Investors who lost money in the Houston financier’s alleged Ponzi scheme now say the state’s financial oversight was too lax.
“We have the right to know what the (Texas State Securities Board) knew and when they knew it, details of their past investigations, and why they didn’t disclose anything to the citizens of Texas all these years,” Austin investor Annalisa Mendez said.
In fact, the state looked into Stanford’s dealings years ago.
The Securities Board wrote a memo in the mid-1990s, expressing concern “that the high return rates and commissions for CDs made it difficult for the Stanford bank to make a legitimate profit on the CDs,” according to a September Financial Industry Regulatory Authority report on the aftermath of both the Bernard Madoff and Stanford cases.
FINRA is a private corporation that provides regulatory oversight of all securities firms nationwide.
Texas Securities Commissioner Denise Voigt Crawford mentioned the securities board’s involvement with the Stanford case in Feb. 20 testimony to the state Senate Committee on Finance, just after the scandal broke.
“We looked at him about 10 years ago, because there was evidence of potential money-laundering,” Crawford said in response to a question from state Sen. Steve Ogden, R-Bryan.
The FBI and the Securities and Exchange Commission took the case, “which is what should have happened,” she said. “But why it took 10 years for the feds to move on it, I could not answer.”
The SEC has been criticized by investors who say the agency didn’t do enough, quickly enough, to stop Stanford.
In 2003, some Stanford employees told the SEC they suspected fraud at the company.
In 2005, the SEC’s Fort Worth office started an informal investigation into the sale of certificates of deposit by Stanford International Bank, which is based in Antigua.
But it was not until this past February that the SEC sued Stanford, alleging he was running a “massive Ponzi scheme” based on fraudulent CDs.
The SEC’s inspector general concluded in a report that the agency had fulfilled its duty to check out accusations against Stanford.
The report found that the agency’s inquiry was “hampered by a lack of cooperation” from Stanford and his attorneys, as well as by jurisdictional obstacles and obstruction by regulators in Antigua.
Stanford’s attorney, Kent Schaffer, denied that his client had operated a Ponzi scheme, saying that money from the CD program was invested in a “wide range of investments.”
What caused the losses were the government’s lawsuit and fraud investigation, which prompted a run on the bank, he said.