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.
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.More amazing highlights after the jump.
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.
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:
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:
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*.
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.
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.
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:
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.
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.
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".
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.")
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.
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.
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."
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.
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.
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.
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.
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.
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.
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.
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