SEC Probed Stanford Companies; Red Flags Abounded

[Hissyspit]

http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/stanford_sec_warning_signs

SEC probed Stanford companies; red flags abounded

By MARCY GORDON, AP Business Writer – 2 hrs 22 mins ago

WASHINGTON – For years, there were red flags — so many they could have massed into a crimson blanket.

As with the Bernard Madoff case, the scandal surrounding billionaire R. Allen Stanford now seems clear and obvious in hindsight. Yet Stanford managed to run his alleged scheme even while the Securities and Exchange Commission and other regulators had him on their radar screens and investigated his businesses. Stanford wasn't charged until last week.

From his tiny accounting firm's office near a North London fish-and-chips shop to certificates of deposit promising outsized returns sold by a bank in Antigua, ample warning signs over the years suggested Stanford's business wasn't what it seemed.

Among them:

- A finding by regulators in June 2007 that Stanford's company lacked enough capital to function properly as a securities brokerage firm. The company paid $20,000 to settle charges by the National Association of Securities Dealers without admitting or denying them.
- Stanford's businesses were inspected and investigated several times, starting in 2006 by the SEC and in 2004 by the NASD, the brokerage industry's self-policing group, now called the Financial Industry Regulatory Authority, or FINRA. NASD's scrutiny resulted in several disciplinary actions: the regulator fined his brokerage company four times, with penalties totaling $70,000, for violations that included misleading investors in sales materials about the risks of the CDs.
- A 2006 lawsuit by a former employee alleging that Stanford's company ran a Ponzi scheme. Two other ex-employees asserted in a suit in January 2008 that Stanford's Antigua bank, Stanford International Bank Ltd., sold CDs based on inflated returns and had destroyed documents.

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"This is another black day for the SEC, unfortunately," said James Cox, a Duke University law professor and securities law expert. "It's deja vu all over again."

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Parallels between the Stanford and Madoff cases are striking.

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[NRaleighLiberal]

1. And how many more? Was it all just a big house of cards, run by jokers?