R. Allen Stanford’s Court Date 2011 – Stanford Financial Group fraud case takes Years – Madoff takes Months?

According to the Dallas Business Journal – U.S. District Judge David Hittner has decreed that Stanford’s trial on charges that he led a $7 billion fraud scheme would begin in January 2011.

The Securities and Exchange Commission, on February 17, 2009, charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program.

“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”

Rose Romero, Regional Director of the SEC’s Fort Worth Regional Office, added, “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world.”

Stanford’s lawyer, Kent Schaffer, had asked Judge Hittner not to schedule the trial until the summer of 2011. If defense lawyers must prepare the case without funding from Stanford’s insurance policies, Schaffer reportedly said it could take as long as two and a half years to get ready for trial.  Meanwhile, according to documents filed with the Texas Workforce Commission confirmed earlier this year Stanford closed its facilities and effectively had to dismiss 1,022 employees across the United States. About 297 workers in Houston, the headquarters of Stanford Financial Group, lost their jobs.

Bernie Madoff knew that he was toast in December of ’08 when he admitted that the financial empire that he build was built based on fraud.  While he did wrong, at least he knew when to admit his guilt.  He saved the taxpayers millions by avoiding a long protracted trial.  In less than a year Madoff knew his fate – the rest of his life in prison.

Stanford – well he is still attempting to prove his innocence.  And, while in this country you are innocent until proven guilty, the bulk of the evidence suggests that Sir Allen Stanford will likely face a similar fate to that of Bernie.  I suspect that Stanford will, too, face the rest of his life in prison.  As a business ethics speaker I have to say, I at least respect that Madoff accepted his fate instead of making the process a circus.

DO YOU THINK THAT STANFORD IS RIGHT IN TRYING TO PROVE HIS INNOCENCE OR SHOULD HE PLEAD GUILTY AND MOVE ON?  Your comments are welcome.

Robert Allen Stanford – Stanford International Bank and Stanford Capital Management – Fraud In the News! What Motivates Fraud?

It seems that the flood gates are open with no hope of shutting – at least any time soon – with investigations and indictments of fraud!  Madoff, Dryer, Grigg and now Stanford.  Every where you turn there is another fraud or investment scam being reported.  I’ve seen a lot over the years as a business ethics and fraud prevention speaker, but this is a profound season for fraud discovery.  So the question – what motivates fraud? 

To address a question like that you need to look at the scope and magitude of the frauds being reported.  And, make no mistake in this economic climate this is the tip of the iceberg.  As I write this, no doubt, there are frauds taking place that will be discovered in years to come.  Not a great comfort.  And, in this environment, the time is ripe for people to be scammed or victimized.

Before, however, look at the motivation, let’s examine what Stanford is being accused of.  According to the Dallas Business Journal:

A Houston-based broker-dealer and investment advisory firm with an office in Dallas has been charged in an $8 billion investment scheme that centers around a CD program and involves false promises to investors.

The Securities and Exchange Commission out of its Fort Worth Regional office alleges in a lawsuit filed in Dallas that Robert Allen Stanford through three of his companies — Antiguan-based Stanford International Bank, Houston-based Stanford Group Co. and Stanford Capital Management — were involved in orchestrating a fraudulent investor scenario where the parties made false promises to investors and fabricated return data on investments, the SEC stated.

“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement. “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”

Rose Romero, regional director of the SEC’s Fort Worth office, called the scheme “a fraud of shocking magnitude that has spread its tentacles throughout the world.”

This was originally reported on February 17, 2009.  Since that time there has been a massive ripple effect related to Stanford’s SEC investigation. Investors have found that their assets have been frozen as Stanford’s assets were frozen to protect investors.  This fraud expands far beyond the boundaries of the US.

The Jamaica Observer states: His is a household name in the tiny Eastern Caribbean island of Antigua & Barbuda.

Likewise, the New York Times reports: Having seized control of Robert Allen Stanford’s two banks in recent days, Antiguan government officials are now pledging to work closely with American regulators to investigate their banking system, long suspected by federal officials of being a center for laundering money from around the region.

Now…as the Stanford saga unfolds so does the mystery.  Keep in mind, fraud – to be successful – has to be based on illusion.  And, as we have seen, the grander the illusion the more plausible the fraud – Bernie Madoff – master illusionist.  So in Stanford’s case the illusion is mystified by a story of an “undisclosed island.”

Again, the New York Times reported on February 20, 2009 – In an October 2008 article, Mr. Stanford told Forbes that he was planning to build an elite resort on what the magazine described as an “undisclosed island in the Caribbean.” At the time, Mr. Stanford said that he was working with 17 architectural and engineering firms to build 30 mansions for a development to be called the Islands Club.

Scheduled to open in 2011, it would have featured the largest private aviation complex in the world, Forbes said, with enough room to park 100 private jets as well as a jumbo marina with enough dock space for 30 massive yachts. The super-exclusive resort would require members to shell out a $50 million deposit, which would be refunded if they left the development. That was on top of the $15 million annual membership fee.

The foundation of a scam is based on three components:  Promises – something that people want and most can’t get; Illusion – the grand scheme that allows people to believe in something unseen as truth; and Trust – the belief that all is right, that somehow the government is overseeing the illusion and that if others do it – well then so should I.

BUT WHAT MOTIVATES A FRAUD IN THE FIRST PLACE?

That’s a good question and one that is not easy to answer.  However, one thing is true – a fraud usually has three distinct components: (1) Need; (2) Opportunity; and (3) Rationalization.  While I am not qualified to speak at this time as to each of these critical components, I can safely say that his NEED was driven by emotion (likely first) and (direct need perhaps second).

Note the following reported by chron.com:  With a net worth north of $2 billion, he owns glitzy homes in and around Miami, the Virgin Islands and Antigua, and in them he has entertained powerful American politicians from both sides of the aisle.

He has an estranged wife, a girlfriend, former girlfriends and at least six children by four women. The monthly tab to support them all runs upward of $200,000, according to court records.

He loves to flash cash and to flaunt the toys that immense wealth can bring, be it yachts, private jets and helicopters, his own professional cricket team or a string of top-shelf pro golfers whom he pays to wear his logo.

An outstanding article appeared in the Wall Street Journal – a link to that article is here.

The flamboyant life style required money to fund the illusion, but more than that the emotional need to be larger than life is likely the key trigger to what and why this whole fraud began.

STANFORD’S JOURNEY CONTINUES:

The story will no doubt unravel.  So consider the following:

1. If you were an investor who was defrauded, consider making contact with me as I am doing research into how the fraud was carried out.  Your comments might help others avoid your plight.
2. What do you think should be Stanford’s consequence for the massive fraud he’s accused of?
3. If you did invest – did it cross your mind that the returns (far better than what the market provided) might be – well – shady?

AS ALWAYS COMMENTS ARE WELCOME!