Stanford Victims might get SIPC

April 27, 2011

The Securities Investor Protection Corp. (SIPC) - touted as a backstop against brokerage losses - can not longer refuse to cover losses by investors in financier Allen Stanford's alleged $7 billion fraud.

People believe their money is protected by SIPC - and they are right!

SIPC is a non-profit corporation funded by its members -- securities broker-dealers -- whose clients get some insurance against loss. SIPC makes good when a brokerage fails.

Literature for the Antigua-based Stanford International Bank, through which Stanford is accused of selling billions of dollars worth of bogus, high-yielding certificates of deposit, bore the SIPC logo, generally regarded as a seal of approval for financial institutions.

Under U.S. law, SIPC repays up to $500,000 in custodial losses to investors whose securities are missing from accounts at member firms. The protection doesn’t extend to investors who’ve got their certificates, even if the securities have been rendered worthless by fraudulent conduct. However the declaration of the forensic accountant Karyl Van Tassel, found that money that was supposed to buy certificates of deposit at Stanford's Antiguan bank was diverted for other purposes.

The 50+ members of Congress who signed the letter to the SEC

We are aware of several issues the SEC staff has raised with respect to whether Stanford Victims qualify for SIPC coverage. It is our understanding that SEC counsel has informally stated that SGC customers are not eligible for SIPC coverage at this time because (1) SGC was merely an introducing broker-dealer, and (2) SIPC is not meant to compensate customers of worthless securities. Before making a formal decision, we request the SEC consider the facts set forth in the Declaration of Karyl Van Tassel (attached hereto as "Exhibit A"), which illustrates how the funds for SGC were generally routed to continue Stanford’s fraudulent business practices, rather then purchasing securities. Read the complete letter here!

Mary L. Schapiro’s response

I assure you that the SEC is taking the situation of the Stanford Victims Coalition ("SVC") members, and all other Stanford victims, very seriously, and is investigating closely their status under SIPA. Commission staff, which has already devoted substantial time and effort on this issue, is striving to complete, as soon as possible, its investigation and review of the relevant facts relating to the Stanford case with a view to determining whether a legal basis exists for a SIPA liquidation of SGC. Read the complete letter here!

Missing or Worthless

Some investors’ lawyers complain SIPC is splitting hairs by limiting coverage to securities that are "missing" instead of rendered worthless by fraud.

"The Madoff clients’ securities were never there, so SIPC covers that loss and has been paying like slot machines," Stanley, who represents Stanford investors, said in an interview. Based on the declaration of the forensic accountant Karyl Van Tassel, Stanford investors should also be covered by SIPC.

Both Ways

"The SEC can’t have it both ways," Malouf said (who represents mostly Latin American investors). "They’re taking my clients’ money and using it to pay non-bank debts. If it is all one company, then there couldn’t have been any CDs purchased from a separate independent bank."

If the SEC believes that "all the Stanford universe is one consolidated entity," Malouf said, then Stanford’s Antiguan certificates of deposit "are exactly what SIPC covers, fraud." In previous similar cases, non-member affiliate companies were also granted with SIPC cover.

SEC spokesman Kevin Callahan declined to comment when asked to clarify the agency’s position on whether Stanford’s businesses should be treated as a consolidated entity. 

Source: http://sivg.org/article/stanford_investors_SIPC.html

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Stanford Investors Sue SEC for Losses in Alleged Swindle

	March 25, 2011 The U.S. Securities and Exchange Commission was sued by eight of indicted financier R. Allen Stanford's investors, who claim regulators' negligence and misconduct caused their losses. The investors, in a lawsuit filed yesterday in federal court in Dallas, said regulators should have investigated Stanford earlier and detected what the agency later concluded was a "massive" Ponzi scheme. The SEC's inspector general, in a report issued last year, faulted the agency's Fort Worth, Texas, office and some of its employees for failing to take action against Stanford sooner. "But for the negligent acts and omissions, misconduct and breaches of duty by Spencer Barasch, a former SEC regional enforcement director, the negligent supervision of Barasch by his SEC supervisors, and other inexcusable acts of negligence by SEC employees, the plaintiffs would not have made, and lost, their investments," according to the complaint filed by the investors' lawyer, Edward Gonzales III in Baton Rouge, Louisiana.
Indicted financier R. Allen Stanford, accused of leading a $7 billion investment fraud scheme, arrives for a hearing at the Bob Casey Federal Courthouse in Houston on Jan. 6, 2011. Photographer: F. Carter Smith/Bloomberg
U.S. securities regulators seized Stanford's operations in February 2009 on suspicion of fraud. Investors who bought certificates of deposit at the financier's Antigua-based Stanford International Bank Ltd. lost more than $7 billion, according to a lawsuit filed by the SEC. Barasch, who left the SEC's Fort Worth office in 2005 and is now a lawyer in private practice, didn't immediately return a call to his Dallas law firm today. Kevin Callahan, an SEC spokesman, declined comment on the lawsuit. Stanford, 61, who is in jail awaiting trial on criminal charges, has denied any wrongdoing. Most of the eight investors who filed the lawsuit live in southern Louisiana, where Stanford had a large trust operation. They claim combined losses of more than $18.7 million, according to their complaint. The SEC failed to conduct a meaningful probe of Stanford until 2005 even though examiners suspected him of operating a Ponzi scheme eight years earlier, SEC Inspector General H. David Kotz wrote in an internal report in April. The agency's Forth Worth office conducted four reviews of Houston-based Stanford Financial Group Co. starting in 1997 and determined after each one that Stanford's purported returns on certificates of deposit were highly unlikely, Kotz said in the report. Ethics Office Kotz also said in the report that Barasch, after he left the SEC, tried to represent Stanford on three separate occasions, until the agency's ethics office blocked it. Barasch told Kotz's investigators that he felt it wasn't necessary for his office to act against Stanford because he had informed other regulatory agencies about the potential fraud, according to the report. Kotz said he found no evidence of such referrals in his investigation. Kotz's report singled out Barasch as having "played a significant role in multiple decisions over the years to quash investigations of Stanford," Gonzales said in the complaint. "Through its negligent actions and inactions, the SEC caused Stanford's scheme to continue and expand, eventually resulting in billions in losses by investors," Gonzales said. The case is Robert Dartez LLC v. U.S., 3:11-cv-00602, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). Source.

Related article:
KLS complaint against the U.S. Government/SEC

FINAL JUDGMENT

The Court has granted Defendant's motion to dismiss for lack of subject matter jurisdiction. Accordingly, it is ordered that Plaintiffs' claims are dismissed without prejudice for lack of subject matter jurisdiction. Court costs are taxed against Plaintiffs. All relief not expressly granted is denied. This is a final judgment.

Signed November 14, 2011.
/s/ David C. Godbey
David C. Godbey
United States District Judge

Read the complete Order by David C. Godbey here.

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How the SEC really treats "Whistleblowers"

March 24, 2011
By Charles W. Rawl

Dear Senator Grassley:

Madoff whistleblower Harry Markopolos' book, They Wouldn't Listen, describes his experience of trying to get the SEC to see a multi-billion dollar Ponzi scheme growing by leaps and bounds each year right before their eyes. Three years ago, my business partner, Mark Tidwell, and I "blew the whistle" on the Stanford Financial Group's (Stanford's) multi-billion dollar Ponzi scheme growing by leaps and bounds each year right before the SEC's eyes. "They" DID listen to us, and used our evidence and testimony to support a civil lawsuit against Stanford and take a global network of companies into receivership on February 17, 2009.

Unfortunately, Mark Tidwell and I have had a very one-sided relationship with the SEC, and the Commission's failed promise of protection in return for cooperation and assistance in their case sends a message to the entire financial industry that being an SEC whistleblower is a dangerous and absurdly misguided endeavor.

Given the record of failure by the SEC and FINRA to adequately regulate the financial sector, it is critically important that whistleblowers be protected and compensated for delivering crucial information to authorities to help stop predatory and criminal enterprises like Stanford. Law-abiding citizens like Mark and I should be able to trust and depend on the SEC's assurances of protection. Instead, we have become the perfect examples of why NOT to blow the whistle.

Mark and I were promised protection when we risked our careers, our reputations and even our families' security to blow the whistle on Stanford. The SEC's promises have been broken in a very blatant manner and I firmly believe that when our story becomes public, it will be counter-productive to the admirable efforts of our nation's leaders like you who encourage citizens to do the right thing and come forward to report fraudulent conduct in corporate America.

I am writing you because of your long-term advocacy for whistleblowers and I am confident you will be appalled to learn some of the shocking details of my experience as a Stanford whistleblower. As the SEC is in the rule-making process for its recently expanded whistleblower program, I feel it is very important Congress truly understands the Commission's CURRENT treatment of whistleblowers so that appropriate legislative support is in place to force the SEC to comply with some very critical provisions to protect whistleblowers.

Source.

Stanford: What's the hold up? http://sivg.org/article/SEC_Whistleblowers.html

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Letter to the Chronicle’s Editor Regarding the SEC’s Failure to Protect the Stanford Group’s Victims

Letters to the editor
HOUSTON CHRONICLE
March 15, 2011

Agencies failed

It has been more than two years since 1,290 Texans lost their life savings in the R. Allen Stanford debacle. Many of the victims were teachers, nurses and firefighters, and these losses reflect most, if not all, of the retirement funds they accumulated over many years of hard work. These Texans relied on the Securities Exchange Commission (SEC) to uphold its federal mandate to protect investors, and despite numerous warnings about Stanford Financial over several years, the SEC failed to act on behalf of investors.

In 2010, SEC Inspector General David Kotz revealed the SEC was aware as early as 1997 that Stanford investors’ funds were in jeopardy of being stolen. It wasn’t until 2004 — seven years after the SEC first became aware of problems at Stanford — that it opened an official investigation. By the time the SEC took action in this case, it was too late for the Stanford victims who had lost virtually everything.

To make matters worse, the Stanford investors were customers of Stanford Group Co. (SGC), a broker-dealer that was a member of the Securities Investor Protection Corp.(SIPC). SIPC allowed SGC to use its seal for brochures, promotional materials and correspondence to give investors additional confidence. “Member SIPC” was adorned on its correspondences to investors, yet to date SIPC, which is under SEC authority, has refused to provide any remedy for Stanford victims. Customers of the Stanford broker dealer have been denied coverage, despite previous cases where investors in similar situations were covered. Skip Swingle, a victim of SGC, aptly warned, “I don’t think it’s just Stanford victims that should be concerned about what’s going on, but everybody.”

On Monday I sent a letter to SEC Chairman Mary Schapiro asking again for an expedited review of this issue. No one can restore all that these victims lost. We cannot replace the trust that was violated, nor can we say that this fraud won’t happen again. What the SEC and SIPC can and should do is live up to the mandate of encouraging investment by establishing customer confidence. If they do not, brokerage firms across the country might reconsider the placement of the SIPC seal, and investors will see it as a symbol of caution, not protection.

— U.S. REP. JOHN CULBERSON,
7th Congressional District of Texas

Source.

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Cricket mogul Stanford sent to US prison hospital

February 16, 2011
By: AFP

Financier and cricket mogul Allen Stanford was sent to a US prison hospital for drug addiction treatment so he can be fit to stand trial on charges of running a $7 billion fraud, officials said Tuesday.

A federal bureau of prisons website listed Stanford's status as "in transit."

The flamboyant Texan was declared incompetent to stand trial last month after government psychiatrists and Stanford's team testified that he was suffering from bouts of delirium linked to his dependency on powerful anti-anxiety medication.

They found the 60-year-old was also depressed due to a brain injury he sustained during a 2009 jailhouse brawl, and recommended he be weaned off the drug.

US District Judge David Hittner denied Stanford's request to be released and treated at a private medical facility because he is considered a flight risk.

The judge recommended that Stanford be sent to a medical center at a federal prison in Butner, North Carolina, where Wall Street swindler Bernard Madoff is currently serving a 150-year term for defrauding investors of $20 billion.

Stanford has pleaded not guilty to 21 counts of fraud, money laundering and obstruction. He faces up to 375 years in jail if convicted.

A self-described "maverick," Stanford hit international sports headlines by creating the eponymous Stanford Super Series Twenty20 cricket competition.

The $20-million winner-take-all match appalled many in the cricket world by challenging the sacrosanct traditional cricket establishment.

In Antigua, he was a larger-than-life figure, the island's largest employer and the recipient of a 2006 knighthood. But after the allegations against him surfaced, much of his support dwindled and the England and Wales Cricket Board cut ties with him.

Source.

Related article: Allen Stanford beaten up by jail inmates.

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Class action vs. PERSHING LLC, and LOCKWOOD ADVISORS, INC.

February 16, 2011

Calling it the best chance for some investors to recover some of the money they lost in R. Allen Stanford's certificates of deposit, attorneys have sued a clearing broker-dealer for the disgraced financier.

The suit alleges that New Jersey-based brokerage firm Pershing LLC — a subsidiary of the Bank of New York Mellon Corp. — dealt in unregistered securities.

Pershing acted as a middleman between Stanford's Antiguan bank and investors who bought billions of dollars' worth of CDs that federal prosecutors say were bogus.

A similar suit was filed in Dallas federal court on December 08, 2009. Austin residents Susan Blount and Gary and Laurie Spellman are among the plaintiffs in the lawsuit, for which class action status is being sought.

"I feel this is the very best claim that has a chance of recovery" for Stanford investors, said the plaintiffs' lawyer, Joseph Brophy, a partner with Hohmann, Taube & Summers LLP in Austin. In court documents, John Ward, managing director for Pershing's global services business, estimated that more than $500 million flowed through Pershing, starting in 2006. The number of investors during that time isn't yet known, but Ward estimated that more than 1,600 transactions took place.

Brophy said the Stanford CDs qualified as securities under the Texas Securities Act and should have been registered.

Pershing should have been "acutely aware" of that fact, he said, adding that under state securities law, investors are entitled to get their money back.

Source.

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Dismay as official Stanford Investors Committee file lawsuit against St Jude's children's cancer hospital charity

February 16, 2011

On this day today, the second anniversary of the civil action by the SEC against the Stanford Financial Group, wholly owned by Allen Stanford awaiting trial on 23 counts of fraud in Texas, allegedly too incompetent to stand trial after being beaten-up in prison and fed a cocktail of anti-depressants. What have we learned?

Firstly Allen Stanford is apparently competent enough today to file a lawsuit against the US prosecutors, the FBI and SEC, accusing them of "abusive law enforcement" and seeking $7.2bn in damages. Since he was declared indigenous after Lloyds of London contested their officer's insurance policy, following the hiring and firing of a carousel of well tailored attorneys, he is now represented by two public defenders. It begs the question who is paying for his lawsuit, and how did he miraculously recover well enough to instruct them.

Now he has recovered, please let the criminal trial begin, and that $7.2bn would also be the same amount the innocent victims of the alleged Stanford fraud have lost. If he's so innocent, where's the money?

On this day today, the Statute of Limitations for any lawsuits in connection with the Stanford case also expired.

Three months ago we woke up to the fact the so-called (SIC) Stanford Investors Committee was going to do nothing very much to help us, so we found a new attorney and launched our own campaign to file FTCA claims against the Securities and Exchange Commission (SEC), for their negligence in not closing down Stanford sooner. They knew he was a fraud 13 years ago. Some of the SEC were merely asleep on the job, while others were caught with their pants down watching porn on their computers. The campaign has been a resounding success, and several thousand Stanford investors have now filed claims.

On this day today, we also anticipated a flood of claims from the receiver and the (SIC) Stanford Investors Committee, who have reportedly been toiling away tirelessly for several months in total secrecy, all in our best interests.

We anticipated a plethora of lawsuits against, amongst others;

BDO Seidman, one of the worlds largest accounting firms, who audited Stanford Group Company, and who fudged their accounts four years running to hide from SIPC it was insolvent and only being supported by tainted funds from SIB in Antigua.

FINRA, who twice fined Stanford for misleading investors, a mere slap on the wrist, but despite all the red flags, could see no further.

The State of Florida, who through their Dept of Banking and Finance granted the newly formed (in 1998) Stanford Fiduciary Investor Services, the illegal right to move vast amounts of money offshore without the reporting a penny to regulators. Yes, Jeb Bush the brother of former President George W Bush became Governor of Florida earlier that same year, and both were recipients of generous campaign donations from Allen Stanford.

Greenburg Traurig, the deep pocketed Miami lawfirm who lobbied endlessly to set up Stanfords Florida deal, and who have been implicated in numerous other murky transactions.

Forbes, and who could forget their endorsement of Stanford as one of Americas 40 richest billionaires with $50bn under management. They gave Stanford his greatest aura of credibility.

One would have anticipated, with four experienced attorneys on the (SIC) Stanford Investors Committee; together with the examiner, the receiver, and Angela Shaw Kogutt, the director and founder of the SVC; these would all be rich pickings; but did they choose to file any suits against any of these? No, not one.

On this day today, sadly, we learned they chose instead to file a suit against St Jude's, the children's cancer research hospital charity who give hope to sick children and their families. Allen Stanford donated $7m towards St Jude's, quite possibly the only truly good deed the "Knight" ever did. No matter where those funds came from, there is one indisputable fact; St Jude's received and spent them in good faith to keep a lot of sick kids alive, and who can begrudge them that?

On this day today, it should have been the day we were all celebrating having made the first step towards recovery from the US Government, who knew for 13 years that Allen Sanford was a fraud, but did nothing. Instead I am sickened that the Stanford Investors Committee, who supposedly act in our best interests, could have instigated such a callous and insensitive action against such a deserving institution as St Jude's without our knowledge, and without our consent.

To all the Stanford investors reading this, I urge you to write or email the Stanford Investors Committee members to withdraw this suit against St Jude's. In the eyes of the world we are all as equally guilty as those undeserving members of the committee who are behind it. Please let us do one good thing and make this right.

Thank you.
Stanford's victim.

Group that lost money in Stanford ponzi scheme sues St. Jude, Le Bonheur

Investors trying to retrieve billions they lost in Stanford Financial Group's Ponzi scheme have sued St. Jude Children's Research Hospital, its fundraising arm American Lebanese Syrian Associated Charities Inc. and Le Bonheur Children's Medical Center Foundation for more than $7.37 million Stanford had donated.

The "Official Stanford Investors Committee" filed suit late Tuesday in the U.S. District Court for the Northern District of Texas, Dallas Division.

The claim represents the Ponzi scheme's latest fallout for Memphis.

Stanford Financial assumed a major profile in town in 2007 and 2008 as title sponsor of Memphis' PGA Tour golf tournament, which benefits St. Jude.

Earlier this month, the investors and the court-appointed receiver also sued the PGA Tour for $12.9 million, an amount that may be related to Stanford Financial's sponsorship of the tournament in 2007-08.

In the hospitals' case, the money that investors are trying to get back was given when Stanford Financial was insolvent and R. Allen Stanford operated the company "in furtherance of his fraudulent scheme," the suit states.

The sum in the suit, however, will be adjusted if the committee finds any additional payments made to the groups from Stanford, according to the lawsuit.

Since the litigation is pending, ALSAC/St. Jude could not reveal a precise amount Stanford gave to the charities, Emily Callahan, chief marketing officer for ALSAC/St. Jude, said in a statement.

But she said, "Our records show that we received less than the amount named in the suit."

The money, she said, was received "in good faith directly from Stanford Financial Group" and was spent immediately "on our mission of saving kids' lives in the U.S. and around the world and finding cures for catastrophic diseases in children...

"While our hearts go out to those impacted by the Stanford investment issues, it would hurt our charitable mission to have to return the money already spent directly on clinical care and support for children suffering from cancer and other deadly diseases, including bone marrow transplants, chemotherapy treatments, on education and training of doctors and nurses who help kids worldwide, and on groundbreaking research," Callahan said in a prepared statement.

Before authorities cracked down in February 2009, Stanford also had contributed a substantial portion of its $2.5 million pledge to Le Bonheur Children's Medical Center's campaign for a new $327 million hospital.

The suit states Stanford donated to ALSAC, St. Jude and the Le Bonheur foundation $2.56 million in 2006, $2.14 million in 2007 and $2.62 million in 2008 and $35,174 in 2009.

Investors who lost an estimated $7 billion to Stanford Financial want as much of their money back as they can retrieve, and some of their other recent "clawback" lawsuits apparently have Memphis ties.

They filed a $12.9 million suit Feb. 7 against the PGA Tour.

The suit says Stanford Financial parties paid the PGA Tour $5.9 million in 2007 and $6.9 million in 2008. Although the suit didn't mention the Memphis tournament, those were the years Stanford was its title sponsor.

This past year, FedEx took over as title sponsor of the FedEx St. Jude Classic.

As he does in his filings against all defendants in the clawback suits, receiver Ralph Janvey claims the PGA received the money from Stanford without providing any services or anything of equivalent value.

The PGA Tour says it doesn't respond in the media to lawsuits.

However, Ty Votaw, the organization's vice president for communications, told The Commercial Appeal on Wednesday that Stanford, as title sponsor of the Memphis event, "received all the rights, benefits and privileges associated with that."

Stanford, like any such tournament sponsor, received such benefits as "naming rights, commercial inventory in the four-day telecast, the benefit associated with being title sponsor of a sporting event that had over 12 hours of television coverage, pro-am spots, hospitality.

"How they use those, I can't comment on," Votaw said.

"We did provide value."

For example, the international TV coverage encompasses 225 countries and 589 million homes, he said.

Stanford is accused of creating a huge pyramid scheme by guiding clients to invest more than $7 billion in certificates of deposit from the Stanford International Bank in the Caribbean island of Antigua and then misusing the money.

Staff reporter Tom Bailey Jr. contributed to this story.

Source.

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Forensic accountant gives Stanford investors a little hope

By LOREN STEFFY
HOUSTON CHRONICLE
February 15, 2011

For two years, Stanford Financial Group's victims have struggled with the grim reality of their situation. Not only is their money gone, but every safety net has failed them. Now, they're hoping a new finding by a forensic accountant will give them a better chance at getting some of their money back.

Last week, investors circulated a declaration by FTI Consulting, an accounting firm hired by receiver Ralph Janvey to determine whether Stanford investors should be covered by the Securities Investor Protection Corp - SIPC.

The ruling found that money that was supposed to buy certificates of deposit at Stanford's Antiguan bank was diverted for other purposes.

The finding "100 percent supports the legal argument we've made" to get investors covered by SIPC, Angela Shaw, the head of the Stanford Victims Coalition, said in an e-mail sent to other investors.

After all, SIPC is covering some of the losses for Bernie Madoff's victims because he never bought the stocks he told clients he'd bought for them.

While the two cases may seem similar, they aren't. Nothing about the accountant's findings in the Stanford case changes SIPC's determination that investors aren't covered, said Stephen Harbeck, SIPC's chief executive. "We don't see a customer that we can protect," he said.

SIPC doesn't cover lost investment value, even if there may be fraud involved. Stanford investors' money may have been diverted, but the CDs did exist and the bank still had records of investors owning them, the accountant's report found. What was falsified, according to the Securities and Exchange Commission, was the assets that backed up those CDs.

Hoping SEC will step in

Stanford investors, though, hope the FTI report will encourage the SEC, which missed so many warnings about Stanford for so long, to ask SIPC to extend the coverage. So far, it hasn't. The SEC could even sue SIPC to compel it to cover Stanford's victims, but that's never happened.

"In this instance, both parties agree that there's no cause to initiate coverage," Harbeck said. "We were not designed to replace the initial purchase price when a security goes down in value."

That, of course, is not what Stanford victims want to hear. And who can blame them? After all, they weren't chasing exorbitant returns on risky investments. They thought they were buying a safe haven low-risk CDs - in a time of market turmoil. In many cases, they were following the advice of their trusted brokers.

Confusing to investors

SIPC is a narrowly defined insurance fund. The arcane details of its limitations have confused investors for years - at least the few who were even aware it existed.

In creating SIPC, Congress was careful to insure against broker misconduct, but not to shield investors from risk that, recent Wall Street bailouts aside, is supposed to be a part of investing.

The Stanford case, though, raises the question of whether that law needs amending. After all, the SEC claims Stanford brokers peddled the bogus CDs, collecting commissions for selling them to clients of the company's brokerage operation, which was a SIPC member.

In other words, SIPC coverage enhanced the veneer of credibility that Stanford used to sell itself to investors, and the FTI report describes a SIPC member firm that was diverting funds from customer purchases without the customers' knowledge. The fact that the alleged fraud wasn't quite as blatant as Madoff's - an obfuscation instead of an outright lie - is a hairline distinction with multibillion-dollar consequences.

Improvements ahead?

Given all the damage from Stanford's collapse, perhaps some good can yet come from the ashes. Perhaps Congress can review the law and build better protections for future investors.

SIPC touts itself as investors' first line of defense. For Stanford investors, it may be their last hope. The forensic accounting declaration makes it very clear that any funds that were intended to buy securities did not in fact reach its purpose; no securities were ever purchased and in fact it was only “fictitious securities.” Fictitious securities have been covered by SIPC in previous cases.

SIPC was denied until now with the excuse that investors got securities, but they are worthless because the Bank got broke and SIPC doesn’t insure worthless securities. But now with this declaration of Karyl Van Tassel, all the victims will get SIPC cover based on previous similar cases.

Nonmember affiliate company were also granted with SIPC cover

SIPC member
Old Naples Securities
First Interregional Equity Corporation
Churchill Securities
New Times Securities Services (New Times)

Nonmember affiliate(s)
Old Naples Financial Services
First Interregional Advisors Corporation
CD Investment Group Churchill Mortgage Investment Corporation
New Age Securities (New Age)

Source: http://sivg.org/article/SGC_Forensic_Accounting_Van_Tassel.html

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WikiLeaks reveals US worries over Allen Stanford

December 21, 2010

US diplomats were worried about Allen Stanford's business dealings three years before his financial empire collapsed, according to WikiLeaks.

The Guardian, which has been publishing details of the cables, said the US embassy in Barbados raised the issue in a cable dated May 3, 2006 after the ambassador attended a breakfast meeting with Stanford and Barbados' prime minister.

The disclosure potentially raises fresh questions about the wisdom of the England and Wales Cricket Board to sign a deal in 2008 with the financier for England to play five Twenty20 matches against the West Indies for a £12 million prize.

In February 2009, Stanford was charged by the US Securities and Exchange Commission with multiple violations of US securities laws in an alleged "massive" 8bn-dollar fraud.

The 2006 embassy cable noted: "Allen Stanford is a controversial Texan billionaire who has made significant investments in offshore finance, aviation, and property development in Antigua and throughout the region. His companies are rumoured to engage in bribery, money-laundering and political manipulation."

A comment appended to the cable added: "Embassy officers do not reach out to Stanford because of the allegations of bribery and money-laundering. The ambassador managed to stay out of any one-on-one photos with Stanford during the breakfast."

Meanwhile, WikiLeaks founder Julian Assange has criticised leaking of details of the sex assault charges he faces in Sweden - which were also published in The Guardian, saying it was intended to undermine his application for bail while he faced extradition proceedings.

He said: "The leak was clearly designed to undermine my bail application. Someone in authority clearly intended to keep Julian in prison."
Source: http://sivg.org/article/wikileaks_stanford.html

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Allen Stanford: Brokers face charges

	December 14, 2010 By Alex Hawkes US authorities have told several brokers that they intend to file civil charges against them over the alleged $8bn Ponzi scheme at Allen Stanford's banking group. US regulators have widened their investigation into the alleged fraud at Allen Stanford's banking group, and are now looking at brokers who worked with the bank as well as the bank's top executives.
Allen Stanford has been held in custody since his arrest in June 2009 Photograph: David J. Phillip/AP
The Financial Times reported this morning that the Securities and Exchange Commission had notified several brokers, as well as the head of Stanford International Bank's brokerage operations, that it intends to file civil fraud charges against them.

Investigators allege that Stanford's banking operation was in fact an $8bn (£5bn) Ponzi scheme - an investment in which returns to investors are funded either through their own payments or through those of subsequent investors rather than any genuine investment returns.

The FT said that Danny Bogar, head of SIB's brokerage operations, had been notified of the SEC's move by means of a Wells notice, a process used to alert individuals that they might face civil charges. Bogar's lawyer said his client knew nothing about the alleged fraud.

Patrick Cruickshank, a broker who worked in Stanford's office in Austin, Texas from 2006 to 2009, also received a Wells notice, the paper said, citing US regulatory filings. His lawyer said Cruickshank had "done nothing wrong" and "was a victim of the Stanford fraud".

Until now only Stanford, four senior executives at the bank and an Antiguan regulator had been charged in connection with the scheme.

Stanford, who has been held in custody since his arrest in June 2009, denies the allegations. His trial is due to begin in January, although defence lawyers argued last week that the businessman was too heavily medicated to prepare for the proceedings.

Former chief financial officer James Davis has pleaded guilty and is co-operating with the probe. Others accused have denied wrongdoing.

Source.

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SEC Eyed for Negligence in Enforcement Cases

November 29, 2010
By Rachelle Younglai

A federal watchdog is investigating whether a senior Securities and Exchange Commission official bungled an examination associated with a "major" investment adviser enforcement case in 2009.

The senior official at one of the SEC's regional offices allegedly told staffers not to pursue certain red flags in an investment adviser examination, according to a report by SEC Inspector General David Kotz.

Kotz's semi-annual report to Congress, released on Monday, did not identify the senior official, the regional office or the major enforcement case.

The senior official was motivated to cover up his tracks because he was deeply involved in the prior examination that did not uncover the fraud, according to an internal complaint received by Kotz.

The report from Kotz comes as the SEC continues to rebuild its reputation after the regulator was blasted for missing Bernard Madoff's epic fraud despite numerous tips and complaints.

The SEC declined comment. Kotz would not elaborate further.

According to the report, the complaint also alleged that a hostile work environment existed in the regional office because management failed to discipline the senior official after it was revealed that he had viewed porn on a SEC computer.

According to the report, Kotz is still eyeing allegations that the enforcement division was negligent in an investigation of an insider trading case. Among other things, Kotz is also probing allegations that SEC staff failed to properly investigate a prominent law firm for obstructing an ongoing case.

Source.

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SEC Did Nothing to Stop Stanford Ponzi Scheme for Years

November 10, 2010
By Jack Kelly

Newly released documents detail 12 years of fits and starts at the Securities and Exchange Commission as financier Allen Stanford was allegedly running a global Ponzi scheme.

At one point, an SEC official laments in an e-mail, "Before I retire, the Commission will be trying to explain why it did nothing." The e-mail from Fort Worth, Texas, Regional Office Assistant Director Julie Preuitt was written in 2004. The agency did not move in on Stanford until 2009.

The documents are exhibits in a scathing report issued in March by SEC Inspector General H. David Kotz. His investigation found SEC staffers were aware of potential problems at the Stanford Financial Group as far back as 1997, but that the SEC's Enforcement Division repeatedly declined to take action. The agency released the exhibits Tuesday after repeated requests by CNBC under the Freedom of Information Act.

Kotz's investigation also found the SEC's former enforcement chief in Fort Worth, Spencer Barasch, repeatedly sought to represent Stanford after leaving the agency, even after being told by the SEC's ethics office that he could not.

The exhibits show Allen Stanford himself pushed for Barasch's hiring. With SEC investigators bearing down on the company in 2006, Stanford wrote in an e-mail to Chief Financial Officer James Davis and General Counsel Mauricio Alvarado, "The former SEC Dallas lawyer we spoke about in St. Croix. Get him on board asap."

SEC officials blocked Barasch from representing Stanford, but the documents show Barasch billed Stanford for work done in 2006. He sought to represent Stanford again after the SEC lawsuit in 2009, but officials again ruled he had a conflict of interest. According to a transcript released Tuesday, Kotz asked Barasch about the 2009 request, and Barasch replied, "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines."

Barasch, who has not been charged with wrongdoing, has not responded to previous requests for a comment about any role he may have played in the Stanford affair.

The documents show Allen Stanford's attempts to exert his influence may have extended beyond the SEC. In a 2004 e-mail exchange with the subject "Stanford - Call to Federal Reserve," SEC officials contemplate the fact that someone at Stanford - the name in the e-mail is redacted - had contacted someone at the Federal Reserve, whose name is also redacted.

The SEC staffers conclude there is nothing they can do about the development, which leads Assistant Regional Director Preuitt to write, "I love this stuff. We all are confident that there is illegal activity but no easy way to prove. Before I retire, the Commission will be trying to explain why it did nothing. Until it falls apart all we can do is flag it every few years." The e-mail is dated October 25, 2004.

By then, officials in Fort Worth had been looking into issues at Stanford Financial for years. In 1997, examiners found evidence of "possible misrepresentation and misapplication of customer funds," according to one of the newly released documents. The report noted that Stanford himself had made a $19 million cash contribution to the company in 1996, and "We are concerned that the cash contribution may have come from funds invested by customers in (Stanford International Bank)."

The report was referred to the Enforcement Division, which ultimately chose not to pursue the matter. Among those who made the decision: regional enforcement chief Spencer Barasch.

The SEC released the Inspector General's report - minus the exhibits - on April 16, the same day the Commission announced a high-profile fraud suit against Goldman Sachs. That triggered charges the SEC was trying to bury the report amid the publicity surrounding the Goldman Sachs case, but a subsequent report by the Inspector General found no evidence of that.

Source.

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Allen Stanford beaten up by jail inmates

	November 8, 2010 By Daily Mail Reporter Bloodied and bruised, this is the shocking picture of cricket tycoon Allen Stanford after a beating by jail inmates. His neck in a brace, his eye bleeding and half-closed and his head bandaged. The final humiliation for Stanford, 61, awaiting trial accused of masterminding a $7 billion fraud, was his feet and hands were shackled as he was taken to hospital. Once he posed with a perspex case containing $20million at Lord's cricket ground, after being hailed as the saviour of English cricket. But that counted for nothing at the private prison in Conroe near Houston, Texas, and the inmates sharing his cell. "I was on the telephone and some of the other people in the cell didn't like it," he told a friend who visited him, according to the Sunday Times.
Attacked: The tycoon sits on a hospital trolley with his neck in a brace, his eye half-shut and a bandage wrapped around his head after the assault by jail prisoners in Texas
"They said something to me and then two of them jumped me and kept punching me and kicking me in the head." "I lost consciousness, but at one time I came round and grabbed one of them by the leg. That just set them off a again". The guards burst into the cell and shackled Stanford before taking him to a hospital where he underwent an operation while still chained up.
	Stanford suffered fractures to his eye socket, cheek bones and severe bruising to his body. He has lost all feeling in the right side of his face. No one has been punished for the attack and he spent three weeks in solitary confinement, before being moved to another prison. The assault happened in October last year in a cell holding 14 other men. It was designed to hold eight inmates and at the time had no electricity, air conditioning and was in virtual darkness. The friend claimed the inmates were "on edge" with each other because of the cramped conditions.
Shackled: Allen Stanford is bound hand and foot at the hospital near Houston
Stanford, who faces 21 charges at his trial which begins in January, had made three requests to be moved to another prison. His downfall began after he signed a deal with the England and Wales Cricket Board in June 2008 for five Twenty20 international matches between England and a West Indies all-star XI with a prize of $20 million. He was caught flirting with the wives and girlfriends of England's cricketers and was seen to grab Emma Prior, wife of wicket-keeper Matt and pull her onto his lap before putting an arm round Alistair Cook's girlfriend. An assessment of Stanford's health was prepared for a court by Victor Scarano, a forensic psychiatrist. He wrote: "Mr Stanford described himself as a breathing corpse with increased episodes of despair, hopelessness and helplessness".

Source.

Related article: Cricket mogul Stanford sent to US prison hospital.

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Antigua prepares to fight Stanford investors

	October 18, 2010 By Caribbean360 The Antigua and Barbuda government says it's building a defence against a lawsuit brought by the Stanford Victims which is seeking to recover financial losses as a result of the fall of Allen Stanford's empire. Attorney General Justin Simon says the administration has instructed its lawyers from Texas who recently visited the island.
The Stanford investors want US$24 billion in compensation - three times the amount the businessman is alleged to have defrauded customers out of.
The Stanford Victims alleges that government has benefited from Stanford's investments and, on that basis, should compensate the members for their losses.

"Government is looking at whether that action is sustainable against a sovereign state and the whole issue as to whether or not there was a commercial enterprise in which the government participated with Stanford would first of all have to be established," a statement from the government said.

The Attorney General noted, though, that there were very few actual engagements between Stanford and the United Progressive Party (UPP) administration and it is hoped that, with the information given to the lawyers, the lawsuit would be dismissed.

The Stanford investors want US$24 billion in compensation - three times the amount the businessman is alleged to have defrauded customers out of.

They have also filed another lawsuit, in which the Eastern Caribbean Central Bank (ECCB) is also named, accusing the regional institution of unlawfully seizing Stanford's Bank of Antigua (BOA) after news of his charges caused a run on the bank and threatened its stability.

The Attorney General says no papers have been served in relation to that matter.

BOA officially becomes the Eastern Caribbean Amalgamated Bank (ECAB) from today, owned by the government of Antigua and Barbuda and five of the largest Eastern Caribbean banks - Antigua Commercial Bank (ACB), St Kitts-Nevis-Anguilla National Bank Ltd, Eastern Caribbean Financial Holdings Company Ltd, National Commercial Bank (SVG) Ltd and National Bank of Dominica Ltd.

Antigua and Barbuda has 40 percent interest in ECAB - 25 per cent belonging to government and the remaining 15 percent allocated to ACB; while each of the other four banks have 15 percent share.

Source.

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Did SEC Hide Botched Stanford Probe? I.G. Says Timing Is "Suspicious"

September 28, 2010
By Phil Trupp

In the style of "Mad" magazine, it's the season of con vs. con at the Securities and Exchange Commission -- only no one's laughing.

Word on the inside is that the Commission covered up -- or at least ignored -- an investigation of billionaire R. Allen Stanford, who is awaiting trial in a Texas jail on 21 criminal charges that his Antiguan bank allegedly sold questionable certificates of deposit with "improbably high" interest rates and was running a Ponzi scheme at the same time.

"They didn't call him 'Agile Allen' for nothing," according to a source familiar with the case.

The SEC apparently wasn't nearly so agile.

A report by SEC Inspector General H. David Kotz claims the SEC was aware Stanford was running a $7 billion Ponzi scheme as far back as 1997, but waited until late 2005 to step in. The Commission filed civil charges in the case in February 2009.

Kotz noted that the Commission filed civil fraud charges against Goldman Sachs last April, on the same day it released his report critical of the Stanford investigation. The timing of the Goldman filing is "suspicious," said Kotz, who went on to suggest that the Goldman charges diverted attention from the report of the botched Stanford probe.

The inspector general said the timing of the two actions in April "strains credulity." Kotz made his suspicions public at a September 22 congressional hearing on the Stanford investigation before Senate Banking Committee.

Republican sources in Washington claimed the SEC made Goldman the poster boy for greed as a cover for the Stanford investigative foul up. These sources also suspect Goldman was sued to help boost support for the new regulatory reforms governing Wall Street's occasionally bad behavior.

Though SEC denies the Goldman announcement was a cover-up of the Stanford probe, Kotz wondered out loud if in fact the timing might have been politically motivated.

Republican speculation aside, Mr. Kotz told the committee that top officials at the SEC's Fort Worth office were "being judged on the numbers of cases they brought, so-called 'stats'," the obvious and easy cases. "Complex cases were disfavored," Mr. Kotz explained, because they were not "slam dunks." Mr. Allen's case is a rat's nest of allegations including, but hardly limited to, the purchase of a Caribbean island. In other words, it didn't add up as a "stat" or "quick hit" case.

Robert Khuzami, director of SEC's Enforcement Division, and Carlo di Florio, director of the Office of Compliance Inspections and Examinations, said they are moving to implement the reforms demanded by Mr. Kotz.

Mr. Khuzami said he was alerting what he called "rank and file" SEC inspectors that quick hits do not drive enforcement. He said the divisions are now coordinating their efforts and stepping up the pace.

So what does it take to make the SEC do the right thing? Among the suggestions by Mr. Khuzami and Mr. di Florio is to expand training programs and modernize the management structure. In addition, they added, it's time to place "seasoned investigative attorneys back on the front lines and improve examiners' risk management techniques." No one on the Senate panel bothered to ask where these "seasoned attorneys" have been hiding.

The Kotz report landed on SEC Commissioner Mary Schapiro's desk in March. The Senate hearing gave the lawmakers a chance to vent their dissatisfaction with the Commission, but it's anyone's guess if substance will come out of the Senate probe. Last year, for example, the House Financial Services Committee held hearings on the $336 billion auction rate securities scandal, but no legislation or regulations followed. When Rep. Barney Frank (D-MA) was asked about this failure, he replied, "The ('08) meltdown got in the way." It now remains to be seen if the Senate Committee can find a clear path to financial reform of the SEC's enforcement process.

The hearing produced notable contradictions. Sen. Richard Shelby (R-Ala), the committee's ranking republican, said the Bernard Madoff $65 billion Ponzi scheme had caught the SEC flatfooted though at least one part of the Commission had been aware of the Stanford case for years. Sen. Shelby was obviously unaware that there had been warnings about Madoff as far back as the late 1990s.

"I believe this should mark the beginning of our review of this troublesome episode," Sen. Shelby said, referring to Mr. Stanford. "We need to know exactly why evidence of this fraud was not more thoroughly pursued."

He added that Mr. Khuzami had brought to light "a colossal failure of the SEC."

Observers wondered why Sen. Shelby was so outraged. "Is he living on another planet?" asked one source. "Is this the first time it crossed his mind that the SEC is maybe a little slow off the mark?"

Another open question: Why was no one fired because of the incompetent handling of the Stanford affair? It seemed a rhetorical question, given that no one was fired in the wake of the Madoff scandal, which was a much larger fraud. Lawmakers also expressed concern that the head of the Fort Worth division later offered to defend Mr. Stanford before the Senate committee.

"It takes time for a culture to change," Mr. Kotz said. "It takes time to trickle down the line."

In the meantime, the investing public will just have to wait on trickle-down ethics to kick in before trust is restored.

Source.

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Senators probe inaction against Stanford

September 22, 2010
By MENGFEI CHEN Copyright 2010 Houston Chronicle

Angry senators grilled top officials of the Securities and Exchange Commission on Wednesday, citing the agency's delays in taking action against accused swindler R. Allen Stanford despite repeated red flags about his financial firm's operations.

Lawmakers sharply questioned Rose Romero, the director of the SEC's Fort Worth regional office, and Robert Khuzami, the agency's national enforcement director, about a report from the agency's independent inspector general.

It found that the Fort Worth compliance office decided at least four times not to act on findings by SEC staffers that Stanford appeared to be operating a Ponzi scheme.

The inspector general's report concluded that Fort Worth SEC officials harbored suspicions that Stanford was acting illegally as early as 1997, two years after his company's broker-dealer arm, Stanford Group Co., registered with the SEC.

Over the next eight years, the compliance branch of the Fort Worth office conducted four separate examinations of Stanford's investments and reported each time that the high returns and low volatility were "highly unlikely" and inconsistent with a "legitimate" fund.

All four times, Fort Worth's enforcement team chose not to act on the findings. The enforcement team first opened a formal investigation into Stanford's company in 2005.

The SEC filed a civil fraud suit in February 2009 against Stanford and his companies, which were placed in receivership. A federal grand jury handed down the criminal indictments four months later.

Sen. Vitter asked Rose Romero why it took so long for the SEC to do something about the "suspected" fraud, one of her answers given was that "we did not think there were any American investors so it really did not concern us".

Victim's comment:
That answer showed me that they did not - and do not - care about any victims from outside of the US... disgusting attitude. The SEC admitted that they were negligent, they admitted that they did not show Due Diligence and yet we are still not able to seek legal redress from them. The whole situation stinks.

Stanford Group Co., was registered with the SEC and the main task of SEC is to safeguard ANY investment of Stanford Group. Of course if they were not racist or if they were "really working" instead of watching porns, then this Ponzi Scheme wouldn't affect thousands of innocent persons.

Source.

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