Allen Stanford's Investors Want Alleged Swindler's Political Donations Returned

February 26, 2010
By MATTHEW MOSK

Democratic and Republican lawyers are scrambling this week to figure out how to contend with an unusual lawsuit filed by the Texas official tasked with recovering money spent by Allen Stanford, the alleged mastermind of an $8 billion Ponzi scheme.

More than $1.6 million from Stanford and his businesses went to fund Democratic and Republican Congressional campaigns between 2000 and 2008, and now the investors want the political parties to give that cash back, according to a lawsuit filed in U.S. District Court.

The suit could be an important one to watch, because of a recent spate of alleged swindlers who also happen to be prolific political donors. Most notable was Florida lawyer Scott Rothstein, convicted last month in a $1.2 billion Ponzi scheme. He and his law firm had parceled out more than $600,000 to politicians in the past five years.

The case against the party committees is also notable because it is built, in part, on an unusual rationale -- the contention that Stanford didn't actually get anything in return for his contributions. Under a quirk of the law, if the lawyers for the political parties can't show that he did receive some tangible benefit, they may have to come up with the money. And it's a point they'll have a hard time contesting, since they can't exactly argue that he bought influence with his money.

Ralph S Janvey, the lawyer who filed the case in Dallas Tuesday, said he began requesting the money in writing a year ago and continued making written requests until earlier this month. The party committees "have ignored these requests, and, as a result, the Receiver has been forced to file this lawsuit seeking the return of the funds," Janvey wrote.

Overall, the Democratic Senatorial Campaign Committee received the largest share of the Stanford money -- $950,500 – according to the Texas lawsuit. The National Republican Congressional Committee received $238,500, the Democratic Congressional Campaign Committee got $200,000, the Republican National Committee took in $128,500, and the National Republican Senatorial Committee received $83,345.

Lawyers and press aides for several of the political committees initially told ABC News they thought the case would be dismissed right away, and they saw little chance they would have to give the money back.

"The money's been spent. It's not going to be returned," one party official said, speaking on the condition he not be named because the litigation is pending.

But after spending more time reviewing the situation, several campaign finance lawyers told ABC News that this could actually be a far more tricky case than it initially seemed.

Under election laws, there are only a small handful of legal reasons a political committee would be forced to return contributions. They would have to refund money if it came from a corporation, came from a foreign source, or was funneled through an illegal straw donor arrangement, said Lawrence M. Noble, a former chief counsel to the Federal Election Commission.

"On the other hand, if the receiver has an independent legal basis for getting the money back, I don't think the party committees would be treated any differently than any other recipient of Stanford funds, whether it is a charity or a business," Noble said.

And that, potentially, is where the trouble starts for the Democratic and Republican committees, said Jan Baran, a Washington election lawyer.

There's a separate set of laws covering something called a "fraudulent conveyance," Baran said. Victims of swindling are entitled to recover any goods that were obtained with their swindled money. If the money was donated or given away rather than used to obtain something tangible, the victim can ask for the money back rather than tangible items. Any charity or other third party that has received money from a swindler may then be compelled to return that money to the person from whom it was originally obtained.

Hence one of the key arguments in Janvey's court filing -- that the political parties to which Stanford donated did not provide anything tangible in exchange for the allegedly swindled funds. They are more like charities that have been given swindled money and must return it.

Just because Janvey's legal argument "is unprecedented, that doesn't mean it will be unsuccessful," Trevor Potter, the campaign lawyer who represented Sen. John McCain during his presidential bid, said in an interview.

Lawyers for the five party committees involved in the case either declined to comment or did not respond to emails and phone calls. They can't argue that Stanford's donations bought him influence, but they are known to be checking if the money got him any tangible perks, like access to a concert or a sporting event or an exclusive gala at one of the party conventions.

Baran, who used to represent Republican congressional committees, said he suspects the party lawyers will try to reach a settlement with Janvey, rather than risk seeing this case resolved by a judge.

"I think Stanford's [alleged] victims are going to get some of the money, if not all of it," Baran said.

Source.

Political contributions from Mr. Stanford and his affiliated companies.

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Stanford Receiver Sues Political Committees

February 23, 2010

The political stakes in the Stanford Financial scandal are getting higher.

The court-appointed receiver who is tracking down the billions of dollars missing in the alleged Ponzi scheme - Dallas attorney Ralph Janvey - has filed suit against the major parties' congressional campaign committee seeking the return of $1.6 million in contributions they received from company founder Allen Stanford and his top lieutenants.

The move comes less than two weeks after Janvey demanded the committees return the funds, but received no response.

The suit, filed in federal court in Dallas, names the Democratic Senatorial Campaign Committee, the National Republican Congressional Committee, the Democratic Congressional Campaign Committee, the Republican National Committee and the National Republican Senatorial Committee.

The suit says the committees "have no legitimate right" to keep the contributions, which Janvey says belong to Stanford's investors.

The suit says the Democratic Senatorial Campaign Committee received the largest amount of tainted contributions, $950,000. The National Republican Congressional Committee follows with $238,500; the Democratic Congressional Campaign Committee received $200,000, the Republican National Committee got $128,500 and the National Republican Senatorial Committee took in $83,345. None of the committees was immediately available for comment.

Janvey has thus far stopped short of suing individual members of Congress, from whom he is seeking another $200,000 in contributions. Several of the congressmen, including Texas Republican Pete Sessions and New York Democrat Charlie Rangel have said they donated their Stanford-linked contributions to charity.

In addition to Janvey's lawsuit, the Miami Herald reported in December that federal prosecutors are investigating whether Stanford's lavish campaign contributions were an improper attempt to buy influence.

Stanford Receiver Sues Democratic, Republican Groups

Democratic and Republican political groups were sued for the return of more than $1.6 million in money investors entrusted to Stanford Financial Group before the company's principals were charged with a $7 billion fraud.

Court-appointed receiver Ralph Janvey claims the Republican National Committee, the Democratic and Republican senatorial committees and each party's congressional campaign groups have refused to return the money, according to a complaint he filed Feb. 19 in federal court in Dallas.

U.S. prosecutors in June announced separate charges against company founder R. Allen Stanford and chief financial officer James Davis for their roles in what the government said was a $7 billion securities-fraud scheme.

"The committee defendants did not furnish any consideration whatsoever for the funds they received from Stanford, Davis and the Stanford Financial Group," according to Janvey's complaint. "Consequently, they have no legitimate right to retain the funds."

Stanford and others were also sued last year by the U.S. Securities and Exchange Commission, triggering Janvey's appointment to oversee Stanford's businesses and recoup money for investors. Stanford has denied wrongdoing.

Davis pleaded guilty in August to three felony counts. His lawyer, David Finn, said then that his client would cooperate with federal investigators.

The Democratic Senatorial Campaign Committee received $950,500, according to Janvey. The organization didn't immediately reply to an e-mailed request for comment on the lawsuit.

Sara Sendek, a spokeswoman for the Republican National Committee, didn't immediately return a call seeking comment.

The political contributions case is Janvey v. Democratic Senatorial Campaign Committee, 10cv346, in the Northern District of Texas (Dallas).

Source.

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Suit filed to force lawmakers to return Stanford contributions

February 22, 2010
By CHRIS HAWES

Thousands of families lost their life savings when, investigators say, they uncovered a massive fraud centered around billionaire Allen Stanford.

Now, the man assigned to defend the victims says money they are due is being withheld by an unlikely source: Politicians.

They're refusing to give back more than $1.8 million they received from Stanford, now accused of being a criminal.

Arley and Marsha Carter worked hard to build the family business that eventually let them retire in the country.

Then came news of the massive ponzi scheme involving their money.

They weren't alone; thousands of other investors were also exposed.

"A lot of sleepless nights," Marsha Carter told News 8 during an interview last March. "It's hard not to worry.

The Carters were hopeful that federal investigators would find some money still left in Stanford accounts. But on Monday, they learned that it is government leaders who are still holding on to some of those funds - and they're angry.

In a lawsuit filed in federal court, attorney Kevin Sadler, representing the court-appointed receiver, contends that political committees from both political parties are holding on to $1.6 million contributed by Allen Stanford and his affiliated businesses - money they retained even as Stanford investors suffered.

"One lady and her husband had invested, and she was having problems just getting his funeral taken are of," Marsha Carter said in the 2009 interview.

The receivers also published the names of individual campaigns that have not returned the money. Thus far, they have not been sued.

In Texas, the list includes KPAC, the political action committee affiliated with Sen. Kay Bailey Hutchison; Sen. John Cornyn; and U.S. Representatives Pete Sessions, Charles Gonzalez, and Pete Olson.

Representatives Kevin Brady, Lamar Smith, Sam Johnson, Joe Barton and Michael McCaul are also on the list.

KPAC - along with the Cornyn, Sessions, Brady, and Johnson campaigns - told News 8 the money went to charity.

But Sadler equated that to saying, "I don't have the money anymore because I gave it to someone else."

He also points out that the gifts to charities do nothing for the victims, many of whom are seeing their golden years become their most trying years yet.

Late Monday, Rep. Olsen said he will return the Stanford funds to the receivership.

Source.

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

TD Bank Loses Bid to End Stanford Investments Lawsuit

January 22, 2010
By Joe Schneider

Toronto-Dominion Bank Canada's second-biggest bank by assets, must face a lawsuit accusing it of negligence for accepting deposits for the Antigua-based bank run by alleged Ponzi scheme operator R. Allen Stanford.

Investors in Alberta and Quebec claim in the suit that they lost C$17 million ($16.1 million) when Stanford International Bank Ltd. collapsed last year amid fraud allegations. The case can move ahead on narrower grounds than initially proposed, Ontario Superior Court Judge Herman Wilton-Siegel in Toronto said in a ruling released yesterday.

"The court has allowed the negligence claim to proceed based on actual knowledge, willful blindness and recklessness," Jim Patterson of Bennett Jones LLP, who represents the plaintiffs, said today in a phone interview. "We will proceed."

Stanford faces 21 criminal charges that he swindled investors of more than $7 billion in a scheme that paid above- market rates to early investors by taking money from those who bought certificates of deposit sold by his bank. The investors included the plaintiffs in the Ontario case, who bought the deposits through Toronto-Dominion, the correspondent bank for Stanford International.

Susan Webb, a spokeswoman for the Toronto-based bank, declined to immediately comment.

Five Plaintiffs

The five plaintiffs in the case are closely held Dynasty Furniture Manufacturing Ltd., which is based in Calgary; Alberta investors Shafiq Hirani, Hanif Asaria and Dinmohamed Sunderji; and a Quebec company. The high-yield certificates of deposit bought by the plaintiffs appear to have been issued as part of a Ponzi scheme that collapsed in February, Wilton-Siegel wrote.

Toronto-Dominion maintained 12 accounts for Stanford International and accepted deposits into the accounts, the judge said.

Wilton-Siegel dismissed the investors' claims that the bank had a duty of care to investigate the Stanford accounts and to verify they were legitimate. The law doesn't require banks to conduct such investigations for their clients, the judge said.

"Nor is there any case law imposing liability on a bank for failing to conduct such an investigation," Wilton-Siegel wrote.

The judge also dismissed claims the bank ought to have known the Stanford scheme was illegal.

Wilton-Siegel allowed the investors to change the wording in their filing to proceed with a claim that the bank failed to comply with the Proceeds of Crime Act, a federal anti-money laundering law.

The case is Between Dynasty Furniture Manufacturing Ltd. and Toronto-Dominion Bank, 09-8373-00CL, Ontario Superior Court of Justice (Toronto).

Source.

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Stanford's Lawyer Played Key Role In Shielding Banker From Scrutiny

January 5, 2010
By Zachary Roth

We told you arlier today about Yolanda Suarez, the Florida lawyer who forged ties with members of Congress and ran interference with journalists on behalf of Allen Stanford. But it's also worth paying attention to another Florida lawyer and key Stanford ally, who appears to have played an equally crucial role in allowing the Texas banker -- who was charged in June with orchestrating a multi-billion dollar Ponzi scheme -- to stay a step ahead of the government for so long.

As Stanford's lawyer of choice, Carlos Loumiet helped set up the unusual regulatory arrangement that allowed the Stanford Financial Group (SFG) to move hundreds of millions of dollars from Florida to Antigua with little scrutiny. Soon afterwards, he served on a Stanford-funded task-force to rewrite Antigua's banking laws -- an effort that U.S. regulators have said left major loopholes and hindered efforts to crack down on fraud. And the court-appointed receiver seeking to unravel Stanford's far-flung financial empire has demanded that the two law firms that have employed Loumiet -- who hasn't been charged with any wrongdoing -- hand over records of their work on behalf of Stanford.

As the Miami Herald reported earlier this year, the story starts in 1998, when Stanford wanted to set up an easy way to move money from SFG's Miami office, which sold certificates of deposit to investors, to Antigua, where his banking empire was headquartered.

He turned to Loumiet, at the time a lawyer at Greenberg Traurig. That's the Miami firm where Suarez, then SFG's legal counsel, had previously worked, and which would later become known as the firm from which Jack Abramoff bribed government officials. As the Herald has also reported, despite the objections of the state's top banking lawyer, Loumiet prevailed on Florida officials to allow SFG to set up a special trust office that could move money to Antigua without submitting to fraud or money -laundering checks. With the money pipeline established, the Herald reported, the Miami office sold millions in CDs over the next decade, then used jets to fly the checks, stuffed in pouches, to Antigua.

That wasn't the end of Loumiet's service to Stanford though. About a year later, the Clinton administration, as part of an effort to crack down on money laundering, was considering cutting off access to U.S. currency for all offshore institutions in Antigua.

In order to convince U.S. regulators to back off, Stanford volunteered to organize and fund a task force to re-write Antigua's banking laws -- allowing him to appoint the task force's members. Stanford named Loumiet and another Greenberg lawyer, Patrick O'Brien.

Loumiet touts the experience in the bio on his law firm website. But the revised laws that he and his fellow panelists drew up were denounced by the U.S. government as containing loopholes that made it even harder than previously for regulators to access bank records. In a letter to the Antiguan Prime Minister, the Treasury Department complained that the island nation had "weakened its anti-money laundering laws to the point they are now significantly below international standards, making Antigua more vulnerable to money laundering."

In an interview with the Washington Post at the time, Loumiet defended Stanford and suggested the U.S. and Britain did not have Antigua's best interests at heart. "Allen Stanford did not feel that if this was done with the benevolent help of the U.S. and Britain it would help Antigua," he said. "They were trying to put the fox in charge of the chicken coop, and frankly the chickens weren't very happy about it."

In any case, the panel had done its job. Stanford's operation continued largely free from regulatory scrutiny.

But Stanford still appears to have taken pains to keep Loumiet involved. When, in 2001, the lawyer moved from Greenberg to Hunton & Williams, where he remains, Stanford switched to the new firm and continued to use Loumiet as a lawyer.

That wasn't all Stanford used Loumiet's new firm for. Since 2000, Stanford Financial Group, like many large companies, had hired lobbyists to promote its interests in Washington. But, according to lobbying disclosure reports, Hunton was hired in 2005 to lobby Congress on tax issues, on behalf of Stanford personally. A spokeswoman for the firm declined to discuss what the work consisted of.

The court-appointed receiver on the Stanford case, Ralph Janvey, appears to see Loumiet's work as central to the operation. Janvey has asked both Greenberg and Hunton for files containing records of their work for Stanford. Hunton has handed over some files, but is fighting to keep others secret, citing legal issues regarding jurisdiction and client privilege.

A request to Loumiet from TPMmuckraker to discuss his work on behalf of Stanford was referred to a Hunton spokeswoman, who declined to comment.

Source.

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Feds probe links between lawmakers, Allen Stanford

January 3, 2010
By MICHAEL SALLAH and ROB BARRY

Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions.

"I love you and believe in you," said the e-mail sent on Feb. 17. "If you want my ear/voice - e-mail," it said, signed "Pete."

The message from the chair of the National Republican Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents.

The Justice Department is investigating millions of dollars Allen Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua, McClatchy Newspapers has learned.

Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar.

The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation's largest Ponzi schemes.

Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests.

Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford's bank and brokerages.

His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. "I haven't seen it, so I can't verify its authenticity at this time," she said.

Found on the servers

But the message found on Stanford's computer servers and the contributions he made to Sessions and other lawmakers - totaling $2.3 million - are now part of the government's inquiry.

Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork - the money plundered from his customers' accounts.

Over the years, he took on battles to protect his banking network while fending off regulators.

In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.

The next year, he helped block legislation that would have drawn more government scrutiny to his bank.

While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers.

Stanford hosted a wedding dinner for New York's U.S. Rep. John Sweeney at his five-star restaurant in Antigua in 2004 - toasting the couple for photographers-and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office.

"He legitimized himself by having himself vetted by powerful members of Congress," said Steven Riger, a former vice president at Stanford's Miami brokerage. "It was all about the public's perception."

Kent Schaffer, Stanford's court-appointed attorney, said his client never asked for special favors. "Stanford gave contributions to politicians, but there was nothing criminal behind it," he said.

The federal investigation comes after months of criticism from victims' groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.

Most members of Congress contacted by McClatchy Newspapers declined to discuss their ties to the banker, other than to say they have since returned the contributions.

Stanford's foray into the Washington power game began in 2001, shortly after he was allowed to open a controversial trust office in Miami.

The special office was a boon to Stanford's bank, generating millions in the sale of certificates of deposit - the money stuffed in pouches and sent on jets to his banking headquarters in Antigua.

But when a bill was created to compel offshore bankers to reveal the sources of money flowing into their banks, Stanford jumped into the fight to kill it.

The measure would have forced Stanford - who was moving millions illegally through his Miami trust office - to open his books to federal regulators.

"He wanted the complete freedom to move money offshore without any threat," said Jack Blum, a lawyer who testified before Congress supporting the legislation. "He was cheerleading for the offshore tax havens."

To combat the bill, Stanford launched a strategy he would use for the next eight years: He gave money to the party in power, including $40,000 to the Senate Republican Campaign Committee and $100,000 to the inaugural committee of George W. Bush, records show. By summer of 2001, the bill was dead.

In the ensuing years, Stanford's banking empire flourished, with the Miami office generating hundreds of millions of dollars, records show.

In late 2001, Stanford confronted another threat: A bill allowing state and federal regulators to share details about fraud cases - which would have brought Stanford's brokerages under closer scrutiny - landed in the Senate Banking Committee.

Though the Senate was now controlled by Democrats, Stanford was prepared: He had given $500,000 to the Democratic Senatorial Campaign Committee in 2002 - his largest-ever contribution.

"I told him that the Democrats were going to take over, and he needed to make friends with them," recalled his lobbyist Ben Barnes, once Texas' lieutenant governor.

Stanford also doled out $100,000 to a national lobbying group to fight the measure.

The bill, which sparked sweeping opposition from brokerages and insurers, never made it to a vote.

While he was scoring points in Washington, Stanford was squaring off for a crisis at his banking headquarters in Antigua.

In 2003, investors began questioning the legitimacy of his certificates of deposit, which generated higher returns than major U.S. banks, and articles began appearing in news magazines about money-laundering in Antigua.

In addition, Stanford was drawing the scrutiny of the SEC, which was demanding to know where his bank was investing customers' money.

A contact in Antigua

In the ensuing years, Stanford would play a dual role of staving off regulators - paying $200,000 in bribes to Antiguan banking chief Leroy King - while forging ties with members of Congress, court records show.

Those connections deepened when Stanford started hosting a series of congressional visits to Antigua.

It began in 2003, when lawmakers including Sessions, Ney, John Sweeney, Gregory Meeks, Donald Payne, Max Sandlin and Phil Crane arrived in Antigua on a mission to "promote relations" with the Caribbean nation.

The cost of the January trip - including nights in luxury hotels and two Stanford jets for travel - came to $39,500, records show.

For four days, they gathered for talks on business in the Caribbean, trading jokes with Prime Minister Lester Bird and touring the island.

In time, the group of lawmakers, which became known as the "Caribbean Caucus," would take 11 more trips - the costs picked up by the Inter-American Economic Council, a nonprofit funded by Stanford.

A total of $311,307 was spent on the trips to places like Montego Bay, St. Croix and Key Biscayne. "We were rolling out food, caviar, wine, lobster," recalled Stanford's personal chef, Jonas Hagg.

During a 2004 Antiguan trip, Sweeney and his 34-year-old girlfriend were married, with Stanford hosting the ceremony and reception for the New York Republican at the famed Pavilion Restaurant.

"If it wasn't for Allen, I certainly would not be here today," Sweeney told Stanford's newspaper, The Antigua Sun. "He has done a tremendous job of promoting and raising the awareness of Antigua in the United States, and people take notice of a man of his standing and stature in the halls of Washington."

Photos of Stanford and caucus members were splashed in company publications and news releases. "You looked and you saw all these important people," Riger said. "That legitimacy allowed him to go out and collect a lot of money."

Stanford was not only funding the trips - the money looted from his customers - but also staging fundraisers.

He held an event at his office on the 21st floor of the Miami Center for Ohio house member Ney, who was later sentenced to 30 months in prison after admitting to accepting gifts and money from clients of lobbyist Jack Abramoff.

He rallied his brokers when Sessions was in a tight race with Democrat Martin Frost in Texas in 2004.

Working the phones

"He got on the speakerphone and told everyone to give to Pete Sessions," said Riger. "He said Sessions was good for our company and we needed to give to him."

Stanford raised $38,875 in the final weeks of the campaign for Sessions, who defeated Frost.

While he was forging ties in Washington, he was getting into deeper trouble with the SEC. By 2006, the agency had sent two confidential letters to the Antiguan government demanding information about the solvency of Stanford's bank, records show.

Both times, Stanford was aided by lead regulator King, who managed to keep the bank's finances secret while accepting thousands in bribes from Stanford - their pledge sealed in a blood oath in Stanford's airplane hangar in Antigua, according to court records and interviews.

With pressure mounting from the SEC, Stanford increased his lobbying in Washington.

In 2008, he started his own lobby firm on 14th Street and New York Avenue, spending $2.2 million - more than he spent the previous four years combined, records show.

"He was spreading his money around," said Blum, the Washington expert on money-laundering.

"It was a way of gaining legitimacy and getting people to say, 'Hey, I'm OK.' "

Just one month before the FBI launched a criminal probe into his banking empire, Stanford hosted a lavish gathering of powerful Washington insiders, with keynote speeches from Madeleine Albright, former secretary of state, and Paul Wolfowitz, former deputy secretary of defense.

Also co-hosting the May event: Miami lawyer Yolanda Suarez, Stanford's longtime chief of staff. The topic: the global financial crisis, and the private sector's need to work with government. But Stanford's own crisis was about to explode.

On Feb. 17, armed with court orders, federal agents swarmed into his offices across the country, shutting down his operations and declaring that Stanford was running a massive fraud.

In his Houston headquarters, agents found reams of company documents, electronic records and e-mails received by Stanford in his final days, including the message from Sessions.

As the scandal unfolded, members of the Caribbean Caucus began returning their contributions.

Nineteen lawmakers gave back a total of $87,800 to the court-appointed receiver as of August. Others, including Meeks, Sessions, Sandlin, Sweeney and Crane, said they turned some of the money over to charities.

In addition, Democratic House member Charlie Rangel returned $11,800 to charities, and Democratic Florida Sen. Bill Nelson $45,000 to charities, half of which came from a fundraiser at Stanford's Miami office in 2006.

"Just like a number of people, (they) started to run for cover the minute Allen was under scrutiny," said Schaffer, Stanford's attorney.

"People he had been very close to - and never asked anything of - all of a sudden are distancing themselves. Whether he's innocent or guilty, they don't really care. They worry about how it affects their image."

As federal agents examine Stanford's political contributions, victims' groups have criticized lawmakers for failing to vet Stanford before accepting his donations and trips.

The State Department had singled out Stanford in a 1999 report for using his influence to weaken the Antiguan banking laws, creating "one of the most attractive financial centers in the Caribbean for money launderers."

"None of this was difficult to ascertain," said Bill Branscum, a former U.S. Treasury agent who investigated laundering in the Caribbean. "With the position of public trust comes a consummate responsibility. They should have made it their business to figure out what was going on."

"You've got to give (Stanford) credit - he got the best bang for his buck."

Source.

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Feds probe banker Allen Stanford's ties to Congress

	December 27, 2009 The ties between indicted banker Allen Stanford and members of Congress -- including millions in contributions and weekends in five-star Caribbean resorts -- are now the subject of a sweeping federal investigation. Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions. "I love you and believe in you," said the e-mail sent on Feb. 17. "If you want my ear/voice -- e-mail," it said, signed "Pete."
The Ponzi scheme was able to continue for so long due to "institutional influences" within the SEC. As Feds Closed In, Stanford Boosted Efforts To Buy Influence.
The message from the chair of the National Republican Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents. The Justice Department is investigating millions of dollars Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua, The Miami Herald has learned. Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar. The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation's largest Ponzi schemes. Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests. Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford's bank and brokerages. His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. "I haven't seen it, so I can't verify its authenticity at this time," she said. But the message found on Stanford's computer servers and the contributions he made to Sessions and other lawmakers -- totaling $2.3 million -- are now part of the government's inquiry. Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork -- the money plundered from his customers' accounts. D.C. CONNECTIONS Over the years, he took on battles to protect his banking network while fending off regulators. In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua. The next year, he helped block legislation that would have drawn more government scrutiny to his bank. While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers. Stanford hosted New York Congressman John Sweeney's wedding dinner at his five-star restaurant in Antigua in 2004 -- toasting the couple for photographers -- and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office. "He legitimized himself by having himself vetted by powerful members of Congress," said Steven Riger, a former vice president at Stanford's Miami brokerage. "It was all about the public's perception." The federal investigation comes after months of criticism from victims' groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.

Political contributions from Mr. Stanford and his affiliated companies. For which purpose?

$950,000 Democratic Senatorial Campaign Committee
$238,500 National Republican Congressional Committee
$202,000 Democratic Congressional Campaign Committee
$128,500 Republican National Committee
$ 83,345 National Republican Senatorial Committee
$ 25,000 Rangel Victory Fund
$ 16,000 Friends of Chris Dodd
$ 14,000 Shelby for US Senate
$ 11,500 Chris Dodd for President
$ 10,000 New Jersey Democractic State Committee
$ 10,000 Representative Pete Sessions (R-TX)
$ 8,000 Friends for Harry Reid
$ 6,600 Representative Gregory Meeks (D-NY)
$ 6,100 Senator Bill Nelson (D-FL)
$ 5,000 Americans for a Republic Majority PAC
$ 5,000 Friends of John Boehner
$ 5,000 Friends of Jay Rockefeller
$ 5,000 Delegate Donna Christensen (D-USVI)
$ 5,000 Representative Charles Gonzalez (D-TX)
$ 5,000 KPAC (affiliated with Senator Kay Bailey Hutchinson of Texas)
$ 5,000 Lone Star Fund
$ 5,000 Representative Charles Rangel (D-NY)
$ 5,000 Senator Roger Wicker (R-MS)
$ 4,600 Senator Barack Obama (D-IL) (presidential campaign)
$ 4,550 Representative Dan Maffei (D-NY)
$ 4,000 Arcuri for Congress
$ 4,000 Senator John Cornyn (R-TX)
$ 4,000 Representative Richard Neel (D-MA)
$ 4,000 Senator Charles Schumer (D-NY)
$ 3,300 Representative Charles Rangel (D-NY)
$ 3,300 Pete Olson for Congress
$ 3,000 Representative James E. Clyburn (D-SC)
$ 3,000 Representative Rahm Emanuel (D-IL)
$ 3,000 ERICPAC
$ 3,000 Leadership PAC 2006
$ 3,000 Alexander for Senate 2014, Inc.
$ 3,000 Mel Watt for Congress
$ 2,550 Representative Eric Massa (D-NY)
$ 2,550 Representative Mike McMahon (D-NY)
$ 2,500 Senator Richard J. Durbin (D-IL)
$ 2,500 Freedom Fund
$ 2,500 Representative Timothy Johnson (R-IL)
$ 2,500 Representative Paul Kanjorski (D-PA)
$ 2,500 Senator Mary Landreiu (D-LA)
$ 2,500 Representative John Lewis (D-GA)
$ 2,500 Senator Mitch McConnell (R-KY)
$ 2,500 National Leadership PAC
$ 2,500 Friends of Mark Warner
$ 2,500 Representative Adam Putnam (R-FL)
$ 2,500 Senator Gordon Smith (R-OR)
$ 2,500 Former Senator John Sunnunu (R-NH)
$ 2,500 Representative John Tanner (D-TN)
$ 2,500 Representative Bennie Thompson (D-MS)
$ 2,500 Collins for Senator
$ 2,500 Campaign Account of Robert Wexler
$ 2,300 Minnick for Congress
$ 2,300 Representative John Boccieri (D-OH)
$ 2,300 Representative Deborah Halvorson (D-IL)
$ 2,300 Senator John McCain (R-AZ)
$ 2,300 Olson-Texas Victory Committee
$ 2,300 Senator Roger Wicker (R-MS)
$ 2,100 Senator Orrin Hatch (R-UT)
$ 2,000 Senator Patty Murray (D-WA)
$ 2,000 Neugebauer Congressional Committee
$ 2,000 Lloyd Doggett for Congress
$ 2,000 People for Patty Murray
$ 2,000 Representative Spencer Bachus (R-AL)
$ 2,000 Senator Evan Bayh (D-IN)
$ 2,000 Reprentative Kevin Brady (R-TX)
$ 2,000 Representative Vern Buchanan (R-FL)
$ 2,000 Representative Dave Camp (R-MI)
$ 2,000 LEADPAC
$ 2,000 Representative Ileana Ros-Lehtinen (R-FL)
$ 2,000 Representative Lamar Smith (R-TX)
$ 2,000 Representative Patrick Tiberi (R-OH)
$ 2,000 Representative Donald Payne (D-NJ)
$ 1,500 Representative Sam Johnson (R-TX)
$ 1,500 Representative Peter King (R-NY)
$ 1,500 Representative Kendrick Meek (D-FL)
$ 1,500 David Scott for Congress
$ 1,500 Charles Boustany Jr. MD for Congress
$ 1,000 Representative Joe Barton (R-TX)
$ 1,000 Senator Max Baucus (D-MT)
$ 1,000 Senator Maria Cantwell (D-WA)
$ 1,000 Representative Shelley Moore Capito (R-WV)
$ 1,000 Representative Steve Cohen (D-TN)
$ 1,000 Former Senator Elizabeth Dole (R-NC)
$ 1,000 Senator Byron L. Dorgan (D-ND)
$ 1,000 Representative Michael McCaul (R-TX)
$ 1,000 Freedom Funds - Mike Crapo, Honorary Chairman
$ 1,000 Barney Frank for Congress Committee
$ 1,000 Senator Pat Roberts (R-KS)
$ 1,000 Marsha Blackburn for Congress
$ 500 Representative Steve Cohen (D-TN)

Source.

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Stanford victims ask why Texas didn't act sooner

November 26, 2009
By Brian Gaar

In the aftermath of the R. Allen Stanford case, some local investors are asking: Where was the State of Texas?

Investors who lost money in the Houston financier's alleged Ponzi scheme now say the state's financial oversight was too lax.

"We have the right to know what the (Texas State Securities Board) knew and when they knew it, details of their past investigations, and why they didn't disclose anything to the citizens of Texas all these years," Austin investor Annalisa Mendez said.

In fact, the state looked into Stanford's dealings years ago.

The Securities Board wrote a memo in the mid-1990s, expressing concern "that the high return rates and commissions for CDs made it difficult for the Stanford bank to make a legitimate profit on the CDs," according to a September Financial Industry Regulatory Authority report on the aftermath of both the Bernard Madoff and Stanford cases.

FINRA is a private corporation that provides regulatory oversight of all securities firms nationwide.

Texas Securities Commissioner Denise Voigt Crawford mentioned the securities board's involvement with the Stanford case in Feb. 20 testimony to the state Senate Committee on Finance, just after the scandal broke.

"We looked at him about 10 years ago, because there was evidence of potential money-laundering," Crawford said in response to a question from state Sen. Steve Ogden, R-Bryan.

The FBI and the Securities and Exchange Commission took the case, "which is what should have happened," she said. "But why it took 10 years for the feds to move on it, I could not answer."

The SEC has been criticized by investors who say the agency didn't do enough, quickly enough, to stop Stanford.

In 2003, some Stanford employees told the SEC they suspected fraud at the company.

In 2005, the SEC's Fort Worth office started an informal investigation into the sale of certificates of deposit by Stanford International Bank, which is based in Antigua.

But it was not until this past February that the SEC sued Stanford, alleging he was running a "massive Ponzi scheme" based on fraudulent CDs.

The SEC's inspector general concluded in a report that the agency had fulfilled its duty to check out accusations against Stanford.

The report found that the agency's inquiry was "hampered by a lack of cooperation" from Stanford and his attorneys, as well as by jurisdictional obstacles and obstruction by regulators in Antigua.

Stanford's attorney, Kent Schaffer, denied that his client had operated a Ponzi scheme, saying that money from the CD program was invested in a "wide range of investments."

What caused the losses were the government's lawsuit and fraud investigation, which prompted a run on the bank, he said.

Source.

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Stanford lawyers and Lloyd's of London butt heads in court

November 19, 2009
By MARY FLOOD

R. Allen Stanford sat in court glumly for three hours Tuesday while a dozen lawyers debated whether insurance should pay for his criminal attorneys and whether those lawyers will have to report to a civil receiver when they find something new in the case.

Lloyd's of London lawyers announced in court that under a Stanford company policy, they've paid out $4.2 million to some criminal defense lawyers for work done before the August guilty plea of the Stanford company's chief financial officer, James Davis.

The Lloyd's lawyers said they won't pay further for the criminal defense of Stanford or those accused with him because Davis said they conspired with him. They said that the insurance contract said Lloyd's could stop payment if it determined money laundering was committed. Though Davis didn't plead guilty to money laundering, Lloyd's contends the terms of the policy were violated.

Dan Cogdell, lawyer for the former Stanford chief investment officer, Laura Holt, disputed that position.

"It's a bad faith denial of coverage," he said.

Stanford, Holt and others are accused of cheating investors who bought certificates of deposit issued by Stanford International Bank, on the Caribbean island of Antigua, and sold through companies affiliated with Houston-based Stanford Financial Group.

Stanford, a native Texan who founded Stanford Financial Group and is the only one of the defendants in the case who is behind bars while awaiting trial, faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

Lawyers for Stanford and other defendants asked U.S. District Judge David Hittner to order Lloyd's to pay on its policy, possibly unprecedented in a criminal case.

"We're in uncharted water," Hittner said, asking lawyers on both sides to submit briefs on the issue.

Hittner observed that the insurance lawyers' position would mean taxpayers have to pay for legal representation of Stanford and his codefendants.

Frozen assets

The payment of the criminal defense lawyers has been an ongoing issue. When the Securities and Exchange Commission filed a civil fraud suit last February in Dallas, it froze all the company assets and the personal assets of Allen Stanford and Holt.

Holt filed a separate lawsuit against Lloyd's in Houston federal court Tuesday, saying it was denying her coverage in bad faith. It's unclear whether Hittner will hear that case.

Also discussed Tuesday, but left undecided, is whether a receiver appointed by the Dallas court in the SEC case should be allowed to force criminal defense lawyers to hand over information they obtain while conducting their defense investigations.

Constitutional rights

Kent Schaffer, Stanford's lawyer, argued that the receiver's demands could violate defendants' constitutional rights and interfere with attorney-client privilege.

On that and the insurance issue, prosecutor Gregg Costa asked the judge to consider moving the case along as quickly as possible, especially since Stanford is imprisoned.

Stanford, who has had two surgeries since he went to jail in late June and has dropped more than 35 pounds, was unshaven and gaunt.

Concern on health

He leaned his head down so much at the beginning of the hearing that Hittner asked his lawyers to check on him and admonished that if Stanford is not well enough to attend court, he should stay in the detention center downtown.

Stanford perked up during a break, engaging in animated conversation with two U.S. marshals.

Source.

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Miami's ex-DEA chief could escape charge in Allen Stanford case

November 3, 2009
By Rob Barry and Michael Sallah

In a blow to prosecutors, a federal judge Monday called for the dismissal of an obstruction charge against Miami's former DEA chief in the Allen Stanford bank fraud case.

Two months after one of Miami's most celebrated drug cops was charged in the Allen Stanford financial scandal, a federal magistrate is recommending that one of the key charges be thrown out.

Judge Robin Rosenbaum said prosecutors failed to prove Tom Raffanello -- head of security for Stanford's worldwide enterprise -- interfered with a federal investigation by ordering the destruction of reams of company documents.

The former Drug Enforcement Administration chief, who left the agency to join Stanford's security force in 2004, was charged with ordering the shredding of records just days after federal agents shut down Stanford's empire in a massive fraud case in February.

Though prosecutors said Raffanello defied a court order by destroying the documents, Rosenbaum said the government failed to show he impeded the U.S. Securities and Exchange Commission's probe.

The magistrate fell short of rejecting the entire case, however, saying prosecutors were able to show the former drug cop destroyed records in the course of a federal investigation. Her recommendation will be taken up by presiding Judge William Zloch later this month.

The charges over the destruction of the records -- including sensitive background checks on employees and investors -- are just part of the government's case against Stanford, who prosecutors say orchestrated a $7 billion Ponzi scheme.

Raffanello's attorney, Richard Sharpstein, said he was pleased with Rosenbaum's recommendation. "We hope Judge Zloch not only agrees with Judge Rosenbaum, but throws out the entire case," he said.

Lead prosecutor Paul Pelletier could not be reached on Monday. However, prosecutors have argued in prior hearings that Raffanello and co-defendant Bruce Perraud were aware of a judge's order to preserve all company documents when they called a shredding truck to the company's Fort Lauderdale security bunker on February 25.

Federal agents have been scrambling to trace billions of dollars that flowed through Stanford's Antiguan bank over the past decade.

Ruling mostly on technical grounds, Rosenbaum said the order to preserve the records was for the court-appointed receiver and not the SEC. "[The indictment] does not assert that defendants knew that when they allegedly obstructed the receiver's investigation, they were also interfering with the SEC's proceeding," Rosenbaum wrote.

She also threw out a portion of a conspiracy count relating to the obstruction charge. A trial on the remaining counts is tentatively set for January.

Source.

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Receiver Goes after Law Firms

October 5, 2009
By Hazra C Medica

Court-appointed receiver Ralph Janvey has turned the spotlight on two law firms. The Miami Herald reported over the weekend that Janvey, who has been working with federal agents, is now pressing for more information directly from Stanford's lawyers.

The receiver has made a request for legal files provided to R Allen Stanford by Greenberg Traurig and another firm, Hunton & Williams. The Herald listed this latest move by Janvey as "one of the most aggressive moves waged by the receiver to search for assets from Stanford's far-flung banking network".

While Greenberg Traurig is not under criminal investigation, the firm is facing a legal review of its actions in Antigua. Ross Gaffney, a former FBI agent who investigated Stanford, was quoted as saying: "I'm sure one of the things they will look at is what did Greenberg Traurig know, and when did they know it, and did they have any liability?"

According to the article, Greenberg Traurig's effort to assist Stanford in 1998 was but one move in a series which saw the Florida law firm rescuing Stanford from crisis and propelling his business interests. The Herald sought interviews with five lawyers who represented Stanford while working for the firm. Two of the five declined to comment, but assured that they were simply providing legal support and were not aware of any illegal schemes by Stanford.

The article spoke of a "money pipeline" between Miami and Antigua which Greenberg lawyers helped Stanford create. It went on to describe Stanford's creation of a trust office in downtown Miami which could move millions overseas without reporting anything to the government.

According to the article, "The unusual arrangement -- created over the objections of Florida's chief banking lawyer -- let Stanford open the office without submitting to fraud checks or money-laundering requirements. Over the next decade, the Miami center sold millions in Stanford's key investments -- certificates of deposit -- the checks stuffed in pouches and sent in jets to Antigua."

The article also chronicled the changes in Antigua's banking system and Stanford's effort to "keep the pipeline alive". The US Treasury, the article explained, was considering blacklisting all of Antigua's offshore institutions because of money laundering and fraud. In response, Stanford met with then prime minister, Lester Bird and agreed to pay out of his own pocket for a task force to rewrite the banking laws.

This task force, the article said, which included Greenberg lawyer Carlos Loumiet, met in Miami and St John's to examine ways to avoid a shutdown of the banks. According to the article, the 1998 legislation gave birth to a new regulatory agency - with Stanford on board - which would give protection to the investor from regulators for the next decade.

The Herald pointed to a particular incident which highlighted the power Stanford gained in Antigua by owning the largest bank. It spoke of the new regulatory agency requesting all of the island's secret offshore banking records. The head regulator, Althea Crick, refused. The agency waited until Crick had left for the day before seizing the filing cabinets containing the records and taking them to another building.

According to the story, the February 1999 takeover was approved by the new regulatory board, including an advisor to Bird, Errol Cort. The Herald rebutted statements which suggested that the takeover "was not done under the cover of darkness". According to the article, records show that Cort was a director of Stanford Trust Company and one of Stanford's Antigua lawyers.

International pressure from US and British authorities would later force Stanford to step down from his position and Antigua officials agreed to change the laws crafted by the task force. However, according to the article, "the momentum was in motion to help Stanford's bank for years to follow."

It noted, "With the new regulatory agency enforcing new banking rules, most of the 56 offshore banks on the island were eliminated, swatting away much of his competition." It also explained that court records show that Stanford's own bank was fabricating financial reports at the same time he was taking over the regulatory agency.

With millions of dollars coming into the Antiguan bank, Stanford switched to Hunton & Williams, after Loumiet joined the firm in 2001. In 2002, regulator Crick was replaced by Leroy King, who has been accused of taking more than $200,000 in bribes.

Loumiet and Hunton & Williams have agreed to turn over records of legal work for Stanford's US companies to Janvey. But they are fighting to keep secret the details of Stanford's businesses in Antigua and other foreign countries.

A spokeswoman for Hunton & Williams, Eleanor Kerlow, was quoted as saying: "There are legal issues regarding jurisdiction and client privilege that must be resolved before we proceed further."

According to the Herald, it is anticipated that Houston Judge David Godbey will decide whether the firm must meet Janvey's demands. Kristie Blumenschein, an attorney with the receiver's firm, has indicated that they are ready to fight for the records. According to Blumenschein, Janvey will not only search for assets, but the actions of the lawyers, dating to the 1990s, will also be under review.

It is being suggested that Janvey can demand lawyers be coerced into testifying about what they knew, since any conversations they had with Stanford about his ongoing crises are not protected by attorney-client privilege.

Source.

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Finra Missed Chances to Catch Stanford and Madoff

	October 2, 2009 By Joshua Gallu, David Scheer and Ian Katz The Financial Industry Regulatory Authority didn't fully probe transactions at Bernard Madoff's firm and repeatedly failed to investigate tips about R. Allen Stanford's alleged $7 billion fraud, an internal report found.
David Kotz.
Employees at the U.S. brokerage industry's main regulator must more aggressively exercise their authority, and escalate suspicions of serious fraud to senior managers or special investigators, according to the report released today. Finra said it will create an Office of Fraud Detection and Market Intelligence to ensure that investigators with expertise in fraud detection can respond rapidly. The report shows regulatory lapses linked to Madoff's record Ponzi scheme weren't confined to the Securities and Exchange Commission, which has been faulted by its own internal watchdog for inadequately pursuing tips over 16 years. In Stanford's case, Finra also received "credible information" from at least five sources, including the SEC, according to the internal report. "As regulators, we owe it to investors -- especially those harmed by recent scandals -- to develop a better, more comprehensive, response to fraud," Finra Chief Executive Officer Richard Ketchum said in a statement. "I am committed to taking the lessons from the report's findings to make Finra even stronger." SEC Chairman Mary Schapiro led Finra and its predecessor NASD from 2006 until taking over the SEC in January this year. During that time, the brokerage regulator conducted some examinations of Madoff's firm and fined Stanford Group Co. The SEC oversees Finra and approves its rules. Jurisdictional Limits In a series of reports this year, SEC Inspector General H. David Kotz has faulted his agency's oversight of Madoff and examined its attempts to investigate Stanford. In the Stanford case, he concluded the SEC was hampered by jurisdictional limits and Stanford's refusal to cooperate. Kotz found that the SEC never fully investigated at least six tips on Madoff since 1992 while he was building a $65 billion Ponzi scheme. While there is no evidence that Finra received similar whistleblower complaints, its examiners did uncover several facts worthy of inquiry that, "with the benefit of hindsight, should have been pursued," the Finra report said. In 2005, the SEC sent a five-page letter to Finra about Stanford. The letter said his certificates of deposit "appear too good to be true" and that his firm had aggressive sales tactics commonly associated with fraudulent schemes. Misinterpretation According to the report, Finra's lead examiner "thought the letter signaled that the SEC had taken over the CD case" when it was actually meant to refer the investigation to Finra. In light of the misinterpretation, the examiner "did not do all he could have done on the CD issue." In 2006, Finra examiners noticed Madoff was making payments to Cohmad Securities Corp., according to the report. Had examiners sought more documents, they might have realized that the fees were for steering clients to Madoff's investment advisory business. Such a discovery "may not have uncovered the Ponzi scheme, but it would have undermined the Madoff firm's longstanding representations" that it didn't have customer accounts, the report said. In 2007, Finra staff uncovered commissions from a London affiliate that criminal investigators have linked to money laundering, according to the report. If examiners had fully scrutinized the transactions, they may have fueled suspicions and prompted a broader investigation, it said. Anonymous Letter In 2003, Finra received an anonymous letter calling Stanford's business a "massive Ponzi scheme that will destroy the life savings of many." The letter was not seen by the organization's enforcement staff until six years later after an analyst determined Stanford's CDs were not securities and therefore outside of Finra's jurisdiction, the report said. The analyst referred the letter to the SEC. "By more aggressively using its authority, Finra could have obtained evidence of wrongdoing much earlier than it did," the report said. If examiners had fully pursued information that Stanford's customers were selling securities to purchase CDs based on his allegedly false advertising, they might have found sufficient evidence of fraud, the report said. On at least two occasions, Finra handled complaints from former Stanford employees who claimed they had been fired after refusing to sell CDs without conducting due diligence. One said Stanford was soliciting unsophisticated investors in Latin America and that the value of his bank's assets were "well below" his obligations to clients, indicating he was running a Ponzi scheme. Finra didn't follow up on the allegations, the report said. 150-Year Sentence Madoff, 71, is serving a 150-year prison sentence after pleading guilty to a fraud that federal investigators said dated to at least the 1980s. Cohmad, which was sued by the SEC in June, has denied wrongdoing. Stanford, 59, faces 21 fraud and conspiracy counts linked to what the SEC has called a "massive" scheme to defraud investors through the sale of bogus CDs by Antigua-based Stanford International Bank. He denies wrongdoing and remains in a Texas jail awaiting trial. The report was prepared by a special panel formed to review Finra's examination program, particularly the Madoff Ponzi scheme and Stanford's alleged fraud. It was led by Charles Bowsher, U.S. comptroller general from 1981 to 1996. Other members included Harvey Goldschmid, a former SEC commissioner; Joel Seligman, president of the University of Rochester; and Ellyn Brown, Maryland's securities commissioner from 1987 to 1992. Finra, funded by Wall Street firms and overseen by the SEC, writes rules for and polices almost 4,800 brokerages. Its board includes representatives of the financial industry along with former regulators and academics.

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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: http://sivg.org/article/2009_Stanford_scam_bilked_Jews_out_of_millions.html

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