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SEC Overlooked Stanford Fraud in 2003

Former employee warned agency, others of 'Ponzi scheme'

By Matt Cantor,  Newser Staff

Posted Feb 27, 2009 9:49 AM CST
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(Newser) – A former employee of Sir Allen Stanford warned the SEC in 2003 of an “illegal Ponzi scheme” involving his firms, but regulators brushed off the allegations, the Financial Times reports. The whistleblower also told another regulatory body that one of Stanford’s companies was “engaged in a Ponzi scheme to defraud its clients,” but regulators didn’t come down on the alleged $8 billion fraud until last week.

Leyla Basagoitia alerted authorities at what is now the Financial Industry Regulatory Authority to several issues recently highlighted by the SEC, including missing oversight and a pledge of high returns that didn’t match market realities. Stanford denied the allegations, regulators dismissed them, and Basagoitia was ordered to pay Stanford $107,782 in damages in return for a loan. Authorities’ inaction adds to concerns over a delayed response to Ponzi allegations surrounding Bernie Madoff.

Investigators from the U.S. Marshals office walk out of the offices of Stanford Financial Group and head to their other office building in the Galleria, Tuesday, Feb. 17, 2009, in Houston.
Investigators from the U.S. Marshals office walk out of the offices of Stanford Financial Group and head to their other office building in the Galleria, Tuesday, Feb. 17, 2009, in Houston.   (AP Photo/Houston Chronicle, Steve Campbell)
In this Wednesday, June 11, 2008 file photo, Sir R. Allen Stanford waves at Lords Cricket Ground in London.
In this Wednesday, June 11, 2008 file photo, Sir R. Allen Stanford waves at Lords Cricket Ground in London.   (AP Photo/Lefteris Pitarakis, File)
Sir R. Allen Stanford, 2nd right, surrounded by officials and former cricket star players pose in front of a box containing $20 million.
Sir R. Allen Stanford, 2nd right, surrounded by officials and former cricket star players pose in front of a box containing $20 million.   (AP Photo/Lefteris Pitarakis)
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COMMENTS
Showing 1 of 1 comment
Robert_Dada
Feb 26, 2009 10:26 PM CST
Our financial regulatory bodies are beneath contempt and criminally inept. All trust has been shattered and it's trust that is supposed to hold it all together.

Stanford employees had links to FINRA
Reuters

 
fraud • SEC • Ponzi scheme • whistleblower • Bernard Madoff • NASD • Financial Industry Regulatory Authority • Bernard L. Madoff Investment Securities • Stanford Financial Group • Robert Allen Stanford

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