEC sent SGC in May 1998. We found that after Stanford refused to voluntarily produce numerous documents relating to SGC’s referrals of investors to SIB, no further investigative steps were taken; after being opened for only three months, in August 1998, the MUI was closed.

1 comment:

  1. Yeah, so the SEC canceled the investigation they were already carrying on, because the investigated party (Stanford) refused to cooperate with them (the SEC) in the investigation of himself (Stanford's)!!!