SEC Ignored Complaints About Stanford: IG Report
The Securities and Exchange Commission knew that Allen Stanford was involved in a Ponzi scheme as far back as 1997, according to a report released Friday by SEC Inspector General David Kotz.
The 159-page report said the scheme was able to continue for so long due to "institutional influences" within the SEC, and the agency's desire to chase after slam-dunk cases.
The report also mentioned an SEC regional enforcement official who three times left the commission in an effort to represent Stanford, saying he was successful in one of these attempts.
SEC Chairman Mary Schapiro responded to the report by saying, "Much has changed and continues to change regarding the agency's leadership, its internal procedures and its culture of collaboration."
"The report makes seven recommendations, most of which have been implemented since 2005. We will carefully analyze the report and implement any additional reforms as necessary for effective investor protection."
Schapiro has had the report in her hands since at least April 1, but it wasn't released until the same afternoon charges were announced against investment bank Goldman Sachsfor defrauding investors $1 billion.
Outrage Among Alleged Victims
"The SEC's Office of the Inspector General investigative report on the agency's oversight of Stanford reveals an entirely new level of the agency's many failures to protect investors," said the Stanford Victims Coalition, a group that represents former Stanford Investors.
"In the Madoff case, we saw the Commission's depth of incompetency, now, in the Stanford case, we see that not only is the SEC incompetent, it is also appears to be corrupt," the group said.
The group also accused the agency of trying to "minimize the revelation of the truth" by releasing the Kotz report on the same day it announced fraud charges against investment bank Goldman Sachs.
The SEC sued Allen Stanford and his companies in 2009, alleging an $8 billion Ponzi scheme.