Another Stanford Employee Told SEC It Was A Ponzi Scheme...In 2003

[girl gone mad]

Another Stanford Employee Told SEC It Was A Ponzi Scheme...In 2003
Henry Blodget, http://www.businessinsider.com/another-stanford-employee-told-sec-it-was-a-ponzi-schemein-2003-2009-2">Clusterstock

Now that it is clear just how many high-level government connections Allen Stanford had, it's time for the SEC to explain why it did not investigate Stanford more aggressively. The SEC also needs to explain what it meant when it said another regulatory agency had told it to shut down the investigation.

By our count, at least five former Stanford employees told the SEC they thought Stanford was running a Ponzi scheme, from 2003 on. (The FT revealed a new one this evening--see below). The SEC began an investigation in 2005, but didn't do anything until 2009--several months after Bernie Madoff and a week after someone else alleged publicly that Stanford was a Ponzi scheme.

So what happened to the complaints of all these whistleblowers? Did the SEC do anything about them? Did they just get lost in different parts of the bureaucracy?

Or, more disturbing, did one of Allen Stanford's connections tell the SEC to back off?

Mary Schapiro wasn't running the SEC when it muffed this latest scam, so she can blame it on her predecessor. But it's time we learned what, if anything, the SEC did during its investigation of Stanford, why it took four years to get anywhere, and why the complaints of so many whistleblowers were ignored.

Here's the latest employee tale, http://www.ft.com/cms/s/0/148817be-043b-11de-845b-000077b07658.html">from the FT:

Leyla Basagoitia, a former Stanford employee, raised a series of red flags about the tycoon’s empire in a 2003 employment dispute with her company at a tribunal run by the finance industry’s self-regulatory body. Ms Basagoitia also alerted the US Securities and Exchange Commission at about the same time, her lawyer said, echoing criticisms the agency ignored early warnings about the alleged $50bn Ponzi scheme run by Bernard Madoff.

Ms Basagoitia told an arbitration panel at the National Association of Securities Dealers in October 2003 that she suspected that Stanford Group Company, one of Sir Allen’s key businesses, was “engaged in a Ponzi scheme to defraud its clients”, according to case documents seen by the FT. In 2007, the NASD became the Financial Industry Regulatory Authority, which has come under scrutiny since the Stanford allegations emerged.

In a nine-point critique, Ms Basagoitia pointed to many concerns cited last week by the SEC in its charges against Sir Allen’s businesses, including allegations about the lack of a credible auditor, misselling of investment products and the promise of consistently high returns that did not “correspond to the reality of the markets”.

And here are descriptions of three other ex-Stanford employees http://www.businessinsider.com/stanford-employees-alleged-ponzi-scheme-three-years-ago-2009-2">who alleged the same thing.

[peacetalksforall]

1. What a horrible feeling to know you have been stolen from. Though I wasn't an investor (far from

it), we were all victims - some more acutely.

[struggle4progress]

2. Dubya's Letter To Allen Stanford (26 Feb 08: Business Insider)

... A reader alerted us to this Stanford newsletter from just last February in which Bush and his wife Laura congratulate Stanford on their new St. Croix expansion ... http://www.businessinsider.com/dubyas-letter-to-allen-stanford-2009-2

[KoKo]

3. Kick....little bits...little bits...

[Warpy]

4. If Congress does its job (a very big if)

the SEC should be blasted completely apart by this and by the Madoff mess. In both cases, the agency had all the information dropped right into their laps and in both cases, the agency said it found nothing wrong.

This goes beyond mere incompetence and into collusion. Not only should heads roll at that agency, many of them should finish their lives in prison.

The SEC can obviously not co exist with Wall Street. The revolving door has to be closed and nailed shut.

Investors deserve better than this even if we don't like some of them very much. Investors deserve a more level playing field, not one in which the agency that should prosecute things like Ponzi schemes instead goes out of its way to protect them.