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Former SEC Official Nearing Settlement Over Stanford Allegations

Allen Stanford
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Allen Stanford

A former regional enforcement official with the Securities and Exchange Commission who was accused of ethical violations in the investigations of accused Ponzi schemer Allen Stanford is close to a settlement with authorities, CNBC has confirmed, according to a source close to the case.

Spencer Barasch was the chief of enforcement in the SEC’s regional office in Fort Worth, Texas — the office that oversaw Stanford’s Houston-based operations. In a blistering report in 2010, SEC Inspector General H. David Kotz accused Barasch of repeatedly derailing or downplaying investigations of Stanford, who in 2009 was accused of running a $7 billion Ponzi scheme.

Under dual civil settlements with the SEC and the Justice Department that could be finalized as soon as this week, Barasch would pay a $50,000 fine and agree to a six-month ban on practicing before the SEC, the source said. It is the harshest penalty available under the law.

Barasch, currently a partner with the law firm Andrews Kurth, did not immediately respond to calls or an e-mail seeking comment.

According to Kotz’s report, after Barasch left the SEC in 2005, he repeatedly sought to represent Stanford even after the agency’s ethics office told him it was improper. Barasch represented Stanford anyway — briefly — in 2006.

In his report, Kotz said that when he asked Barasch why he was so interested in representing Stanford, he replied, “Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines.”

Kotz found SEC staffers were first alerted to potential problems with Stanford as far back as 1997, but did not take action against him until 12 years later.

The source said the settlement is unrelated to Stanford’s criminal trial, which is scheduled to begin on January 23 in Houston. Stanford, 61, faces 14 criminal counts. He has denied wrongdoing.

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