SEC Eyed for Negligence in Enforcement Cases

A federal watchdog is investigating whether a senior Securities and Exchange Commission official bungled an examination associated with a “major” investment adviser enforcement case in 2009.

The senior official at one of the SEC’s regional offices allegedly told staffers not to pursue certain red flags in an investment adviser examination, according to a report by SEC Inspector General David Kotz.

Kotz’s semi-annual report to Congress, released on Monday, did not identify the senior official, the regional office or the major enforcement case.

The senior official was motivated to cover up his tracks because he was deeply involved in the prior examination that did not uncover the fraud, according to an internal complaint
received by Kotz.

The report from Kotz comes as the SEC continues to rebuild its reputation after the regulator was blasted for missing Bernard Madoff’s epic fraud despite numerous tips and complaints.

The SEC declined comment. Kotz would not elaborate further.

According to the report, the complaint also alleged that a hostile work environment existed in the regional office because management failed to discipline the senior official after it was revealed that he had viewed porn on a SEC computer.

According to the report, Kotz is still eyeing allegations that the enforcement division was negligent in an investigation of an insider trading case. Among other things, Kotz is also probing allegations that SEC staff failed to properly investigate a prominent law firm for obstructing an ongoing case.


HSBC Paid off Wealthy Madoff Investors

HSBC not only failed in their duty of care in the Stanford case they also failed in the Madoff case, the difference being HSBC reimbursed their wealthy clients. It appears if you are wealthy and can afford a barrister HSBC will pay but if your a pensioner who lost all your money because of HSBC negligence they are not going to pay.

More than 720,000 victims of the fraudster Bernard Madoff have won an estimated $15.5bn (£11bn) back from non-American banks that had channelled the victims’ money towards the corrupt Wall Street investment manager.

An alliance of victims’ lawyers yesterday said that 14 months on from Madoff’s conviction, dozens of European banks including Santander and HSBC had made partial reimbursement, for fear of losing long-standing and often lucrative customers. About 80% of Madoff investors represented by the alliance have struck deals with their banks. The average profile of a victim is a 54-year-old male who invested $35,000 in Madoff’s phoney Wall Street fund management business.

Javier Cremades of Spanish law firm Cremades & Calvo-Sotelo, who is co-ordinating the victims’ network, said customers were typically getting their original investment without the false profits the jailed financier claimed to have added. “Client confidence is banks’ most important asset,” he said at a press conference in New York. “They’re facing a huge reputational problem at a time when confidence is not particularly abundant.”

Generally speaking, banks are not refunding their customers in cash, but are using a variety of forms of credit or convertible paper intended to tie in victims as ongoing clients. Santander, one of the biggest sources of money to Madoff outside the US, has offered its clients a form of convertible paper redeemable in 10 years and has settled 98% of claims.

When asked about settlements in Britain, Cremades named HSBC as one of the banks involved in deals. The British bank has taken charges of $1.05bn to cover Madoff-related losses, and revealed in its annual report that it was the subject of litigation with “numerous defendants” over the Madoff scandal in jurisdictions including the US, Ireland and Luxembourg. However, sources close to HSBC expressed scepticism, saying they were not aware of such settlements.

Cremades said victims’ lawyers had been surprised at the willingness of banks to settle: “In Europe, one year later, most of the victims have solved their problems through settlements. It has been easier than we thought.”

An exception, however, is Switzerland, where the situation has been complicated by its banking privacy laws. Some victims had secret accounts and are unwilling to air their losses in litigation.

Regarded as the biggest financial crime in Wall Street history, Madoff Investment Securities claimed to have $65bn of assets under management. But the financial crisis led to attempts by investors to withdraw money, exposing Madoff’s firm as a vast Ponzi scheme. He is serving a 150-year sentence in North Carolina.

Within the US, most of his victims were either direct investors or had channelled money through boutique firms that acted as so-called feeder funds. They face a longer struggle for recompense as a court-appointed trustee, Irving Picard, sorts through claims. European banks will wait in line with US victims to get their own share of any distribution, though they are not likely to get back anything close to the sums that they are reimbursing clients.

“They can’t expect to get back much of what they’ve given,” said Gaytri Kaychoo, a lawyer for US victims. “They [European banks]looked at their own situation and rationalised making their settlements with wealthy, very good clients, because they can’t afford to lose them.”

A Double Robbery Without Guns

Since I first posted the article FROM A NEWSPAPER entitled “A ROBBERY WITHOUT GUNS I have had a torrent of abusive emails from Angela Shaw to such a degree that I told her not to email me any more and blocked her from my email system.

It would seem that telling her I wanted nothing to do with her and would not reply to her abuse was not enough for Ms Shaw and today I noticed that she has started to post even more abuse, this time on Stanfords Forgotten Victims blog. I am not going to go down to her level and even bother to reply to her nasty comments and have removed her posting, and I will continue to remove any more postings she puts on there. I would like to apologize to all readers of the blog for this persons behaviour and for trying to spoil what has been a source of information to Stanford victims. It would appear that Ms Shaw has some kind of fixation with me and seems to hold me personally responsible for the bad light others see her in. The blog will continue and I will continue to print any and all articles I find that are of any interest to the Stanford Victims, whether they say complimentary things about Ms Shaw or not. If any readers find a posting on the blog from her, please let me know so that I can remove it. Many thanks.

Below is the article taken from a newspaper.

Things have not gotten any better lately for the majority of investors in the failed Stanford Bank, at least not for those who are not US citizens, who are by far the majority.

First the Antiguan receivers managed to get themselves fired, and have not yet been replaced. Then the US Receiver dodged a motion for bankruptcy, which would not only have significantly curtailed his billing, but would have greatly expedited payments to the victims.

Instead, the Judge who appointed him established an investors committee, ostensibly so the victims of the fraud could be represented in the receivership.

Regrettably, the Examiner who chairs the committee allowed it to get hijacked by the lawyers acting on the class-actions, and a couple of American investors, fronting the Stanford Victims Coalition (SVC), claiming to represent all the victims, but whose sole stated intent (now they are appointed) is to gain SIPC coverage for a minority of mainly US citizens.

Once the remaining investors started to raise questions, and began to realise that any SIPC pay-out could well be at their expense, they were ceremonially dumped, and branded anarchists or radicals.

The leader of the SVC now states that she is only representing the Americans and is going out of her way to thwart any attempts by the international investors to gain any information, and is also trying to close down the Stanford Victims forum which is used by the international investors to share news and comments.

A double whammy for the international investors; first, the failure of the SEC in America to act, knowing for 13 years Stanford was likely a Ponzi Scheme; the reason they gave for not acting was because they simply did not think there were any US investors.

Then, the International Investors were abandoned by the very people (SVC) who asked them to help fight for justice, just as soon as they could see a way to their own personal recovery. The SVC know that if they are successful in getting SIPC cover, all the receivership assets may be claimed to subsidise their pay-out and this would leave the majority of International Investors with nothing!!

Only in the United States of America could this be allowed to happen… robbed once by Stanford and then robbed again by the very people (the SVC) who misled so many into believing they were working to help them.

HSBC Take Note!

UBS is sued for £1.25bn over Madoff fraud

A lawyer representing investors who fell victim to fraudster Bernard Madoff ‘s £40billion ‘Ponzi’ scheme is suing Swiss bank UBS and others for more than £1.25billion.
UBS stands accused of facilitating Madoff ‘s swindle – in which investors were shown false returns based on cash from new victims – by sponsoring so-called ‘feeder’ funds that channelled money into the fraudulent operation.
The complaint – lodged by court – appointed trustee Irving Picard – alleges that UBS lent the funds ‘an aura of legitimacy’, allowing the bank to collect nearly £50million in middleman fees. Picard said that despite identifying warning signs about Madoff Investment Securities, UBS ‘chose to enable Madoff’s fraud for their own gain’.

Complaint: UBS has been accused that it was party to 23 counts of fraudulent transfers and other misconduct

Picard has filed around 20 lawsuits to recover £11billion from feeder funds that poured money into Madoff ‘s pockets and claims to have recouped £950million from former clients of the conman, who is serving a 150-year jail term.
His case alleges that UBS worked with co-defendant Access International Advisors, led by French executive Thierry Magon de la Villehuchet who was found dead in an apparent suicide in New York following the discovery of Madoff’s fraud. He was said to have been distraught at losing nearly £900million of clients’ money and around £30million of his own.
UBS said investors had been well aware that funds were being directed to Madoff, adding that it ‘does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal’.
Picard has not yet said whether he intends to file claims against other European banks. But HSBC could yet find itself embroiled in the saga, due to a ruling by a Luxembourg court earlier this year.
The court told clients filing claims against UBS to seek redress through the US liquidation process being led by Picard.
The ruling means that investors who claim to have lost £630million through Herald, a fund affiliated with a Luxembourg division of HSBC, could add their claims to those being managed in the US.

HSBC declined to comment.

SEC Did Nothing to Stop Stanford Ponzi Scheme for Years

Newly released documents detail 12 years of fits and starts at the Securities and Exchange Commission as financier Allen Stanford was allegedly running a global Ponzi scheme.

At one point, an SEC official laments in an e-mail, “Before I retire, the Commission will be trying to explain why it did nothing.” The e-mail from Fort Worth, Texas, Regional Office Assistant Director Julie Preuitt was written in 2004. The agency did not move in on Stanford until 2009.

The documents are exhibits in a scathing report issued in March by SEC Inspector General H. David Kotz. His investigation found SEC staffers were aware of potential problems at the Stanford Financial Group as far back as 1997, but that the SEC’s Enforcement Division repeatedly declined to take action. The agency released the exhibits Tuesday after repeated requests by CNBC under the Freedom of Information Act.

Kotz’s investigation also found the SEC’s former enforcement chief in Fort Worth, Spencer Barasch, repeatedly sought to represent Stanford after leaving the agency, even after being told by the SEC’s ethics office that he could not.

The exhibits show Allen Stanford himself pushed for Barasch’s hiring. With SEC investigators bearing down on the company in 2006, Stanford wrote in an e-mail to Chief Financial Officer James Davis and General Counsel Mauricio Alvarado, “The former SEC Dallas lawyer we spoke about in St. Croix. Get him on board asap.”

SEC officials blocked Barasch from representing Stanford, but the documents show Barasch billed Stanford for work done in 2006. He sought to represent Stanford again after the SEC lawsuit in 2009, but officials again ruled he had a conflict of interest. According to a transcript released Tuesday, Kotz asked Barasch about the 2009 request, and Barasch replied, “Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines.”

Barasch, who has not been charged with wrongdoing, has not responded to previous requests for a comment about any role he may have played in the Stanford affair.

The documents show Allen Stanford’s attempts to exert his influence may have extended beyond the SEC. In a 2004 e-mail exchange with the subject “Stanford — Call to Federal Reserve,” SEC officials contemplate the fact that someone at Stanford — the name in the e-mail is redacted — had contacted someone at the Federal Reserve, whose name is also redacted.

The SEC staffers conclude there is nothing they can do about the development, which leads Assistant Regional Director Preuitt to write, “I love this stuff. We all are confident that there is illegal activity but no easy way to prove. Before I retire, the Commission will be trying to explain why it did nothing. Until it falls apart all we can do is flag it every few years.” The e-mail is dated October 25, 2004.

By then, officials in Fort Worth had been looking into issues at Stanford Financial for years. In 1997, examiners found evidence of “possible misrepresentation and misapplication of customer funds,” according to one of the newly released documents. The report noted that Stanford himself had made a $19 million cash contribution to the company in 1996, and “We are concerned that the cash contribution may have come from funds invested by customers in (Stanford International Bank).”

The report was referred to the Enforcement Division, which ultimately chose not to pursue the matter. Among those who made the decision: regional enforcement chief Spencer Barasch.

The SEC released the Inspector General’s report — minus the exhibits — on April 16, the same day the Commission announced a high-profile fraud suit against Goldman Sachs. That triggered charges the SEC was trying to bury the report amid the publicity surrounding the Goldman Sachs case, but a subsequent report by the Inspector General found no evidence of that.

Allen Stanford is scheduled to go on trial in January on 21 criminal counts.