SEC Sanctions Former Staffer Accused of Thwarting Stanford Probe

By: Scott Cohn Senior Correspondent, CNBC
 

A former regional enforcement director with the Securities and Exchange Commission who allegedly derailed repeated attempts to investigate convicted Ponzi schemer Allen Stanford and then tried to represent Stanford in private practice has been barred from practicing before the Commission for one year, the SEC said.

Spencer Barasch, 54, a partner at Andrews Kurth, previously agreed to pay a $50,000 civil penalty to the Justice Department to settle allegations he violated federal conflict of interest laws.

 Barasch was a top enforcement attorney in the SEC’s Fort Worth office beginning in 1998, around the time the office began receiving complaints about Stanford. An internal investigation found Barasch repeatedly rebuffed other staffers’ requests to investigate Stanford. After Barasch left the Commission in 2005 for private practice, he asked the SEC’s ethics office for permission to represent Stanford and was told he could not. But in 2006, Barasch began representing Stanford anyway, even asking his former colleagues for information about the investigation they had finally begun.

The SEC sued Stanford for fraud in 2009, and a federal grand jury indicted him later that year for running a $7 billion Ponzi scheme. He was convicted on 13 criminal counts in March and is awaiting sentencing.

Asked by then-SEC Inspector General why he was so persistent in attempting to represent Stanford, Spencer Barasch reportedly replied, “Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines.”

The SEC says Barasch has agreed to the one-year bar “without admitting or denying the Commission’s allegations.”

“This action shows that the Commission takes seriously ethical lapses by attorneys who appear and practice before it, and that such violations will result in serious disciplinary action,” SEC Associate General Counsel Richard Humes said in a statement.

Stanford Update re Receiver’s Claims Process and SEC Suit

    KACHROO LEGAL SERVICES, P.C.

Stanford Update re Receiver’s Claims Process and SEC Suit 

Dear Stanford clients:

This update provides information regarding the claims process recently approved by the Court in Dallas, as well as the status of our class action pending against the SEC.

The Stanford Receiver’s Claims Process

On May 4, 2012, the Court in Dallas approved the Receiver’s proposal for a claims process and, on May 11, 2012, the Receiver published the Claim Form that needs to be completed. The deadline to submit your claim is September 1, 2012. For many of you, we have the necessary information and supporting documentation to complete the Claim Form on your behalf. However, if you have any of the following documents and have not previously sent us copies, please do so immediately:

• Personal checks, cashier’s checks, wire transfer advices, Stanford International Bank, Ltd. account statements and other documents showing that you invested funds or paied funds to Stanford;

• Your Stanford International Bank, Ltd. certificate of deposit, and any written contract or agreement made in connection with your investment in Stanford;

• A chronological accounting of all money you received from any Stanford entity;

• All documents and records reflecting any withdrawals ever made by you or payments received by you from Stanford;

• All agreements, promissory notes, purchase orders, invoices, itemized statements of running accounts, contracts, court judgments, mortgages or security agreements relating to your investment in Stanford; and

• Any other documents evidencing the amount and basis of your claim.

If you have not sent us any supporting documentation and you have no supporting documentation, please contact us immediately. We will need to explain to the Receiver why the documentation is unavailable.

Please note that a Claim Form must be completed even if you previously submitted or will be submitting a claim to the Antiguan liquidators. If you are in the Stanford Further Actions (SFA) program, but have decided to submit your own claim, please send it to us so we can check the claim and have a copy of it for our files.

Also note that the submission of a Proof of Claim to the Dallas receivership will submit you to the jurisdiction of the court for all purposes related to the claim. This means that, to the extent there is a dispute regarding your claim,

you may be required to appear in court or provide sworn testimony regarding your claim. You will also be required to sign your Proof of Claim under penalty of perjury. As soon as we complete your Proof of Claim, we will send you a copy to review, sign and send back to us.

If you have any questions regarding your claim, please contact us. If you want KLS to handle your claim, but you have not yet signed up for the SFA program, please contact us for further information on how to sign up.

Update on Stanford/SEC Case

On February 14, 2012, the United States filed a motion to dismiss our Complaint. As we explained in our last update, the United States is arguing that the government is immune from suit based on a statute that exempts it from liability for certain discretionary actions. In our response brief, we argued that we alleged certain statutory violations by the government and the government has no “discretion” to violate statutes. The motion is now fully briefed and we are waiting on a ruling from the judge. There is no timeline for when the judge will rule on the motion, and it may be several more weeks before we receive a ruling. We believe strongly that the Court should rule in our favor, but we are prepared to immediately appeal should the Court grant the motion to dismiss. We will update you as soon as the Court rules on the motion.

The KLS Stanford Team

Investors Sue Auditor for Stanford Ponzi Fraud

By DAVID LEE
DALLAS (CN) – Investors defrauded by Allen Stanford’s $7 billion Ponzi scheme say in court that the fund’s auditor knowingly participated in the fraud. 
The Official Stanford Investors Committee filed the federal complaint against BDO USA, and related entities BDO International, BDO Global Coordination and Brussels Worldwide Services. The complaint abbreviates Stanford Group Co. as SGC. 
“Despite the pervasive fraud that infected Stanford Financial Group’s operations, BDO USA repeatedly issued unqualified audit opinions on its Stanford clients’ annual financial statements,” the complaint states. “BDO USA’s audit opinions on SGC’s financial statements were critical to Stanford Financial Group’s success.”
In March, Stanford was found guilty of one count of conspiracy to commit mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct a U.S. Securities and Exchange Commission investigation, and one count of obstruction of an SEC proceeding. He was
acquitted of one wire fraud charge. 
“Allen Stanford and his co-conspirators used the promise of SIBL CDs to lure investor money into Stanford Financial Group and then stole billions of dollars in assets from Stanford Financial Group companies for their own personal benefit,” the complaint states, abbreviating Stanford International Bank Ltd. certificates of deposit. 
“Substantial sums of these stolen funds were used to: 
(i) support the lavish lifestyles of Allen Stanford and his Ponzi insiders; 
(ii) issue bogus, unsecured personal “loans” to Allen Stanford; 
(iii) capitalize other entities wholly owned by Allen Stanford; and 
(iv) fund investments in speculative, illiquid, and high-risk assets, including private equity holdings and massive investments in Antiguan real estate.” 
Investors say BDO USA provided critical services to Stanford Financial Group for over a decade, auditing the annual financial statements of Stanford Group Co., a Houston-based broker-dealer and investment adviser that recommended and sold SIBL CDs to investor. 
BDO USA also allegedly audited the annual financial statements of Stanford Trust Company (Louisiana), which served as trustee and custodian to hold the SIBL CDs that SGC sold for its investors’ IRA accounts. And it audited the annual financial statements of Stanford Group Holdings, a holding company for the broker-dealer arm of Stanford Financial Group, including SGC and STC, according to the complaint.
BDO allegedly played a significant role in weakening banking laws in Antigua, where SIBL was based. 
When Antigua came under increased scrutiny from foreign regulators, Stanford formed a task force to rewrite the country’s banking laws, according to the complaint. The task force allegedly succeeded both in weakening regulations, and in effectively eliminating SIBL’s Antiguan competitors, making Stanford the
country’s de facto offshore banking regulator.
“The smashing success of the Stanford task force and its misleading regulatory ‘reforms’ were rooted in its exclusive nine-person membership,” the complaint states. “Every firm represented on the Task Force provided crucial services to Stanford Financial Group, and every individual member of the Task Force was personally appointed by Stanford himself. … BDO USA’s partners and associates comprised nearly half of the Stanford Task Force’s members, more than any other firm represented on the Task Force.”
The key initiative of the task force was to amend Antigua’s Money Laundering Act to ensure that “fraud” and “false accounting” were not included as violations, investors say.
BDO USA allegedly had some of the most important responsibilities in completing the initiative, including reviewing and advising on Antigua’s banking laws, and making recommendations to Antigua’s regulatory
authorities, including procedures for supervising and examining international banks.
BDO USA’s service on the task force completely undermined its independence from SFG and, and as a result, violated generally accepted auditing standards by issuing unqualified audit opinions on its Stanford clients’ annual financial statements during the years that BDO USA served on the Stanford Task Force, the complaint says. Investors also accuse BDO USA’s audit engagement partner, Carlos Ancira, of concealing critical, material information from his own audit engagement team. 
“Ancira knew that SGC was under increasing scrutiny from the SEC years before the U.S. Government seized Stanford Financial Group in February 2009,” the complaint states. “Shockingly, however, Ancira reassured SGC in a February 28, 2007 email that ‘[d]ue to the sensitivity of the situation,’ no other members of BDO USA’s audit engagement team would be told about the SEC’s investigation of SGC for possible securities fraud. Furthermore,
Ancira’s email permitted SGC’s outside legal counsel to omit any discussion of the SEC investigation in its audit response letter.” 
For every year BDO USA audited SGC’s annual financial statements, it failed to confirm that SGC remitted investor funds to purchase SIBL CDs and failed to properly modify its audit opinions, the complaint alleged. It also stated that BDO USA failed to properly consider and apply consolidation principles, failed in its role as a public watchdog and issued unqualified audit opinions in spite of knowing its Stanford clients “substantially” depended on SIBL CDs. 
The investors seek actual and punitive damages for negligence, civil conspiracy, breach of fiduciary duty, fraud and conversion. They are represented by Guy Hohmann with Hohmann, Taube & Summers in Austin.

Stanford auction to be held this weekend

Source: Deborah Wrigley 
Facebook, News Team 

HOUSTON (KTRK) — Hundreds of items that once belonged to disgraced money manager R. Allen Stanford are going on the auction block this weekend. Stanford was convicted two months ago for running a massive Ponzi scheme that lost around $7 billion of investors’ money.

The warehouse is in northeast Houston, and it looks like a scene from an Indiana Jones movie. The warehouse just keep on going with row after row of merchandise. Most of it is office furniture but some of it is personal furniture belonging to a former Stanford executive.

Until three years ago, this furniture would have been found in the offices of Stanford financial near the Galleria. Now it sits in a warehouse, organized, numbered and awaiting buyers.

“If these could talk, what do you think they’d say?” we asked Auctioneer Seth Worstell.

“I don’t know, couldn’t tell you,” he said.

When R. Allen Stanford’s empire crashed, taking investor and clients money in what was called a $7 billion Ponzi scheme, whatever assets could be found became the property of the court and its receiver. That includes the personal contents of Stanford CFO Jim Davis. Everything was seized, from a $310,000 grandfather clock to a baby grand piano, a now-ironic inspirational poster and a pair of inflated exercise balls.

“With the nature of this sale, everything is going to sell absolutely – no minimums, no reserves, so there’s absolutely an opportunity here for people to get a great deal,” Worstell said.

 It’s the end of an era at Worstell Auctions. Founder Harry Worstell is retiring Saturday, and his son will take over the business. Worstell oversaw the last Stanford auction. Before that, he auctioned off Enron assets. This, he says, is better stuff

“There are many exciting things in this, there many things I’ve never sold,” Harry Worstell said.

 They say there’s no minimum bid for the stuff up on the auction and they say everything must go.

The warehouse opens for viewing at 8am Saturday and the auction begins at 10am.