Subscribe By RSS
Update: R. Allen Sanford Charged In $8 Billion Fraud Case
By Markham Lee on February 18, 2009 | More Posts By Markham Lee | Author's Website
Here is an update to the R. Allen Sanford case I blogged about earlier this morning, it appears that charges were being filed as was blogging about the investigation….
From the WSJ:
The Securities and Exchange Commission charged R. Allen Stanford with an $8 billion fraud centered around the sale of certificates of deposit, saying the flamboyant businessman hoodwinked investors by promising high and seemingly safe returns.
As the SEC charges were made public Tuesday morning, U.S. marshals and Federal Bureau of Investigation agents raided Stanford offices in Houston.
The SEC said that Stanford Investment Bank sought to lull investors into thinking their investments were safe, providing assurances that the bank invested the money in liquid financial instruments that were monitored by a team of more than 20 analysts.
But those assurances were false, the SEC said. Instead of ultra-safe investments, a substantial portion of the portfolio was placed in real estate and private equity, the SEC said. The investments weren’t monitored by a team of analysts, but instead by two people, Mr. Stanford and James Davis, chief financial officer of the bank.
It was the second huge alleged fraud to emerge in three months, following the SEC’s charges in December against Bernard Madoff, who was accused of carrying out a $50 billion Ponzi scheme.
The SEC said Stanford sold about $8 billion of the certificates of deposit. The agency also accused Stanford of fraud connected with the sale of a mutual-fund program with reported assets of more than $1.2 billion.
The SEC said Mr. Stanford and three of his companies claimed to have received double-digit returns on investments for the past 15 years, but the returns were “improbable” and unsubstantiated.
“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said SEC enforcement director Linda Thomsen in a statement…
…The SEC said that Stanford suffered losses in the alleged Madoff fraud, contradicting Stanford’s assurances to its investors that it had no direct or indirect exposure. According to the SEC, Messrs. Stanford and Davis were told on Dec. 15 that Stanford companies had a loss of roughly $400,000 based on indirect exposure to Mr. Madoff.
One fraudster loses money by investing with another one, the only way that could be anymore ironic (or funny dependent on your disposition) is if Madoff was depositing money at one of Sanford’s banks.
The thing about this situation that astounds me the most is that wealthy investors could fall for something like this, and/or weren’t savvy enough to realize that the returns were too good to be true. However perhaps the most surprising thing is that more frauds of this magnitude weren’t discovered in the earlier days of the credit crunch, i.e. why were people like Madoff and Stanford able to outlast Lehman, Merrill Lynch, Countrywide, the Mortgage GSEs, etc? You’d think the Ponzi schemes that are being unraveled in the wake of the credit crunch would’ve unraveled before the legitimate companies did.
In any event some serious thought needs to be given to what changes need to be made to the SEC (and other federal agencies), so that they’re able to detect these frauds prior to their collapse or (in this case) right before a collapse. The SEC should’ve been on the case as soon as Stanford starting selling “investments” whose returns were too good to be true.
Perhaps that says something about the investors Stanford bilked, they chased the yields instead of asking the right questions and alerting the authorities.
You can read more here, the SEC statement here, the SEC complaint here, and an article discussing Mr. Sanford’s possible whereabouts here.
Source:
The WSJ: “SEC Charges Sanford in $8 Billion Fraud; Agents Raid Headquarters” — Siobhan Hughes, Miguel Bustillo.
Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.
Subscribe by RSS 
Subscribe by Email
Email This Post To A Friend
One Reason Why The US Dollar Might Rise 
Ron Paul Thinks That Fed “Oversight Is Laughable” 
S&P 500 Index Is Still Overvalued - This Small Oil Exploration Company Is Ripe For A Takeover… Here’s How To Profit
- Obama Commits To Free Trade Agreement With South Korea, But Auto Trade Remains An Obstacle
- Bay Street Stocks Slip Slightly Again - Canadian Commentary - 1 day ago
- Stocks Close Mostly Lower Amid Disappointing Quarterly Results - U.S. Commentary - 1 day ago
- Bay Street Stocks Linger Slightly Below Unchanged Level - Canadian Commentary - 1 day ago
- Stocks Remain Stuck In The Red In Mid-Afternoon Trading - U.S Commentary - 1 day ago
- European Markets Fall, Led By Banks, Oils - European Commentary - 1 day ago
R Allen Sanford and Gov. Sanford S.C. are tied together by more than blood. The reason he went to Argentina was he was checking on the ill gotten gains from the ponzi sheme. Money from the S.C. employyees retirement fund was invested in this Ponzi scheme. Don’t know if any was actually lost; but the proceeds went to Argentina and the Gov’s mistress was trying to access the account.
there seems to be no-way to distinguish between the rich and the poor, their behavior TODAY is the same. they’re OFF THE RADAR, with a big TITLE.
Criticism of the SEC and the other ‘watchdog’ agencies is misplaced. Alan Greenspan specifically encouraged congress, and advised Presidents (Clinton & Bush), to ‘let markets self regulate’. The montra became “let the market decide”. The head of the SEC was asleep at the wheel because our leaders wanted it that way. It was a silly belief in maximizing the markets through deregulation. So the SEC was headed-up by a deregulator who didn’t believe the SEC should be a watchdog! From that non-sense we got the Burnard Madoffs and his ilk!
Anyone who ever uttered the phrase ‘let the market decide’ should reflect on the shame and destruction that belief ultimately rendered. It brought hucksters into the fold, enabled reckless risk-taking in the financial markets, and brought the world to the edge of ruin.
Shame on every fool who thought an unbridled market meant a healthy market. Adam Smith specifically cautioned AGAINST unregulated markets because he said they would inevitably consume the society that fostered them. Thus, his belief in the role and purpose of the ‘invisible hand’. How right he was. How wrong the deregulators were!