I’ve got several thoughts on the Stanford Financial story.
First, I think some of the press is a bit misleading in its coverage of the Stanford Financial scandal today.
The Journal, the Times, and the Washington Post call it an “$8 Billion Fraud” in their headlines, and the Journal calls it that in its story, as well (the Times and Post do not). The Financial Times and Bloomberg don’t put a number on the fraud, making clear it’s an “alleged fraud” involving “selling about $8 billion in certificates.”
Sure, it’s not technically wrong. Stanford is alleged to have sold $8 billion worth of certificates of deposit by misleading investors. But the “$8 billion fraud” phrase implies that all or most of the money has disappeared, which as far as I can tell isn’t the case. (UPDATE: Felix Salmon makes a great case for why most of it has likely disappeared.)
The Stanford case is just bizarre. How could a firm not raise suspicions much earlier than it did when it was promising returns on CDs that doubled the average? And it was run in part out of Antigua.
The SEC has been caught snoozing again and is scrambling to look tough. Check out this Reuters video of agents raiding Stanford. Talk about made for TV. You can practically hear a producer standing off camera, yelling “aaaand ACTION!”
Why hasn’t the SEC released any numbers on how much money has actually been lost? I’m sure it doesn’t have a firm figure, some guidance would be great. From the press accounts it appears that the money was invested in illiquid assets like real estate, so there’s at least some money there, unlike Bernie Madoff.
The NYT appears to be the only paper to have interviewed Jonathan Winer, whom I ran across in Factiva in a long Houston Chronicle story from 2000 about how Stanford was drawing scrutiny for its involvement in trying to water down Antigua’s banking laws. Winer’s group said this, according to the Chron:
Later, State Department officials were more explicit in their accusations: “Individuals suspected of involvement in money laundering and other illicit economic activities used their considerable financial influence to weaken Antigua’s anti-money laundering legislation,” the department noted in a report issued earlier this year.The changes “undermined the ability of law enforcement to investigate and prosecute financial crimes,” the report said.
Good for the Times for doubling back with this guy.
The scandals are coming fast and furious these days. These are the kind that suck the confidence out of the entire financial system, which doesn’t have much to spare these days.
There are many more to come—bet on it.
Here's what the Houston Chronicle is saying this morning. It's a pretty good summary of events to date:
http://www.chron.com/disp/story.mpl/business/steffy/6268222.html
Loren Steffy writes the business reporter beat for the paper and does a good job of getting in front of these types of stories, e.g., Landry's Restaurants, Enron
#1 Posted by John St.Lawrence, CJR on Wed 18 Feb 2009 at 11:17 AM
This isn't the first time a Stanford Financial Group company has been accused of fraud, see: www.arttheftcentral.blogspot.com
#2 Posted by Mark D, CJR on Thu 19 Feb 2009 at 01:07 AM
'89 JUNK BOND KING convicted in SCANDAL.
'99 S&L SCAM loss cost $161Billion
2-15-02 COOKING-THE-BOOKS SCHEME: Black Friday; Enron, Global Crossing, AIG, WorkCom (MOST entriely Caribbean Corp.'s), 1000's other Co's, & players A&A'ing PriveWaterhouse & Anderson accounting firms.
CURRENT: From the time Realtors who always "Pre-Qualify" prospects, to Buyers willing to go along with FALSIFYING CREDIT APPS & INCOME Documents, including Cut &Paste W-4 statements, ubder the watchful eye of greed given CORPORATE officers at Countrywide, BofA, Wells Fargo, Wamu & MANY others & ALL-IN-THE-LENDING CHAIN knew defaults would follow increased monthly PYMTS.
If the MTHLY did not increase, where would be B instead of where we're at now?
#3 Posted by ZW, CJR on Thu 19 Feb 2009 at 11:24 AM
I have a couple of comments about this. I'm one of those guys who invested in the Stanford International Bank. I've lost a nest egg that took 25 years to build. I made it honestly, through hard work, 80 hour weeks and by saving when others were buying toys, I saved.
Having said that, I started banking with Standford's Baton Rouge office in 2000. I had just lost some money in the .dot com boom, with Merrill Lynch at the helm. I had some neighbors who had been banking with Stanford FOR OVER 10 Years.
I met the financial advisers, and I started to move money there. Not all of it, about 1/3 of my holdings. Over the next couple of years some of my accounts did ok and others did not. I was diversified. About 2004 I wanted to retire and was tired of the month reviews of my holdings and they suggested putting the money in the Stanford International Bank.
They sent me the quarterly financials and annual audits of the bank. I spoke to my neighbors and several (6 or so) had investments in the bank. Some had been there long enough that the CD's matured and paid out.
So in 2004 I moved all my money to the Bank and retired. Each month, including Feb 2009, I received my interest payments like clockwork. Each quarter I received copies of the bank's financial reports and year year I got a copy of their financial audit.
Yes, I'm dumb for putting all my eggs in one basket. Stupid, Stupid, Stupid.
But I was also lied to, given false info and cheated. The lack of character in this world is simply shocking. I'm wiped out. I'll likely lose by house and have to pull two kids out of college.
You can't trust financial reporting, audits, the government, no one. My advice is, pay off your homes and stick the rest in CDs at different U.S. banks, making sure you stay below the FDIC cap.
I've lost all faith in people. I thought my financial advisers who I had gotten to know the past 9 years were my friends. We eat together, golfed together, had long talks about Madoff and each time I was told over and over again the Bank had been in business for over 30 years, made it through tough times before. The bank was audited by auditors and the Antigua government.
No, I didn't go digging to see if they were lying. I thought I knew them and I trusted them. They lived and worked in my community.
I don't know what I'm going to do. My wife and I are going back to work. We'll start over. We will never trust anyone again.
Michael
#4 Posted by Michael, CJR on Thu 19 Feb 2009 at 02:22 PM
Surely your broker friends did not operate in a vacuum. They had to suspect something!!! I'm not an attorney but would you consider a law suit against your broker friends who drew you in on a scheme to take all of your money?????
#5 Posted by Eura, CJR on Sun 22 Feb 2009 at 08:31 PM
It's amazing the damage that the Stanford case has done to a large number of people, savings and dreams compromised now.
There is a web site www.sibfraud.com used by some of the victims to stay updated and share information.
#6 Posted by UltraSeven, CJR on Thu 26 Feb 2009 at 10:59 PM