SEC's Stanford Probe Proper, Internal Review Finds
Wednesday, July 29, 2009
The Securities and Exchange Commission acted appropriately in its investigation of R. Allen Stanford, the alleged mastermind of a $7 billion Ponzi scheme, even though the probe took nearly four years, the agency's internal watchdog said Tuesday.
The SEC's investigation of Stanford's business was first delayed by his refusal to cooperate and difficulties in obtaining documents and other information from his bank in Antigua. The inquiry was then slowed by an FBI investigation into possible money laundering and wire fraud by Stanford, the SEC inspector general said in a report.
Stanford, awaiting trial at a prison in Conroe, Tex., faces criminal and civil charges for allegedly orchestrating a massive fraud from his brokerage firm in Houston, Stanford Financial Group, and his bank in Antigua, Stanford International Bank. After the SEC acted to stop the alleged fraud in February, questions surfaced about whether the agency had missed red flags in the nearly four years since it began looking at the financier.
The inspector general "did not conclude that the SEC breached its obligation to vigorously pursue allegations of wrongdoing in the Stanford matter," according to the report.
The report said the SEC's Fort Worth regional office opened an investigation into Stanford's businesses in June 2005 after a routine review of his brokerage generated concerns. It continued for nearly three years.
In April 2008, the SEC suggested that the Justice Department open a criminal investigation of Stanford. The Justice Department in turn asked the SEC to halt its ongoing probe of Stanford's Antigua-based bank, fearing that it could obstruct any criminal review by federal prosecutors.
After the Bernard L. Madoff case broke in December, however, the SEC "felt an increased sense of urgency regarding any ongoing investigation of possible Ponzi schemes" and sought to continue with its own probe, the inspector general's report said.
The SEC contacted the FBI and determined that the criminal investigation into Stanford was in an early stage. The FBI asked the SEC to continue to delay its probe. At that time, the SEC went over the FBI's head to the Justice Department, where officials told the SEC to carry out its investigation.
"The Department of Justice and the SEC have a long history of working collaboratively and effectively to bring financial fraudsters to justice, both in civil and criminal actions," Justice Department spokeswoman Laura Sweeney said. "Each agency, however, makes its own decisions on how to pursue their investigations, including decisions regarding timing and implications for other agencies."