SEC Dates Stanford Probe to 2005

SEC Dates Stanford Probe to 2005 - 2/26/2009

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SEC Dates Stanford Probe to 2005, The SEC offered up the revised time frame for its investigation of alleged CD fraud at Stanford Financial to rebut charges from critics that it had dropped the ball
Matthew Goldstein

BusinessWeek. February 26, 2009
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EXCERPT: Securities regulators, who are under fire from critics for the pace of their investigations into two major financial frauds, now say they were on the trail of financier R. Allen Stanford as far back as the spring of 2005, nearly 16 months earlier than previously believed. Stanford has been accused by the Securities & Exchange Commission of running an $8 billion fraud relating to certificates of deposit issued by a Stanford-controlled bank on the Caribbean island of Antigua. New Start Date The SEC says its investigation into the business practices of the Texas-born billionaire and his Stanford Financial Group began soon after it completed a formal examination of the Houston-based firm. The regulatory agency says the investigation remained an active matter up until the filing of civil fraud charges against Stanford and two of his top deputies on Feb. 17 of this year. The SEC previously had pinned the starting date for its investigation to October 2006. Regulators now suggest that 2006 date may refer to the first time it issued investigatory subpoenas seeking documents and testimony. "The SEC investigation was initiated in the spring of 2005," SEC spokesman John Nester said on Feb. 25. "It has been active ever since and has included cooperation with other federal agencies." Former Broker Initiated Investigation Meanwhile, BusinessWeek has learned that the SEC examination was the result of information provided to regulators by a former Stanford Financial broker who told investigators that the financial services company was running a Ponzi scheme. In 2004 the broker contacted the SEC's office in Fort Worth to voice concern about the investment firm's focus on selling high-yielding CDs issued by an offshore bank in Antigua that Stanford controlled. The former broker, who declined to be identified but talked to BusinessWeek, spoke to two investigators in the Fort Worth office and told regulators that the unusually high yields on the CDs weren't sustainable. The Stanford whistle-blower was aware of the SEC examination but had no further contact with regulators until January, a month before the SEC filed civil charges against Stanford. The former broker's account was verified with other sources familiar with the investigation.

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