The Securities and Exchange Commission knew that Allen Stanford was involved in a Ponzi scheme as far back as 1997, according to a report released Friday by SEC Inspector General David Kotz.
The 159-page report said the scheme was able to continue for so long due to “institutional influences” within the SEC, and the agency’s desire to chase after slam-dunk cases.
|“In the Madoff case, we saw the Commission’s depth of incompetency, now in the Stanford case, we see that not only is the SEC incompetent, it is also appears to be corrupt”.
The report also mentioned an SEC regional enforcement official who three times left the commission in an effort to represent Stanford, saying he was successful in one of these attempts.
Kotz also found that the former head of enforcement in Fort Worth, Spencer Barasch, “played a significant role” in quashing investigations of Stanford and sought to represent him on three occasions after he left the SEC. In 2006, he did briefly represent Stanford before being informed by the SEC ethics office that it was improper to do so.
Spencer Barasch could have done something years ago about the Allen Stanford Ponzi scheme, but didn’t. Four times red flags went up in the Securities and Exchange Commission’s Fort Worth, Texas, office about Stanford, who has been accused of crafting a $7 billion fraud, but Barasch – the SEC’s local chief of enforcement – declined to investigate or closed down probes begun by others.
(Washington, D.C.) – U.S. Sen. David Vitter today reacted to the report released by the Inspector General of the Securities and Exchange Commission that revealed the agency was aware of fraud committed by Texas financier Allen Stanford and did not pursue an investigation.
“The depth of the failure at the SEC in the Stanford investigation is unbelievable,” said Vitter. “There were four examinations in 1997, 1998, 2002, and 2004, and in each case examiners concluded that Stanford’s CDs were likely a Ponzi scheme. Yet the SEC did absolutely nothing while Stanford fleeced investors for roughly $8 billion. What is clear from the report is that the debt the SEC owes the Stanford victims is enormous.”
In August of 2009 Vitter hosted a U.S. Senate Banking Committee field hearing on the Stanford case in Baton Rouge. At that time, it was determined that the original IG report was insufficient, which led Vitter, along with Sen. Richard Shelby, to request a more complete report from the SEC on the investigation. Vitter will meet with David Kotz, inspector general of the SEC and author of the report, later this week.