Legal News

Forget Madoff; Did the SEC Mess Up the Stanford Probe Too?

By Ashby Jones

Pity the Securities and Exchange Commission. Just when it appears the agency is finally crawling itself out from under the disaster that was Bernie Madoff and Harry Markopolos — not to mention the financial crisis — it appears another mortar is on its way.

Incoming!

According to this story in Reuters by Matthew Goldstein, the SEC’s Inspector General, David Kotz (Maryland, Cornell Law), is expected to soon release a report criticizing how the SEC handled its Allen Stanford investigation. According to Goldstein’s story, Kotz’s report is expected “to be highly critical of the agency.”

The report is likely to strike a different chord from the one struck by Katz in a preliminary report issued last July, in which he concluded that the SEC did nothing wrong when it "stood down" on investigating Stanford, following the request of federal prosecutors.

But the new report, writes Goldstein, looks further back at the agency's dealings with Stanford and, “suggests the SEC dragged its feet in getting its own probe under way.”

A spokesman for the SEC had no comment. Kotz's report is being reviewed by the agency's Freedom of Information Act office.

In February 2009, the SEC filed civil charges accusing Stanford and three of his companies of fraudulently selling billions of dollars of Certificates of Deposit. But it has said it faced jurisdictional hurdles in pursuing an investigation against an offshore bank like Stanford’s, which was based in Antigua.

In the meantime, Stanford (looking here, as one LB reader recently put it, a lot like the Most Interesting Man in the World) sits in a Texas detention center, held on numerous criminal charges arising arising out of his alleged $7 billion Ponzi scheme. His trial is scheduled for next January.

Full post as published by Law Blog - WSJ.com on April 14, 2010 (boomark / email).