Stanford Pulled in $5B While SEC Dithered

Feds ignored employee warnings, fumbled over jurisdiction

By Kevin Spak, Newser Staff

Posted Apr 16, 2009 12:13 PM CDT

(Newser) – When the Securities and Exchange Commission sent probing questionnaires in 2005 to investors who’d bought certificates of deposit from Stanford Group, panic set in. “Then it all seemed to go away,” says one former Stanford employee. Concerns over jurisdiction stayed the SEC’s hand for almost 4 years, Bloomberg reports, while the alleged Ponzi scheme grew from $3.8 billion to $8.5 billion.

Stanford’s alleged scheme centered around CDs issued by a branch in Antigua. Not only is Antigua beyond the SEC’s usual reach, but CDs are typically overseen by bank regulators, not the SEC. The same territorial concerns also prevailed at Finra, the self-regulatory firm for brokerages. “Finra was just a bunch of robots,” said one former employee who accused Stanford of wrongdoing. “No one would look at our documents.”

[Images (3)]

[Quotes (4)]

In this June 11, 2008 file photo, Sir R. Allen Stanford, poses for photos at the Lords Cricket Ground in London. (AP Photo)

The Logo of Stanford Group (Suisse) AG, the only European branch of the Stanford Group, is seen in Zurich, Switzerland, Feb. 19, 2009. (AP Photo)

Security Exchange Commission Chairman Christopher Cox testifies on Capitol Hill in Washington, Oct. 23,2008. (AP Photo)

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This is an abject failure of anything akin to self- regulation. These are people from the industry who cannot see their brethren as crooks. - William Black, former bank regulator

You can’t allow black boxes. The SEC could say, ‘We won’t accuse you of fraud, but if you don’t answer our questions, you can’t do business in the United States.' - William Black, former bank regulator

The SEC is largely to blame.
If any of this information that’s being released now had been released then, we would still have our money. - Mark Shapley, an investor burned by Stanford

There was not a derogatory thing on the Internet about this guy. All you see is how he’s taken Antigua and
helped all the people and helped the cricket, whatever the hell that is. - Mark Shapley, an investor burned by Stanford

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Stanford Pulled in $5B While SEC Dithered