FRONT PAGE CONTRIBUTOR
We Need More Regulation (Like a Hole in the Head)
One of the Democrats’ main goals is to re-regulate the businesses that were deregulated in the ’80s and ’90s.
As if the problems that we’ve had are all the result of not enough regulation. Sen. David Vitter (R-LA) begs to differ. Several government agencies had direct knowledge of serious red flags (including employee whistleblowers) at the Stanford Group, but failed to act.
Houston-based Stanford was a kind of a Madoff-lite, pulling off the same kind of Ponzi scam, promising too-good-to-be-true, risk-free returns to investors. The main differences: 1) the amount of money involved, and 2) the location of his victims. Stanford’s tentacles mainly stretched into Texas and Louisiana; Madoff had a lot of victims in the media centers of New York and Los Angeles.
The Stanford Group, which is accused of bilking Louisiana investors of more than $1 billion, was allowed to operate despite warnings to the federal Securities and Exchange Commission as early as 1999.
In a recent letter to SEC Chairwoman Mary L. Shapiro, U.S. Sen. David Vitter outlined a series of reports concerning possible fraud by the company over the last decade. The Louisiana Republican said his chief concern is getting relief for the estimated 1,000 Louisiana investors. But Vitter also wants to know how Stanford was able to operate despite the warnings.
“We’re asking all of those questions,” Vitter said. “We don’t want it to happen again.”
Vitter said he found that:
* Between 2001 and 2009, dozens of Stanford employees came forward reporting suspicions of fraud. In addition, the SEC received a warning from the Texas State Securities Board that activities of the Stanford Group of Companies, including its operations in Antigua, were likely fraudulent.
* Prior to the SEC giving the Stanford Group of Companies permission to sell certificates of deposit at Stanford International Bank-Antigua, starting in 2001, numerous government agencies had knowledge of fraudulent activities involving Stanford. The FBI, Drug Enforcement Agency and Internal Revenue Service all conducted investigations into Stanford’s international operations, Vitter said.
* Twice in 2007, the SEC fined the Stanford Group for failing to meet adequate capital requirements and providing “misleading, unfair and unbalanced information” about its certificates of deposit, according to the Financial Industry Regulatory Authority, an independent securities regulator.
In February, the SEC charged Robert Allen Stanford and three of his companies for orchestrating what they called a fraudulent, multibillion-dollar investment scheme. The operation centered on $9 billion in certificate of deposit and mutual fund programs to provide interest on customer investments.
So my question is, if the SEC can’t handle securities fraud when the evidence is placed right under their noses, why do we expect things to get better if we increase the scope of their authority?