Alleged 'massive fraud' at Stanford Financial exposes regulatory gaps—AGAIN!

[TexasLawyer]

Alleged 'massive fraud' at Stanford Financial exposes regulatory gaps—again

No industry oversight. Unknown accounting firm. Undocumented ROI claims. Alleged fraud at Stanford Financial sounds awfully familiar

By Neil Roland
February 17, 2009 12:17 PM ET

In one of the biggest civil fraud cases ever brought, Texas financier R. Allen Stanford was accused by regulators today of masterminding an $8 billion offshore fraud and misleading investors about their exposure to Bernard Madoff’s scheme. The case is likely to raise new questions about cracks in the U.S. regulatory structure. The Securities and Exchange Commission has been investigating the case since 2007. The alleged fraud has echoes of Mr. Madoff’s alleged scheme. Like Mr. Madoff’s fund, Mr. Stanford’s bank is run by a close circle of his family and friends, and its auditor is a small local accounting firm (this one on Antigua).

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Antiguan regulators did not audit the bank’s assets, contrary to the firm’s claims, the SEC alleged. And the firm’s accountant, C.A.S. Hewlett & Co., didn’t answer the telephone when called several times by the SEC, the complaint alleged. Also similar to the Madoff case, the Stanford Group Co. investment advisers did not register with the SEC for many years, precluding potential inspection by regulators, according to the complaint.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, regional director of the SEC’s office in Forth Worth, Texas.

The SEC has been investigating since 2007 and took as long as it did to bring today’s case because it ran into problems trying to obtain Mr. Stanford’s off-shore documents and admissible evidence, Ms. Romero said in an interview. Key witnesses started coming forward only at the end of last year, she said.

“When we do our investigations, we search for admissible evidence—not innuendo, gossip or speculation—under rules of evidence and law that we have to adhere to, and that takes some time,” Ms. Romero said. Both Mr. Stanford and Mr. Davis refused to appear and give testimony to investigators, the complaint said.

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http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090217/REG/902179991/1036

[aquart]

1. Pasture pastry.

Not buying the excuse for a second.