Commentaries

What sentence should a Ponzi get

Federal prosecutors are sort of boxing themselves in when it comes to sentencing requests for big Ponzimeisters.

Bernie Madoff, the king of Ponzis, got 150 years. And now federal prosecutors in NY are seeking an almost equally as punitive 145-year sentence for Marc Dreier, the mastermind of a much, much smaller Ponzi that fleeced some hedge funds out of some $400 million.

Dealbreaker’s Bess Levin surmises that Dreier, who was arrested in December a few days before Madoff, must be disappointed because he’s once again been upstaged by Bernie.

OK, I can understand the 150-year sentence for Madoff. Sure, it was overkill but it was intended to send a message as much as anything else. But Dreier is a mere Ponzi piker compared to Bernie.

And what about Tom Petters? The Minnesota businessman was charged by prosecutors with bilking hedge funds out some $2 billion. Most people aren’t familiar with the Petters case because it unfolded around the same time a little investment bank called Lehman Brothers was filing for bankruptcy.

If Petters is convicted, what should he get 147 years? 

And don’t forget about R. Allen Stanford, the alleged architect of the second-biggest Ponzi. Sure, we’re only talking about $7 billion–chump change compared to Bernie’s estimated $60 billion scheme.

Stanford gets Madoffed

It appears the punishing 150-year sentence meted out by a federal judge to Ponzi king Bernie Madoff is already having legal reprecussions.

A day after Madoff was sentenced to spend the rest of his life and then some in a federal prison, another federal judge in Texas sided with prosecutors in ordering R. Allen Stanford to remain in jail pending a trial on his own Ponzi-related charges. Now there’s no definitive connection between the Madoff sentencing and the ruling in the Stanford case, but it’s hard not to see some cause-and-effect.

After all, a federal magistrate judge initially ruled that the alleged $7 billion Ponzi mastermind could be released after posting $500,000 in bond. But a federal judge overruled that decision, agreeing with prosecutors that the one-time Texas billionaire is a flight risk.

It’s this kind of tough justice that may do more than anything the SEC could ever do to deter future scamsters.

Investors go mad

The global financial meltdown apparently has prompted some German investors to take justice into their own hands.

If the press reports are true, it appears a group of investors allegedly kidnapped and tortured a financial advisor who lost them a boatload of money. Now revenege is never the way to go, especially when there are authorities to take care of this sort of thing.

We can only hope this sad story is more of an abberation than the start of a disturing trend. After all, it took awhile, but the authorities did finally catch-up to Bernie Madoff and R. Allen Stanford.

Alex on Stanford

Alex Dalmady, the man who got the ball rolling on R. Allen Stanford, has the last word of the day on the alleged $7 billion scamster.

Stanford: a little help from his friends

You can officially called R. Allen Stanford the alleged criminal mastermind of a giant multi-year Ponzi scheme.

Stanford’s name, of course, is all over the 21-count indictment. But the big shocker in the investigation into the $7 billion fraud involving those bogus certificates of deposit is an allegation that a top regulator in Antigua–where Stanford’s offshore bank was based–was on the take.

OK. Maybe that’s not such a shocker, given the fact that the former prime minister of Antigua basically gave Stanford a blank check to do whatever he wanted on the tiny island nation–including a chance to help write the country’s banking laws.

But in filing criminal charges against Leroy King, the former administrator and chief executive officer for the Antigua financial services regulatory commission, US prosecutors have a shed a lot more light on the years of deception that was at the core of Stanford’s sprawling financial empire. Prosecutors are charging King took bribes in excess of $100,000 from Stanford to help conceal the allegedly fraudulent activites at Stanford’s bank from the Securities and Exchange Commission.

Like Stanford, King is both a US citizen and a citizen of the double island nation of Antigua and Barbuda. Stanford was knighted by the former ruling party in Antigua.

Stanford also got some friendly help after the Securities and Exchange Commission filed civil fraud charges and effectively shutdown his high-pressured CD machine in February. Prosecutors seperately charged Bruce Perraud, a Stanford security specialist, with allegedly ordering the shredding of documents at a Stanford Financial Group office in Ft. Lauderdale.

 The shredding party took place on Feb. 23, six days after the SEC stepped in and the a court-appointed receiver ordered all of the company’s 4,000 employees to preserve documents.

Allen Stanford lost at sea?

The R. Allen Stanford legal defense story keeps getting stranger and stranger.

While the securities world waits for the inevitable indictment of the Texas financier, he keeps going through lawyers with the same speed the alleged Ponzi mastermind was said to date women. Last week Stanford replaced his civil litigation defense team with a group of lawyers from the little-known Washington, D.C.-based law firm The Gulf Law Group.

The Gulf firm bills itself as a “full-service firm,” but it mainly appears to be a law firm specializing in admiralty and maritime law. On the firm’s homepage there are photographs of a lighthouse, a cargo ship and offshore drilling platform.

Securities law does not appear to be one of the firm’s specialities. Yet that’s just what Stanford, who allegedly sold some $8 billion in dubious certificates of deposits to investors, needs. On Feb. 17, the Securities and Exchange Commission charged Stanford with civil fraud and its widely expected that federal prosecutors ultimately will criminally charge him too.

Ruth Schuster, a partner in the Gulf law firm, recently signed her a name to court motion, filed by Stanford, opposing a $20 million fee request by the court-appointed receiver for Stanford’s former financial empire. And another lawyer in the Gulf firm is reaching out to former Stanford employers to see if they would offer supportive testimony for their ex-boss.

A spokeswoman with Qorvis Commuications, a public relations firm working with Stanford, says other lawyers are also working with the Gulf firm on the civil case. And he still has hot-shot criminal lawyer Dick DeGuerin waiting in the wings. DeGuerin was the architect of those puzzling TV interviews Stanford was giving a few weeks ago, in which he alternatively cried and threatened to punch a few reporters.

But maybe the selection of the Gulf firm isn’t as odd as it may seem. There is something a little Thurston Howell III about Stanford, a man who managed to get himself knighted in Antigua–the island nation he almost single-handily took over. Or, as one former Stanford employee: “Hey, his ship is sunk.”

Allen Stanford’s many lives

The clock is still ticking on what would appear to be an inevitable indictment for disgraced Texas financier R. Allen Stanford, the man who allegedly ran an $8 billion Ponzi scheme out of his Antigua-based bank. It appears the federal prosecutors manning the investigation are trying to make sure they have an airtight case before filing criminal charges–something Stanford and his lawyer expect will happen any day.

At first blush, it’s hard to fathom why it should take this long for prosecutors to file charges, given that Stanford and two of his top associates were the subject of a civil action by the Securities and Exchange Commission nearly three months ago. One of those associates, Laura Pendergest-Holt, has even been indicted on federal obstruction of justice charges. But still nothing on Stanford.

Bryan Burroughs, in the most recent issue of Vanity Fair, does a good job detailing how just about every US investigative agency was on Stanford’s tail for more than 15 years. But whether it was allegations of money laundering, or fleecing investors with the sale of dubious CDs, no one was ever able to get the goods on Stanford.

In fact, I’m told Houston and New Orleans agents from DEA and IRS even considered running an ABSCAM-style sting on Stanford in 1998. The plan called for the agencies to work together and rent a yacht and throw a party with undercover agents posing as big-time drug dealers. The agencies planned to invite Stanford and some of his cronies to the party to see if he’d be willing to do business with the drug dealers. In other words, help them hide the proceeds from their illegal trade. The sting never happened.  It’s not entirely clear why.

Ironically, a year later, DEA agents in Miami would praise Stanford as being one of the good guys in agreeing to turn over money that a group of alleged drug dealers had stashed away in an account at his Antigua-based bank. Again, it’s not clear if the Miami agents knew about the aborted sting the Houston agents had discussed.

Sure, a lot of the difficulty in going after Stanford stemmed from the simple fact that he kept the core of his operation in a tiny country, whose political leaders were all too cozy with the native Texan and dependent on his largess to fuel the nation’s economy. But there probably also was a simple lack of will on the part of the SEC, FBI, DEA and IRS to follow things through, in part because so many of Stanford’s banking customers were Latin Americans.

Or, as Burroughs describes, may be it was the aggressive lobbying by the investigative firm Kroll that tamed the authorities looking into Stanford. And, of course, don’t rule out the impact of inter-agency turf battles making it difficult for anyone investigative agency to take the lead and bring Stanford to justice.