Allen Stanford Found Guilty of $7 Billion Ponzi Scheme

Andrew Stoltmann, of Stoltmann Law Offices in Chicago specializes in investment fraud, and cites several “red flags” that were “missed or ignored” by the SEC.

First was the fact Stanford’s businesses were inspected and investigated several times, starting in 2004 by the National Association of Securities Dealers, the brokerage industry’s self-policing group, which is now FINRA. “NASD’s scrutiny resulted in several disciplinary actions: the regulator fined his brokerage company four times, with penalties totaling $70,000, for violations that included misleading investors in sales materials about the risks of the CDs,” Stoltmann says.

Then there was a 2006 lawsuit by former employees alleging that Stanford’s company was running a Ponzi scheme. An SEC Office of inspector general’s report later found that the SEC’s Fort Worth, Texas, office was aware since 1997 that Stanford was likely operating a Ponzi scheme, Stoltmann says.

Stanford’s company also lacked capital. In June 2007, Stoltmann says, “a finding by regulators stated that Stanford’s company lacked enough capital to function properly as a securities brokerage firm. The company paid $20,000 to settle charges by the NASD without admitting or denying them.”

Mike Patton, an AdvisorOne blogger and president of Integrity Wealth Management, an RIA firm in Baton Rouge, La., said, “This closes one chapter in the ongoing saga of one of the most egregious con men of modern times. Still in limbo, however, is the reimbursement for those who were duped by the charismatic ex-billionaire. While the SEC brandishes swords with SIPC over the matter, those who invested in the once ‘highly touted CD’ are forced to wait, while the political machinery crawls along.”