The Inspector General for the SEC issued a blistering 159-page report concluding that the agency’s Fort Worth office knew Texas businessman Robert Allen Stanford was operating a Ponzi scheme in 1997.
The Robert Allen Stanford alleged Ponzi scheme and its impact on middle class investors still isn’t getting the media attention it deserves. Last week, a blistering report on the incompetence of the Securities and Exchange Commission was buried by the Goldman Sachs fraud charges; both were released Friday.
The Inspector General for the SEC issued a detailed 159-page report, dated March 31, concluding that the agency’s Fort Worth office knew the Texas businessman was operating a Ponzi scheme in 1997. The Stanford Victims Coalition, a group that represents former Stanford investors, was quick to accuse the agency of trying to “minimize the revelation of the truth” by releasing the IG’s report on the same day it announced fraud charges against investment bank Goldman Sachs.
The IG’s report was requested by Republican U.S. Sen. David Vitter.
Among the most damning findings was the warning issued by a retiring assistant district administrator for the Fort Worth examination program in 1997 to the branch chief: “Keep an eye on these people [Stanford] because it looks like a Ponzi scheme to me, and some day it’s going to blow up.”
It was not the examiners, but rather the enforcement division, that dropped the ball. Fort Worth examiners repeatedly conducted examinations of Stanford in 1997, 1998, 2002 and 2004, concluding each time that Stanford’s CDs were likely a Ponzi scheme. “The only significant difference in the Examination group’s findings over the years was that the potential fraud grew exponentially, from $250 million to $1.5 billion,” according to the report. However, “no meaningful effort was made by Enforcement to investigate the potential fraud or to bring an action to attempt to stop it until late 2005.”
The report also noted that the former head of the SEC’s enforcement office in Fort Worth impeded investigations into Stanford’s operations for years. Spencer Barasch repeatedly decided “to quash the matter,” the report reads. Later, when the SEC began investigating, “Barasch repeatedly attempted to represent Stanford in connection with the investigation he had blocked for seven years.” Barasch is now a partner at the law firm Andrews Kurth LLP. Andrews Kurth managing partner Bob Jewell said Barasch did not violate any ethics laws and will remain with the firm, Dow Jones reported. However, because Barasch’s representation of Stanford appears to have violated state bar rules that prohibit a former government employee from working on matters in which he participated as a government employee, Inspector General H. David Kotz referred the findings of his investigation to the SEC’s ethics counsel for referral to the bar counsel offices in the two states Barasch is admitted to practice law.
Additionally, the IG noted that SEC enforcement officials also ignored a number of warnings from insiders at Stanford’s operations. The report notes that a letter was forwarded to the SEC in October 2003 by the National Association of Securities Dealers warning that Stanford’s businesses “WILL DESTROY THE LIFE SAVINGS OF MANY.”
After the initial red flags, it would be another eight years, 2005, before a serious effort to expose the alleged fraud was launched. And another several years before the SEC stopped it. In February 2009 the SEC shut down Stanford’s operations.
It is estimated that about $1 billion was invested in the CDs in Louisiana. The flamboyant Texas billionaire remains in jail facing charges of operating a $7 billion Ponzi scheme.
In the conclusion of the report, the IG noted:
We found that senior Fort Worth officials perceived that they were being judged on the numbers of cases they brought, so-called “stats,” and
communicated to the Enforcement staff that novel or complex cases were disfavored. As a result, cases like Stanford, which were not considered “quick-hit” or “slam-dunk” cases, were not encouraged.
The OIG’s findings during this investigation raise significant concerns about how decisions were made within the SEC’s Division of Enforcement with regard to the Stanford matter. We are providing this Report of Investigation (“ROI”) to the Chairman of the SEC with the recommendation that the Chairman carefully review its findings and share with Enforcement management the portions of this ROI that relate to the performance failures by those employees who still work at the SEC, so that appropriate action (which may include performance-based action, if applicable) is taken, on an employee-by-employee basis, to ensure that future decisions about when to open an investigation and when to recommend that the Commission take action are made in a more appropriate manner.
Read the IG’s full report here.
Despite sweeping changes enacted by Gov. Bobby Jindal's administration, the health insurance program for state workers and public school employees will have to use $88 million from its reserve fund to cover its costs this year.
The LPSB races are sure to get heated between now and Nov. 4, and with only 9 available seats, this year's field of 20 candidates will surely be wanting to set themselves apart from the crowd early; they'll get their chance next week, starting Tuesday with the kick-off of a three-day series of candidate forums.
Lawmakers say they've received complaints that waits have spiked, with people being forced to wait in line for more than an hour — and sometimes three hours — to handle routine tasks.
The campaign announced that Rep. Stuart Bishop of District 43 and Nancy Landry, District 31, have thrown their support behind the Naval Academy graduate and entrepreneur in his bid to unseat current Hunter Beasley in District 8.
A Lafayette man with an alleged taste for child porn was busted Thursday evening during a cyber crime sting launched by the Attorney General’s Office.
U.S. Rep. Vance McAllister says his chief of staff is on temporary leave after being booked with drunken driving.
It was a rare moment in Congress this week as Republicans briefly put aside partisanship in support of President Barack Obama's request to train and arm Syrian rebels, and while a number of Democrats opposed the measure, Louisiana's Democratic Sen. Mary Landrieu found herself on the same side of the issue as her Republican challenger Rep. Bill Cassidy.
Home Depot breach bigger than Target; Alibaba IPO could be big; Rivers' last project and more national and international news for Friday, September 19, 2014.
Friday's Blogs from the Bog!
City-Parish President Joey Durel is asking the council to sign off on a resolution approving a pair of deals that would lead to razing the seedy Lesspay Motel at Four Corners to build a new police substation as well as transforming nearly a block Downtown where the old federal courthouse building now molders into a mixed-use development.
In 2013, the IRS — already the least popular governmental agency in the country — became the target of intense investigations after it was revealed that they had specifically and improperly scrutinized applications for tax-exempt status from organizations associated with the nascent Tea Party movement.
Improving the running game was "a point of emphasis" during the offseason and the results have manifested themselves in the form of substantially greater production.
Louisiana's health department said Wednesday that its evaluation of the state's Medicaid privatization was on target, despite criticism from the legislative auditor that it lacked key data and contained inconsistencies.
The feds converge on your office, seizing records on several employees as part of a pay-for-plea investigation. WWYD? If you’re Mike Harson, you give yourself a $12k raise.
It’s football season and after back-to-back winless weekends for the Saints and the Cajuns many citizens are finding it difficult to be civil much less happy. Well, chew on this.
Considering his repeated stays in the local penal system, David Narcisse Jr. should have known that having a semiautomatic shotgun, even one given to him by a friend, wasn’t the brightest of ideas.
A state district judge on Tuesday threw out a last-minute retirement hike lawmakers gave to the state police superintendent, ending a political firestorm over a pension boost passed without public scrutiny on the last day of the legislative session.
The House has passed a bill to increase oversight of veterans' hospitals under construction, following a report that some medical centers take three years longer to complete than estimated and cost an extra $366 million per project.
An obvious follow-up question for any Republican politician who accuses Democrats of being science deniers is one about science, to which Jindal bobbed and weaved like a welterweight champ.
The Lafayette City-Parish Council is expected to decide tonight (Tuesday) whether to go along with a proposal City-Parish President Joey Durel made in February’s State of the Parish Address and consolidate taxes for mosquito control and the parish health units into a broader tax program that would also cover animal control.
U.S. District Judge Richard Haik has dismissed Greg Davis’ lawsuit against the LPSB, yet in his ruling, the federal judge doesn’t bite his tongue in pointing out the "threat" being posed by certain board members.
Of all the political offices being contested throughout Lafayette Parish, the race for Broussard’s top police post has literally become one of the most heated.
A state district judge is deciding whether to issue an injunction against the enforcement of a last-minute retirement hike that lawmakers gave to the state police superintendent.
A new website is up for Louisiana's state government employees and retirees to choose their health insurance plans for next year, a choice they must make by October.
That fact that New Orleans led both games in the final 10 seconds of regulation, and lost each by a field goal or less, is of little solace.