Mittwoch, 23. September 2009

Stanford scam bilked Jews out of millions

By Todd Bensman
SAN ANTONIO, Texas - Over the past 15 years, Kadima, a Jewish charity in Mexico City, has helped developmentally disabled Jews live to their fullest potential. The charity, which has 250 beneficiaries, offers day care for adults with Downs Syndrome, and provides job training and placement for the mentally handicapped.

To ensure that the aid would be there despite the frequent turmoil in Mexico's economy, for years the charity has vigorously raised funds, and has scrimped and saved wherever possible. "What we really wanted to do with the money is to make sure the institution can go for another 10 years," said Sofie Freiman, head of Kadima's fundraising efforts. "It was a great deal of money for an institution that relies on donations by other people.
It took us 13 years to save it."

By 2009, Kadima had amassed enough money that its directors planned to expand the clinic and start up new programs.

Now, most of that money is gone. The charity had invested its nest egg with R. Allen Stanford's Houston-based Stanford Financial Group, which, according to U.S. prosecutors and the Securities and Exchange Commission, was an $8 billion Ponzi scheme. The alleged Stanford fraud is the world's second biggest Ponzi scheme, after the $65 billion Bernard L. Madoff case.

It has been widely reported that Madoff wiped out the fortunes of many wealthy Jewish families and charities. Now a GlobalPost Passport investigation reveals that, as a victim of Stanford, Kadima was far from alone among the Jewish communities of Latin America.

According to numerous interviews with victims, community leaders and lawyers representing them, Stanford laid financial waste to Jewish organizations and individuals of every income level. A lawyer representing Latin American victims estimates that half of the one billion dollars lost in Mexico came from the capital's 40,000-strong Jewish population. The smaller Jewish community of Caracas, Venezuela also appears to have been hit hard.

In both cities, Stanford - who was called Sir Allen after being knighted by the Antiguan prime minister in 2006 - mounted aggressive advertising campaigns and hired Jewish salesmen, who used their connections and trust within the community to bring in money.

The same way that many American Jews entrusted Madoff with their fortunes, many Latino Jews were so confident in the consistently high returns from Stanford's investments that they invested substantial portions of their savings with him.

And while he had many victims from other faiths, as a single ethnic group, the Jewish population was disproportionately hurt by the scandal. Many Christians were among his victims as well. Stanford is a graduate of Baylor University, a Baptist institute in Waco, Texas. He reportedly prayed with his sales force and used Christian connections to raise money. Nonetheless, the Jewish community is asking, did he deliberately target Jews? Or were they merely easy prey?

"This is where it's most painful, because they knew exactly who they were hurting," said Sofie Freiman, head of Kadima's fundraising efforts. Stanford's salesmen "targeted the Jewish community because they knew all these people. This is why we were hit. We are deeply hurt by this fraud and not just because we lost money."

It is well known that the $65 billion Madoff Ponzi operation exploited a phenomenon known to criminologists as "ethnic affinity crime" to gain the trust necessary to lure investments from thousands of American Jewish institutions and families. Madoff's exploitation of fellow American Jews has resonated as a caveat to future unsuspecting investors, not to be taken in by their own kind.

But dozens of interviews with Stanford victims and their lawyers show the scheme in Mexico alone left a trail cluttered with damage: Jewish schools struggling to pay teachers; widows and retirees without the means to support themselves; young married couples without wedding endowments; and once-wealthy families bereft of prosperity built over lifetimes. Childrens' college funds are gone. After-hours day care facilities are struggling, along with libraries and synagogues as donations from hard-hit donors dry up.

"Everybody knows somebody who got hurt," said Monika Unikel, a Jewish Mexican who conducts walking tours of a historic Jewish neighborhood. "In Mexico, so many Jews lost everything. A lot of widows and institutions lost their money from that. Each one has an individual story to tell, but no one has written it."

In Venezuela, the Jewish community of 14,000 reports many similar misfortunes from investing in Stanford, also the result of the company's strategy to hire trusted Jewish sales people from the community.

Chief Rabbi Penchas Brener, who represents Caracas' largest synagogue, acknowledged that he lost $50,000 to Stanford from the endowment of an important local foundation he heads. That's a substantial sum in a country where per capita income is less than a third of that in the U.S.

"I don't know how hard it hit the community, but I know it hit," Brener told GlobalPost.

Easy Prey

The Texas born Stanford's rise was nearly as abrupt as his fall. He had owned several gyms in Waco, Texas that went bankrupt in the 1980s. Afterwards, he emerged as a financier who grew an investment banking empire, based in Antigua and Houston. By the time he landed on the Forbes 500 list, he was known as a colorful multi millionaire aficionado of mansions, cricket, fancy cars and women - including exes to whom he paid lavish alimony.

In February 2009, the U.S. Securities and Exchange Commission filed a civil suit alleging that Stanford's operations were fraudulent. Subsequently, Stanford and all of its subsidiaries collapsed, leaving investors with between $6 billion and $8 billion in worthless paper. He is now in federal custody facing 21 counts of conspiracy, fraud, bribery and obstruction of justice. He insists he is innocent.

To clients, Stanford had peddled seemingly-safe certificates of deposit that paid as much as twice the market rate. According to the SEC, the assets were in highly-illiquid real estate and private equity investments. The firm's victims were more far-flung internationally than Madoff's, the bulk of them in Mexico, South America and the Caribbean.

As class action lawsuits and criminal indictments move forward, the Stanford strategy of targeting Latin American Jews is only now beginning to emerge, according to several of the American law firms signing on clients.

San Antonio lawyer Ed Snyder is one of several Texas and New York attorneys representing well over 1,500 Mexican and Venezuelan victims in various lawsuits against Stanford, a number that is growing fast.

Snyder recounted how he first became aware of this one victim demographic: On his first trip to sign up Mexican clients in February, he was surprised to encounter furious Hasidic Jews wearing yarmulkes and other religious attire, speaking Yiddish before switching to Spanish. Subsequent trips to sign up clients and to hear their stories more than confirmed Snyder's initial impression.

He estimates that out of an estimated one billion dollars lost by some 4,000 Mexicans, about half came from Mexico City's Jews.

"My perception is that the Jewish community in Mexico City, for various reasons, has been heavily impacted by the Stanford disaster," Snyder said. "I think what you have here is a situation where that community was specifically targeted."

The story of Stanford's depredations in Mexico's Jewish community, however, has been slow to emerge because it is not one that anyone there is eager to tell. Although a number of people agreed to speak privately to GlobalPost, dozens impacted by the scam declined requests for on-the-record interviews, for fear of repercussions from both criminals and law enforcement officials. Some believed they were expatriating more money than Mexico legally allows, via Stanford. Others feared drawing the attention of Mexico's rampant kidnappers, which have so far largely left the community alone.

"What I can tell you," said Rabbi Marcelo Rittner, who leads one of Mexico City's larger synagogues "is that some people were really hit hard by this situation. I don't have much to tell you more than that because of confidentiality."

Jews weren't the only target. A practicing Protestant, he opened meetings with a prayer, the Brisbane Times reported. He also used his faith to recruit sales representatives, and to lure many of his estimated 30,000 victims worldwide.

There is no evidence that Stanford set out deliberately to target particular religious group, and no motive has emerged. But there was money to be had in the Jewish community, and he soon discovered them to be easy prey.

Stanford hired a Mexican Jew named David Nanes to open up a sales operation in Mexico ten years ago. Nanes actively recruited other Jews well known in the community, to devastating effect.

Kadima's chief fundraising officer, Sofie Frieman, described why Stanford was so successful duping Jews: "The Jewish community is very tight, so if someone comes up with a great idea recommended by another person you know, you listen," she said.

"It's word of mouth. If your brother and brother-in-law, and the friend of your wife, is making money you might go ahead and participate. You would never think in your life, if you're a widow, that a nice Jewish boy is going to fool you in a scam, because you know his mother and you never think he's going to take advantage," she said. "This is where it's most painful."

A favorite son, or a traitor?

Jewish victims in Mexico almost universally blame their ills on Nanes, who was born and raised in the Jewish community, married a local woman there and had children there.

According to his Houston lawyer, Stanford hired the 41-year-old MBA about ten years ago to take charge of opening up Mexico - and more recently, South America - to sales of financial products. When Stanford collapsed earlier this year, Nanes left Mexico with his family, facing death threats that his lawyer says continue to this day.

Neither U.S. nor Mexican authorities have accused Nanes of any wrongdoing, although serious alleged misdeeds are detailed at length in the San Antonio class action lawsuit, and in a new book published in Mexico called "The Paper Empire" by Mexican journalist Gabriel Bauducco.

Nanes' Houston attorney, Charles Parker, said his client always believed in the financial products he was selling.

"He never suspected anything was wrong," Parker said, adding that Nanes and his wife "lost several million, his parents even more." Believing that Stanford products were legitimate, Nanes naturally decided to market them to the Jewish community because "that's who he knew. That was the wealthiest community," Parker said.

It made sense for Nanes to recruit other Jews from the communities as sales officers because they also had extensive local connections there, Parker said.

"And word spread, and people were happy," Parker continued. "They got their return and passed it on to others. Everybody was pretty happy until everything went to hell in a hand basket."

The same strategy of targeting wealthy Jews and hiring Jewish sales officers also apparently unfurled in Venezuela, instilling a comfort level in potential clients like Rabbi Brener.

Brener said he felt almost no wariness about reaching out to one of Stanford's "account executives," a local Jewish man whose family he'd known for decades, to invest his foundation's $50,000 reserve account. "I didn't pay too much attention to the credentials," Brener said. "They were Venezuelan Jews. They worked for a bank. He didn't have to convince me; I called him. This was made easier, so to speak, by the fact that he was Jewish."

Reached by phone, the former Stanford salesman, Morris Serrero, told GlobalPost Passport he sold extensively to fellow Jews in Caracas and also to Jews in Panama and as far away as Switzerland. But he insisted he had no clue it was all a scam and said that he too lost most of his personal money and his parents' money when the Ponzi scheme was exposed. Serrero refused to talk further.

The good corporate neighbor

In Mexico, Kadima's Frieman refuses to believe that Nanes and at least some of his sales recruits didn't know their investments were being diverted and couldn't be redeemed.

Not long after Nanes brought Stanford to Mexico City's Jews, he instituted an aggressive marketing campaign that targeted the community. The company became a major, consistent corporate sponsor of cultural and sporting events, doling out generous amounts of money to local charities and organizations.

Stanford also advertised heavily in community publications, including a well-read sports center newsletter about teams the bank sponsored, said Renee Shabot, director of Tribuna, an organization that acts as a liaison between the Jewish community and the non-Jewish world.

"People got used to seeing the name, seeing their faces and so they trusted them," Shabot said.

Stanford was especially generous to Kadima. In fact, the company sponsored Kadima's annual fundraiser for so many years that board members felt they couldn't say no when Nanes put the squeeze on for the charity's endowment, Frieman said.

"If you're sponsoring me and helping me out, I understand it would be good to move my money to your bank," she said. "And also, some of the people on our board had their money there already. This is why we were so confident. But it was a scam. We were fooled like everybody else."

Today, Frieman counts herself among the minions of Mexican Jews who feel a strong enmity toward Nanes. She doesn't buy his story about not knowing the whole operation was a confidence swindle.

"I know a lot of people looking for him," she said. "People would probably spit in his face if they saw him. He harmed many, many honest hardworking people."

Read more:

Visit the Stanford International Victims Group - SIVG official forum

Sonntag, 13. September 2009

Former agent goes to court on Stanford-related charge

September 13, 2009
A former top federal drug agent appeared handcuffed in a Fort Lauderdale, Fla., federal court today, a day after he was indicted on charges related to the Stanford Financial Group fraud case.

Thomas Raffanello, who was Stanford Financial's global security director, is accused of conspiracy, destroying records and impeding a probe by the U.S. Securities and Exchange Commission into the operations of Stanford Financial, founded by Texas native R. Allen Stanford-who also faces criminal charges.

Raffanello is the former head of the U.S. Drug Enforcement Administration's Miami office.

Magistrate Robin Rosenbaum set bail at $100,000 and set Raffanello's arraignment for next Friday.

Raffanello, 61, is the second Stanford executive to be charged in Florida by prosecutors and federal securities regulators who accuse Stanford and others of bilking investors out of more than $7 billion through a scheme involving bogus certificates of deposit.

Thursday's three-count indictment accuses Raffanello, 61, and Bruce Perraud, 42, of helping to shred documents at Stanford Financial's office in Fort Lauderdale. Their lawyers have said the men only destroyed documents after giving investigators electronic duplicates.

R. Allen Stanford, who also denies wrongdoing, is being held without bail in a Conroe jail awaiting trial on a 19-count indictment by a federal grand jury in Houston. That indictment also named three other company executives and a banking regulator in the Caribbean island nation of Antigua and Barbuda.

Another company executive was charged separately, pleaded guilty and is cooperating with prosecutors.

Visit the Stanford International Victims Group - SIVG official forum

Freitag, 4. September 2009

Toronto-Dominion Sued Over Stanford Investments

September 4, 2009
By Joe Schneider
Toronto-Dominion Bank, Canada's second-biggest bank, was accused in a lawsuit of negligence and knowing assistance for allegedly helping R. Allen Stanford, who is accused of swindling investors of more than $7 billion, the National Post reported.

The lawsuit, filed in Ontario Superior Court Aug. 26 by Bennett Jones LLP, seeks C$17 million ($15.5 million) for five Canadian investors who say Toronto-Dominion's role as a correspondent bank increased the credibility of Stanford's investments, the Post said. The investors claim they lost money in certificates of deposits based on recommendations made by a financial adviser who worked for the Stanford Group of companies, the Post said.

Toronto-Dominion conducted its business in an "appropriate and lawful manner," Susan Webb, a spokeswoman at the bank, told the newspaper.

Stanford, who faces 21 criminal charges, denies all wrongdoing tied to what the government says was a scheme to pay early investors "improbable if not impossible" returns with funds taken from later investors in Antiguan certificates of deposit. He is being held without bail until he can go on trial.

Visit the Stanford International Victims Group - SIVG official forum