Steve Rattner

Did Pay-To-Play Probe Cause Rattner's Resignation?

Zachary Roth | July 15, 2009, 2:34PM

So: is Steve Rattner stepping down as the Obama administration's car czar because of the investigation into whether his private-equity fund used pay-to-play tactics to win business from New York's public pension fund?

Probably.

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Allen Stanford

Allen Stanford's New Lawyers: Admiralty And Maritime Law Experts

Zachary Roth | June 8, 2009, 5:56PM

Remember our old friend Allen Stanford? Matthew Goldstein, who had been covering the Stanford story closely at BusinessWeek, and has now moved to Reuters, has an interesting catch about the cricket-loving billionaire's curious legal strategy.

Goldstein reports that Stanford last week replaced his civil defense team with a group of lawyers from the Gulf Law Group, a little-known Washington, DC-based firm.

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Securities and Exchange Commission

SEC Attorneys Accused Of Insider Trading Like Legally Dumb And Dumber

Moe Tkacik | May 15, 2009, 6:31PM

When first we heard that two enforcement attorneys at the SEC were being probed by the FBI for insider trading, we almost sympathized. After all, as the GAO informed us last week in its damning report on the dysfunctional agency, commissioners seem to have spent the Bush years thinking up new ways of preventing enforcement attorneys from doing their actual jobs. And in an environment of incessant deregulation, the markets have to regulate themselves, right?

Uh, then we read the 51-page SEC Inspector General report on the case submitted to SEC chairman Mary Schapiro March 3 by SEC IG David Kotz, who made no attempt to conceal his amazement at their awe-inspiring stupidity. Seriously, Hank Paulson's chief of staff who didn't know who the nine big banks were is a MacArthur fellow next to this pair, who are only identified in the report as [#1] and [#2].

The OIG investigation disclosed that [#1] sent e-mails to his brother and sister-in-law from his SEC e-mail account during the work day recommending particular stocks, and sometimes informing them that [#2] had recommended those stocks as well. Both [#2] and [#1] inexplicably testified that they failed to see how [#1]'s sending e-mails to his brother and sister-in-law from his SEC account could raise an appearance that he may be sharing nonpublic information with someone outside of the SEC.

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AIG

Ashcroft Made Millions As Corporate Monitor, Sees Dire Need For More Corporate Monitoring

Zachary Roth | May 5, 2009, 3:19PM

You can say one thing for John Ashcroft: he's not short on chutzpah.

In an op-ed in today's New York Times, the former attorney general points out a thorny problem that the Justice Department may face as a result of the financial crisis: if there's evidence that a company that has received significant amounts of bailout money committed fraud or other financial crimes, how do the Feds prosecute that company, while still protecting the health of the company on behalf of taxpayers?

The answer, according to Ashcroft: deferred prosecution agreements.

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Allen Stanford

Viva Las Vegas: Stanford Spent A Quarter Million At The Bellagio -- After Asset Freeze, Say Feds

Zachary Roth | May 5, 2009, 11:09AM

It looks like Allen Stanford just couldn't quit his high-living ways -- even when the chips, so to speak, were down.

The Financial Times has a great find in the court filings made by the SEC in Stanford's case:

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Allen Stanford

Stanford To Feds: Take Me Now. Please?

Zachary Roth | May 1, 2009, 11:07AM

Doesn't anyone want Allen Stanford?

The accused Ponzi schemer tried to turn himself in to the Feds yesterday -- without success.

Over to the Houston Chronicle:

Read more »

AIG

Congress To DOJ And SEC: Hand Over AIG Docs Or We'll Subpoena Them

Zachary Roth | April 28, 2009, 10:21AM

Congress is upping the ante in its bid to get access to those insider reports on AIG compiled by a government monitor.

House Oversight chair Ed Towns, joined by ranking GOPer Darrell Issa, yesterday sent letters to the Justice Department and the SEC, threatening them with subpoenas if they don't hand over the information by this Thursday*.

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Bank of America

Cuomo: Paulson Kept SEC Out Of The Loop On B Of A

Zachary Roth | April 23, 2009, 12:19PM

New York Attorney General Andrew Cuomo has just released documents from his investigation into Bank of America, its receipt of government money, and those billions in bonuses that went to Merrill Lynch executives.

Here's one quick nugget we found: It looks like then-Treasury Secretary Hank Paulson didn't keep the SEC -- whose role, of course, is to protect investors -- informed on the government's intense December 2008 discussions with B of A about Merrill's losses, and possible government assistance for B of A.

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Bailout

Bailout Fraud Prosecutor Nets First Catch

Zachary Roth | April 22, 2009, 1:41PM

In an interview with The Hill published yesterday, Neil Barofsky, the inspector general for the bailout, said that he was pursuing 20 criminal and civil investigations into potential fraud in the TARP program.

And it looks like at least one has now paid off.

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Allen Stanford

Stanford Rages: "I Start To Get An Itch To Grab Somebody By The Throat"

Zachary Roth | April 20, 2009, 6:05PM

Allen Stanford has gone on a PR blitz in an effort to clear his name. But from the looks of it, he may already be regretting doing so.

The Texas billionaire, accused earlier this year by the SEC of orchestrating a "massvie ongoing fraud," sat down today with the New York Times, in the office of his lawyer, Dick DeGuerin. That interview was preceded by one with the Houston Chronicle.

The Times' writeup is worth excerpting at length:

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AIG

Source: SEC (Unlike DOJ) Cooperating With Congress's Request For AIG Docs

Zachary Roth | April 15, 2009, 12:17PM

Earlier this morning, we reported that the Justice Department is dragging its heels on a demand from Congress to hand over information compiled by a highly placed government monitor at AIG.

But DOJ's recalcitrance is underlined by the approach of the SEC, which was also asked to turn over the monitor's information. According to a source on the House Oversight committee, the SEC has said it's complying with the request, and is expected to turn over the information shortly.

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Bailout

SEC Reviewing Whether B of A Broke Law On Merrill Bonuses

Zachary Roth | April 14, 2009, 11:37AM

Ever since AIG's bonus shenanigans exploded onto the national scene last month, Merrill Lynch's own outrageous payouts have kind of gotten short shrift. We've felt this was unfair to the Thundering Herd, since at an around $3.6 billion, its bonuses dwarfed those of AIG. Granted, its role in bringing down the financial system may not have been quite as central as that of AIG's financial products unit, but it's not like Merrill, which needed rescuing last fall by Bank of America, was squeaky clean. Where's the respect?

But luckily, the Merrill bonuses are back. The SEC is looking at whether Bank of America broke the law by not disclosing, in filings last year, the fact that it was planning to pay those bonuses, reports the Washington Post.

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Bernard Madoff

Report: Shana Madoff Contacted Prison Consultant

Zachary Roth | April 13, 2009, 12:05PM

A female relative of Bernard Madoff -- identified by the New York Post as Madoff's niece, Shana Madoff -- called a "federal prison consultant" to ask how much jail time she might be facing, the consultant told TPMmuckraker.

Larry Levine -- a former federal prisoner who now runs a company, Wall Street Prison Consultants, that gives advice to future inmates on how to survive prison time and win an early release -- said that a woman had called him about three weeks ago, saying that she might face conspiracy charges. At first, said Levine, the woman was hesitant to divulge any specific information, but, when pressed by Levine, said that she was a relative of Bernard Madoff, explained the basics of her situation, and asked how much jail time she might be facing. "No money changed hands," said Levine, describing the call as "exploratory".

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Allen Stanford

In Interview, Stanford Plays World's Smallest Violin

Zachary Roth | April 6, 2009, 3:34PM

Texas billionaire Allen Stanford has given ABC News his first interview since being charged by the SEC with orchestrating a massive Ponzi scheme. And he doesn't offer a sympathetic portrait.

Amid protestations of innocence -- "I would die and go to hell if it's a Ponzi scheme," and "if it was a Ponzi scheme, why are they finding billions and billions of dollars all over the place?" -- Stanford revealed he expects to be indicted by a federal grand jury in the next two weeks. (A senior official at the Justice Department told ABC News the case is "moving along rapidly.")

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Allen Stanford

Lawyer: Stanford Number 2 Helping To Probe Billionaire's Money Trail

Zachary Roth | April 6, 2009, 1:44PM

The walls around Allen Stanford appear to be closing in ever tighter.

David Finn, a lawyer for Jim Davis, the number 2 man at Stanford Financial, tells Bloomberg that Davis is helping investigators track Stanford's European assets, focusing on Swiss banks.

In addition to potentially helping to build a criminal case against Stanford, tracking the assets could help repay victims of Stanford's alleged fraud.

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Bernard Madoff

Madoff Feeder Fund Charged With Ignoring Red Flags

Zachary Roth | April 2, 2009, 11:28AM

We're a little late to this, thanks to some developments in other areas, but Fairfield Greenwich, the feeder fund that placed much of its assets with Bernie Madoff, was sued Tuesday by the state of Massachusetts, for defrauding its customers.

Secretary of State William Galvin claims that Fairfield, the largest of several feeder funds that funnelled investors to Madoff, failed to conduct due diligence as it promised. For instance, Galvin alleges, Fairfield didn't question Madoff about his unusual trading strategy, or about the fact that he hadn't hired an outside firm to handle record-keeping.

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Bailout

Bush Bailout Architect Lands On His Feet -- Helping Private Clients Adjust To Brave New World Of Finance

Zachary Roth | March 30, 2009, 1:29PM

We should have seen this one coming -- government officials who helped respond to the financial crisis, now cashing in by helping private sector clients "navigate the new world of finance."

That's what David Nason, a former assistant treasury secretary under Hank Paulson will be doing for clients of Promontary Financial Group, which he's joining as a managing director, reports the Wall Street Journal (sub. req.). Nason, who had a major hand in drawing up Treasury's bailout plan last fall, "is expected to advise big financial institutions on everything from how to participate in the government's rescue programs to meeting regulatory requirements."

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Allen Stanford

Stanford Lawyer: "SEC Came In Like A Bunch Of Storm Troopers"

Zachary Roth | March 26, 2009, 3:06PM

Dick DeGuerin, the hard-charging Texas lawyer who just signed on to represent Allen Stanford, isn't pulling any punches.

In an interview with TPMmuckraker moments ago, DeGuerin denied that Stanford was running a Ponzi scheme. And, referring to federal investigators' raids on Stanford offices as the SEC prepared charges last month, DeGuerin played the Nazi card, declaring:

The SEC came in like a bunch of Storm Troopers, which caused a panic, and caused the banks in Venezuela and elsewhere to nationalize his banks, just take them away.

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Allen Stanford

Stanford Lawyer: SEC Using Sir Allen As "Distraction" From Madoff

Zachary Roth | March 26, 2009, 2:31PM

Yesterday, we noted BusinessWeek reporting that Dick DeGuerin, the high-profile Texas lawyer who has represented Tom DeLay and David Koresh, among other bold-faced names, might have signed up to defend accused massive Ponzi schemer Allen Stanford.

And today, the magazine confirms that DeGuerin is on the case -- and that the official Stanford fight back, after weeks of being portrayed as a corrupt, Gatsby-esque fraud -- is underway.

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Allen Stanford

For Stanford Number 2, A Gated Home With Ionic Columns, And A God-Fearing Rep

Zachary Roth | March 26, 2009, 12:56PM

Bloomberg has some good details about Jim Davis, Allen Stanford's Number 2 man, who, along with his boss, has been charged with orchestrating a massive Ponzi scheme.

In mid-January, Davis -- who still lives in the region of northern Mississippi where he was born -- sent a text message to the youth pastor of a local church he helped start, telling him: "I'm praying for you."

Among church congregants, Davis, known by some as Mr. Jim, was viewed as God-fearing and honest, according to Ethan Nanney, an elder at the church. In fact, Nanney told Bloomberg, Davis started the church, whose pastor is black, because he wanted a place where black and white people could come together. Davis is also on the board of Memphis's National Civil Rights Museum, which is located at the motel where Martin Luther King Jr. was assassinated.

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Bernard Madoff

Looking For A New Career? Try Fraud Investigator.

Zachary Roth | March 26, 2009, 11:14AM

One of the few growth industries in the current economic climate? Fraud investigators.

Allegations of fraud are increasing, as the financial crisis drags on. As a result, reports the New York Times, people who are skilled at following the money have rarely been more in demand.

The FBI is recruiting new hires to work on a glut of cases -- it had more than 1600 open mortgage-fraud investigations at the end of fiscal 2008, almost twice as many as two years earlier.

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Allen Stanford

Stanford Number 2, "Devastated" By Alleged Fraud, Talks With Investigators

Zachary Roth | March 26, 2009, 9:12AM

Is the noose tightening?

James Davis, Allen Stanford's number 2, sat down with FBI and SEC investigators yesterday, Davis' lawyer, David Finn, told Bloomberg. Finn said earlier this week that Davis would fully cooperate with both investigations.

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Allen Stanford

Report: Stanford May Hire DeLay Lawyer

Zachary Roth | March 24, 2009, 6:27PM

We probably should have seen this coming.

Billionaire Texas banker Allen Stanford is considering hiring Dick DeGuerin -- the heavy-hitting Texas defense lawyer who has represented a string of big-name clients, including former House Speaker Tom DeLay -- to defend him on charges that he orchestrated an $8 billion Ponzi scheme, reports BusinessWeek.

The magazine sources that news to "a person familiar with the securities fraud investigation" into Stanford, and adds:

A secretary for DeGuerin says the attorney had been contacted about representing Stanford, but declined to comment further.

Read more »

Bernard Madoff

Madoff's Confession Points Up SEC Failure

Zachary Roth | March 13, 2009, 11:26AM

It's fair to say that the incompetence and fecklessness of the SEC in failing to catch Bernie Madoff's $50 billion Ponzi scheme (merely "alleged" no more!) has already been pretty well established -- by this guy, among others.

But if anything, Madoff's courtroom confession delivered yesterday only makes the extent of the SEC's screwup even more startlingly clear.

Here's what Madoff said:

To conceal my fraud, I misrepresented to clients, employees and others, that I purchased securities for clients in overseas markets. Indeed, when the United States Securities and Exchange Commission asked me to testify as part of an investigation they were conducting about my investment advisory business, I knowingly gave false testimony under oath to the staff of the SEC on May 19, 2006 that I executed trades of common stock on behalf of my investment advisory clients and that I purchased and sold the equities that were part of my investment strategy in European markets. In that session with the SEC, which took place here in Manhattan, New York, I also knowingly gave false testimony under oath that I had executed options contracts on behalf of my investment advisory clients and that my firm had custody of the assets managed on behalf of my investment advisory clients.

And here's how the SEC -- in a memo that recommended closing that inquiry, having found only minor violations -- what appears to be that same piece of testimony:

[I]n the course of a preliminary inquiry into [Markopolos' allegations that Madoff's hedge fund profits were the result of fraud], the staff learned that during a recent examination of BLM by NERO's broker-dealer examination staff, Bernard Madoff, the sole owner of BLM, did not fully disclose to the examination staff either the nature of the trading conducted in the hedge fund accounts or the number of such accounts at BLM.

But of course, it wasn't that he didn't fully disclose the trading information. It's that he wasn't even making any trades, and had directed his staff to create false tickets to fool investors. Presumably, that deception could have been detected had the SEC simply bothered to try to match up those trade with the supposed counter-parties -- who didn't exist.

The SEC had another chance to catch that scheme when Madoff filed reports with the agency that year. Madoff said yesterday:

Another way that I concealed my fraud was through the filing of false and misleading certified audit reports and financial statements with the SEC. I knew that these audit reports and financial statements were false and that they would also be sent to clients. These reports, which were prepared here in the Southern District of New York, among things, falsely reflected my firm's liabilities as a result of my intentional failure to purchase securities on behalf of my advisory clients.

"Were there sufficient red flags for SEC to have caught this?" asked Ross Albert, a former SEC senior special counsel, asked in an interview with TPMmuckraker last December. "Absolutely, without a doubt."

Since then, that conclusion has become only more indisputable. And the case for those additional SEC funds has grown only stronger.

Allen Stanford

Stanford Exec: Court-Appointed Lawyers Went Through My Panty Drawer!

Zachary Roth | March 11, 2009, 6:16PM

No one likes lawyers rifling through their underwear drawer.

Laura Pendergest-Holt, the chief investment officer for Stanford Financial Group -- who has been charged along with Allen Stanford himself and number 2 Jim Davis -- is trying to get overturned a court order that put her assets under the control of a court-appointed receiver.

In an emergency motion, attorneys for Pendergest-Holt wrote that lawyers for the receiver, Ralph Janvey, conducted a raid of her Mississippi home March 2, seizing her family's car, diverting her mail, went through her underwear drawer, and mocked her husband -- telling him he wouldn't be living in the house for long.

The court filing called the move a "stunning act of bad faith", and asked for the assets to be returned form the control of the receiver. It argued that Pendergest-Holt had agreed to the seizure only before she knew that criminal charges would be filed against her. Now that they have been, the seizure violates her constitutional rights, according to the filing.

The filing says:

In effect, the Receiver's lawyers, in the context of the civil case, have conducted a free-wheeling warrantless search of Ms. Pendergest-Holt's home and have taken Ms. Pendergest-Holt's personal property without due process of law. Because the Receiver's lawyers are duty-bound to cooperate with the SEC, DOJ and FBI under the Receivership Order, the Government will no doubt be the primary beneficiary of the Receiver's unlawful search and seizure of Defendant's property.

Pendergest-Holt was charged by the SEC earlier this month with making misrepresentations to the FBI about, among among things, her knowledge of Stanford's portfolio.

Allen Stanford

Stanford Takes The Fifth

Zachary Roth | March 11, 2009, 3:05PM

In better days, Allen Stanford was, by most accounts, a loqacious and charming figure, wooing clients, lawmakers, and foreign dignitaries alike with the sheer power of his personality.

Now, not so much.

In court documents filed today, Stanford took the fifth, declining to testify in the SEC's complaint against him, in which he is accused of orchestrating an $8 billion Ponzi scheme.

His former college roommate and Number 2 at Stanford Financial Group, Jim Davis, is likewise staying mum, it was reported last week.

Bernard Madoff

Is Madoff Probe Expanding?

Zachary Roth | March 11, 2009, 2:22PM

Bernard Madoff is set this week to plead guilty to orchestrating a massive Ponzi scheme. But could we be in line for more guilty pleas before this is all over?

The Daily Beast reports:

[T]he [Madoff] investigation ... has broadened to include a number of suspected co-conspirators, according to federal officials involved in the case.

The Daily Beast story -- written by Lucinda Franks, whose byline identifies her as a Pulitzer-Prize winning journalist who was formerly on the staff of the New York Times -- also reports that, according to sources, "several members of Madoff's inner circle transferred assets to their wives, transactions thought to be laundered through an English bank."

There are said to be three groups of possible co-conspirators, who could potentially be charged either criminally by the Justice Department, or civilly by the SEC.

In the first group are employees of Madoff's firm who concocted false trades and sent out phony statements to thousands of unsuspecting clients.

The second group is comprised of principals in feeder funds such as Cohmad Securities Corp. and Fairfield Greenwich Group, which funneled investor dollars to Madoff and received large fees for steering this business. If they were aware of Madoff's fraud, they could face criminal charges; if they were not, they could be hit with civil charges for a lack of due diligence.

The third group is the target of an investigation that's still in its early stages into money laundering through British banks, in which US and British authorities are cooperating. This group consists of solicitors, accountants, and others in London who may have assisted Madoff in transferring funds from client accounts to a Madoff entity that lists Ruth Madoff, brother Peter Madoff, and sons Mark and Andrew Madoff among its board members.

It's not clear from any of this that any specific members of Madoff's family, or his inner circle, are in immediate legal jeopardy.

But the Wall Street Journal appears to be thinking along similar lines (sub req). It notes:

Prosecutors alleged Tuesday that Mr. Madoff hired numerous employees with "little or no prior pertinent training or experience in the securities industry" and caused them to "communicate with clients and generate false and fraudulent documents."

Its report doesn't go as far as the Daily Beast's. The Journal says it's still unclear whether prosecutors believe these people knew they were involved in a fraudulent scheme, and doesn't explicitly say that the investigation has broadened beyond Madoff himself.

But it's noticeable that the paper does take the time to lay out what's known about the possible involvement in the scheme of five of Madoff's relatives and associates -- including his wife Ruth, who has hired her own lawyer, and his brother Peter, who was the chief compliance officer for Madoff's firm.

With Madoff's guilty plea soon to be safely in the bag, are these reports an indication of where prosecutors are going next?

Allen Stanford

For Stanford, A Long Trail Of Run-Ins With Authorities

Zachary Roth | February 23, 2009, 12:13PM

Relatively few Americans had heard of Allen Stanford until the last week or so. But it turns out that, over the last decade, the Texas billionaire had attracted the scrutiny of a range of government authorities, and been the subject of several civil suits -- so much so that it's hard to believe it took until last week for him to be formally charged.

Let's recap what we know about the various inquiries, investigations, and lawsuits focused on Stanford's sprawling financial empire over the last decade:

Circa 1998

- Stanford writes in a letter to the US ambassador to Antigua that he has been investigated by numerous agencies over the years, and none had found evidence of wrongdoing.

1999

- After Stanford finds that a former Mexican drug lord had used his bank to hide or launder money, he voluntarily makes out a cashier's check worth $3.1 million, and gives it to the Drug Enforcement Agency.

- The Treasury Department places Antigua -- where Stanford's business is based, and with whose government he is cozy -- on its money-laundering watch list.

Circa 1999

- Texas securities regulators find evidence of potential money laundering involving Stanford. They refer it to the FBI and the SEC, because it involves offshore banks. Texas securities commissioner Denise Voigt Crawford later tells the state legislative committee: "Why it took 10 years for the feds to move on it, I cannot answer." She added: "We worked with the FBI and the SEC and basically gave them the case. We told them what we'd seen and they were going to run with it."

2005

- A lawsuit filed in Florida accuses Stanford of aiding a Ponzi scheme.

2006

- The SEC's Fort Worth office opens an investigation into Stanford's business, but is asked by another agency to "stand down," and complies. (Rep. Dennis Kucinich, who chairs the House Domestic Policy subcommittee, asked late last week that the agency turn over documents related to that sequence of events.)

2006

- A second Florida lawsuit, this one filed by a former employee, accused Stanford of being involved in a Ponzi scheme.

2007

- Two former employees sue Stanford, alleging fraud.

- The SEC finds, during a routine exam, that Stanford's Houston-based broker-dealer operation is violating net capital requirements. The firm pays a $20,000 fine.

- Stanford Financial pays a $10,000 fine to FINRA in response to allegations that it gave out "misleading, unfair and unbalanced information" about its certificates of deposit.

2008

- Stanford Financial pays a $30,000 fine to FINRA in response to allegations that it didn't adequately disclose in its research reports its method for valuing certain securities, among other information.

- FBI opens an investigation into whether Stanford laundered drug money for Mexico's violent Gulf Cartel. Mexican authorities detained one of Stanford's private planes after officials found checks inside believed to be connected to the cartel. (The DEA also at some point probed Stanford for laundering drug money.)

- That inquiry into Stanford by the SEC's Fort Worth office is reopened, in the wake of widespread criticism of the agency for failing to catch Bernard Madoff's alleged $50 billion Ponzi scheme, and for de-emphasizing enforcement in recent years.

2009

- SEC files charges against Stanford, alleging "massive ongoing fraud."

As we reported last week, there's strong reason to believe that the SEC should have pushed harder on Stanford sooner. The long history of inquiries that failed to uncover Stanford's alleged $8 billion fraud only strengthens that notion.

Allen Stanford

SEC Vet: Agency Should Have Looked Closer At Stanford

Zachary Roth | February 19, 2009, 4:50PM

Did the SEC fall down on the job by not paying closer attention to Allen Stanford, the billionaire Texas banker accused of orchestrating an $8 billion fraud? One former long-time enforcement director for the agency thinks it may well have.

Robert Fusfeld, who spent 31 years as an SEC enforcement lawyer, and for 15 managed the trial unit in the commission's Denver office before retiring in 2006, told TPMmuckraker that there was plenty of reason for the SEC to aggressively scrutinize Stanford's operation.

"A registered broker dealer and registered investment adviser is selling offshore Caribbean CDs in mammoth volumes, and nobody's looking at the bonafides of the bank," he said.

The New York Times reported today that the Stanford Group paid several fines over the last few years after regulators found that it did not have enough capital to meet the requirements of being a broker-dealer and used misleading sales literature. "There were numerous very significant red flags that included a history of violations," said Fusfeld.

The case, he said, contained the "same kind of red flags as Madoff" -- like consistently high returns -- but with the added red flag of the Antiguan CDs. "It's not Germany, France, or England," he continued, noting the history of "flagrant offshore CD frauds" over the last 10-15 years.

Because Stanford was a registered broker dealer and investment adviser, the SEC had full access to its operation, Fusfeld added. "They can walk right in."

The SEC was publicly flogged earlier this month for its failure to catch Bernard Madoff's alleged $50 billion Ponzi scheme. Since then, its appears to have been making a special effort to show it's capable of acting aggressively -- a concern which may have affected the timing of the Stanford complaint filed Tuesday.

It would certainly be ironic if, in this case too, it was found to have fallen down on the job.

Allen Stanford

The Daily Stanford

Zachary Roth | February 19, 2009, 11:02AM

The developments in the Allen Stanford case are coming thick and fast. Let's get up to speed:

- ABC News reported that the FBI has been investigating whether Stanford laundered money for a Mexican drug cartel.

- Bloomberg reported that the FBI is separately investigating Stanford's fraud and seems likely to bring criminal charges. (To date, Stanford has not been criminally charged.)

- The New York Times reported that both the SEC and FINRA had investigated Stanford in recent years, and merely issued a few fines, despite the existence of "major red flags" in the words of one expert. (More on that to come.)

- Some members of Congress said they'd return donations from Stanford. But others, like GOPers John Cornyn and Pete Sessions said they'd keep the loot!

- The government of Venezuela took over a local Stanford bank.

- Latin Americans and Caribbeans scrambled to get their money out of Stanford banks.

- Former Swiss President Adolf Ogi said he would resign from the board of Stanford Financial Group.

- And maybe most worryingly, the SEC has admitted it doesn't know where Stanford is.

Allen Stanford

Six Degrees Of Allen Stanford

Zachary Roth | February 18, 2009, 2:24PM

Here at TPMmuckraker, the more we think about the Allen Stanford saga, the more it seems like a kind of harmonic convergence of recent high-profile muck.

The emerging story's range of ties -- some incidental, some more substantive -- to some other high-profile scandals of the past few years, from Bermard Madoff to Jack Abramoff to Rod Blagojevich -- is pretty striking.

First, Madoff.

It's not just that questions about the pace of the SEC's Stanford investigation -- including whether the agency's decision to bring charges yesterday was prompted in part by recent news reports -- have to be considered in light of the SEC's well-documented missteps on the Madoff case.

It's also that, according to the SEC complaint, Stanford's investors were exposed to losses via Madoff -- but falsely assured them they weren't.

From the complaint:

In a December 2008 Monthly Report, the bank told investors that their money was safe because SID "had no direct or indirect exposure to any of [Bernard] Madoffs investments."

But, contrary to this statement, at least $400,000 in Tier 2 was invested in Meridian, a New York-based hedge fund that used Tremont Partners as its asset manager. Tremont invested approximately 6-8% of the SIB assets they indirectly managed with Madoffs investment firm.

Pendergest, Davis and Stanford knew about this exposure to loss relating to the Meridian investment. On December 15, 2008, an Analyst informed Pendergast, Davis and Stanford in a weekly report that his "rough estimate is a loss of $400k ... based on the indirect exposure" to Madoff'.

As for Abramoff, we reported yesterday that a bevvy lawmakers with ties to the crooked lobbyist or a history of other ethical problems - including then-GOP members of Congress Bob Ney, Katherine Harris, Tom Feeney, and John Sweeney, as well as current Rep. Charlie Rangel -- went on a 2005 junket to Antigua that was funded by an organization with close links to Stanford.

Indeed, until yesterday, that organization, the Inter-American Economic Council, had photographs from the trip -- showing Harris, Feeney, and pals hobnobbing in splendor with Antiguan dignitaries -- posted on its website. It's since removed them, but not before we saved them. You can see the slideshow here.

And there's also another congressional angle which, though not on a par with the Abramoff sleaze, nonetheless appears to reflect the cynical money-for-access culture that has characterized Washington politics in recent years:

In 2002, as we reported yesterday, after lobbying from Stanford's firm, the Democratic-controlled Senate killed a bill designed to bolster efforts to catch financial fraud. During that cycle, Stanford's company had given an eye-popping $800,000 to the Democratic Senatorial Campaign Committee. And according to campaign finance records examined by TPMmuckraker, it had also given generously to key Democrats on the Senate Banking committee: $8000 to Chuck Schumer, $6000 to Chris Dodd, and $1000 to then-chair Paul Sarbanes.

So there's that.

What about Blago?

Well, it turns out that, according to lobby disclosure reports examined by TPMmuckraker, one of Stanford's paid lobbyists in 2002 -- the year that the firm was lobbying on the anti-financial-fraud bill -- was John Wyma. One form lists Wyma and his team's work as "Helping them address legislature (sic) which involves financial services companies."

In case you'd forgotten, Wyma used to be one of Blagojevich's closest aides, before cooperating with Pat Fitzgerald's investigation by secretly recording conversations with the then governor.

The two were apparently think as thieves at one time. The Chicago Tribune reported at the time of Blago's arrest:

The governor routinely reported exchanging personal gifts and often appeared at Wyma-sponsored fundraisers where Wyma's clients hobnobbed with the governor before turning over checks for his campaign fund.

Now all we need is a link to the U.S. Attorney firings, and we'll be all set.

Allen Stanford

Judge Freezes Stanford Assets

Zachary Roth | February 17, 2009, 1:08PM

The Houston Chronicle reports:

U.S. District Judge Reed O'Connor issued an order freezing the defendants' assets and appointed a receiver to marshal them.

And Reuters, in full blog mode, adds:

STANFORD FINANCIAL GROUP SIGN IN HOUSTON SAYS NOW "UNDER THE MANAGEMENT OF A RECEIVER" - REUTERS EYEWITNESS.

Allen Stanford

Stanford Charged With "Fraud Of Shocking Magnitude"

Zachary Roth | February 17, 2009, 12:32PM

Allen Stanford, the billionaire Texas banker, has been charged with orchestrating a fraudulent, multibillion dollar investment scheme, the SEC announced in a press release this morning.

An SEC spokeswoman called it "a fraud of shocking magnitude that has spread its tentacles throughout the world."

There's also more detail on Stanford's alleged scheme, which seems to have involved selling certificates of deposit worth $8 billion based on fraudulent returns.

From the release:

The SEC's complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.

According to the SEC's complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in "liquid" financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators.

There's also a possible connection to the Bernard Madoff case. The release continues:

Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme.

The release does not give details as to the nature of that exposure.

But there are other details reminiscent of Madoff:

Others charged along with Stanford are James Davis, the chief financial officer for Stanford International Bank (the wing of Stanford's financial empire implicated in the alleged fraud) and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.

According to the release, Pendergest-Holt had no financial services or securities industry experience before joining Stanford. And Davis was Stanford's college roommate.

In the same vein, the agency notes that the investment committee for Stanford International Bank "is comprised of Stanford; Stanford's father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales." That committee is charged with managing the bank's multi-billion dollar portfolio of assets.

And according to the New York Times' examination of the complaint itself, the SEC acted after it subpoenaed Stanford and Davis for testimony and documents that would help account for $8 billion in assets, and received no response.

As for Pendergast-Holt, the chief financial officer, she claimed that only Stanford and Davs had access to the bank's assets.

Separately, Reuters just reported that about 15 people, some wearing jackets identifying them as U.S. marshals, were seen entering Stanford's Houston office this morning.