" By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, January 21, 2010
Eric Kolchinsky was an executive at Moody's, the credit rating company, when he called a top official at the Securities and Exchange Commission in September to warn that his firm might be violating securities law. He reported that Moody's was blessing mortgage-backed investments that it knew were dangerous, according to a person familiar with the conversation.
The SEC official assured Kolchinsky that someone from the agency would call him back shortly. But the call never came, Kolchinsky later told congressional investigators who were examining how the credit rating industry's failures contributed to the financial crisis. He had gone to Congress after losing patience with the SEC.
Kolchinsky is one in a series of whistleblowers who in recent years tried to tip off the SEC to potential wrongdoing, only to be ignored, misunderstood or left to wonder whether they were being listened to. The SEC has no system in place to guide how officials should handle tips and complaints from outsiders, making it difficult for investigators to take advantage of an invaluable source of information.
This failure helped to continue two of the most celebrated frauds of the last decade for several years, potentially costing unwitting investors millions of dollars. Countless others may have been left vulnerable to shysters because of warnings that went unheeded.
Since SEC Chairman Mary L. Schapiro took office last year, she has said that fixing the holes in the process for handling tips and complaints has been a top priority. But improving the way hundreds of thousands of tips are analyzed and pursued has proven difficult.
The SEC's enforcement division got back in touch with Kolchinsky about his allegations only after he told the story publicly to a congressional committee last fall, according to a person familiar with the matter.
The SEC said it responded to Kolchinsky's concerns but declined to provide details or to say how fast it did so. Moody's said it examined his allegations and found nothing improper.
The SEC has a haphazard, decentralized system for analyzing outsider information.
Tips arrive by phone, mail and e-mail to officials throughout the agency -- investor education to enforcement divisions. A study commissioned by the SEC last year and conducted by Mitre, a nonprofit group that does research for the federal government, found that the SEC lacks technology to analyze tips and complaints, as well as cohesive policies for what officials should do when they get information.
Whistleblower complaints are one of the main ways that investigators should be tipped to wrongdoing, SEC officials say, along with inconsistencies in financial filings and alerts from financial exchanges about suspicious trading patterns. But the SEC lags behind some other federal agencies in handling tips.
The Internal Revenue Service, for instance, pays reward money to whistleblowers who provide credible information about tax fraud. The Federal Trade Commission has set up a call center for tips and complaints.
On top of structural problems at the SEC, agency officials individually made mistakes in handling several recent cases, sometimes violating agency rules.
Members of Schapiro's management team said they recognized problems with the system for handling whistleblowers shortly after taking over.
"There was no uniformity to it. Every division and office had its own system of recording, tracking or handling tips and complaints. That system was pretty rudimentary," said Steve Cohen, the official tasked by Schapiro to overhaul the agency's tips, complaints and whistleblower program. "We're already working to acquire and deploy technology that centralizes all of the agency's tips and complaints so they can be sorted, reviewed, analyzed and tracked."
No shortage of witnesses
The SEC's struggles were underlined over the past two years with the revelation of two huge Ponzi schemes.
In the case of Bernard L. Madoff, whistleblowers had provided credible information to various SEC units for years.
The most prominent of these informants, a Boston financial analyst named Harry Markopolos, contacted the enforcement division on numerous occasions, according to the SEC's inspector general.
In one instance, Markopolos provided a detailed explanation of why Madoff's business was probably a fraud. Enforcement officials listened, but they dismissed him in their internal discussions. Two former enforcement officials told the inspector general that they discounted Markopolos's information because he was not an insider in Madoff's company.
Then, a few months after the Madoff scheme exploded into the headlines, the SEC exposed a second large Ponzi scheme, run by R. Allen Stanford. But that happened five years after an insider went to the SEC, warning that Stanford might be conducting a fraudulent business.
Leyla Wydler had been a vice president at Stanford's Houston-based company when she first started asking her supervisors tough questions about what the firm did with clients' money, according to her testimony before Congress last year. Her superiors were evasive, and she ultimately was fired.
After that, she went to the National Association of Securities Dealers, a private industry regulator overseen by the SEC. The NASD dismissed her concerns. Then in September 2004, she contacted the SEC's Fort Worth office, according to her congressional testimony. She followed up with a letter to an official there, questioning whether clients' money had been invested in the way Stanford said.
She never heard from the SEC again -- until January 2009, days before the SEC finally filed a case against Stanford, according to her testimony. The agency wanted to know more about her allegations. An inspector general report from June 2009 said the SEC began looking into Stanford years earlier but struggled to build a case against him.
Turning in the Tipster
In one case, it was the SEC that blew the whistle on Peter Sivere, an informant.
Sivere worked in the compliance office of New York investment bank J.P. Morgan Chase. As part of a team helping the bank furnish documents related to a 2004 SEC probe into suspected illegal trading, he found an e-mail that he thought was incriminating.
According to a subsequent report by the SEC inspector general, the e-mail said J.P. Morgan was knowingly providing hundreds of millions of dollars in credit to a firm "in the business of day trading mutual funds" -- which is illegal.
Sivere asked his superiors if this e-mail had been turned over to the SEC but did not get an answer. Instead, he was taken off the SEC project, according to the inspector general report. Sivere accessed his superiors' e-mail accounts to retrieve relevant e-mails, then contacted the SEC. He told the agency that he had relevant documents and asked whether he could receive a reward. He was told he was not eligible, but he turned over the documents anyway.
Sivere informed J.P. Morgan that he had contacted the SEC.
The company fired him, partly on the grounds that he had "sought payment from the SEC to provide documents and information to them outside of the normal scope of their investigation," according to a letter company lawyers wrote defending his dismissal. J.P. Morgan declined to comment for this article.
Sivere was shocked to learn that J.P. Morgan knew he had inquired about a bounty. He had been promised that his discussions with the SEC were confidential.
An SEC internal probe found that an investigator working on the case disclosed Sivere's information to J.P. Morgan's lawyers, violating the agency's confidentiality rules. The inspector general recommended that the SEC official who made the disclosure be referred for disciplinary action. None was taken, according to agency documents.
Retraining the Watchdog
Cohen, who is overhauling the SEC's whistleblower practices, said a database, jury-rigged from existing technology, will be in place this month to centralize all tips and complaints. Officials said that by the end of 2010, they hope to develop technology that would not only centralize the data but also automatically analyze them for patterns to help officials prioritize cases.
Currently, the SEC is setting procedures for responding to whistleblowers and is creating an office of market intelligence to coordinate how the agency's various units respond to tips.
The agency also wants to be able to reward whistleblowers, which it can only do now for insider-trading cases. The SEC has requested that Congress pass legislation giving it the ability to offer financial rewards to people who provide evidence of violations of securities law. ""
Source of Article
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/20/AR2010012005125_2.html
The SEC Gets Tips that Will inevitable Cost Shareholder Millions and they HAVE No System in place to really handle these tips, yet they act like they are taking in Tips and Handling them. The Iviewit Technologies Case will one day explode into Billions in Loss and the SEC has ignored the Eliot Bernstein SEC Complaint - and has know of the Involvement of Proskauer Rose way before the Standford Billions were lost. More on the Iviewit Stolen Patent and what Companies are affected go to http://www.deniedpatent.com/ and www.Iviewit.TV
Why is there no Accountability for the SEC Insiders that let these Billion Dollar Scams Happen then after the Scam and many innocent investors lose everything, the SEC insider gets a a Really Good Job at a high profile law firm. And no one seems to raise an eyebrow.
All these Billion Dollar Investment schemes seem to have the same thing in common. They have a Mega Law Firm behind them helping them, and the Law firms such as Proskauer Rose seem to have No Accountability for the Damage they due to investors.
In the Stanford investment Scandal SEC Sjoblom went to Proskauer Rose - talk about a conflict of Interest - Proskauer Rose seems to be behind a whole lot of these Billion Dollar Scams and they never seem to be held accountable.
In the Dreier Scandal there was Proskauer Rose LLP Attorney Sheila Gowan.
In the Madoff Scandal and there is said to a woman who fled the SEC to the Law Firm Proskauer Rose and that she is fingered all over the SEC report on Madoff failures.
So the SEC seems to hire these lawyers and let them run these scams and there seems to be no REAL regulators of any kind for the ones in place seem to be part of the organized RICO Enterprise of Criminal Lawyers and Law Firms and the US court System does not seem to be able to do anything about them.
Is the SEC Liable for Billions to Trillions of Investors money when it is Obviously, Easily proved that the SEC Ignored TIPS for Years upon Years in all these cases. Time to Sue the SEC. This Government Agent should not be above the law, it is as if they let this stuff go on - on Purpose for pay offs and cushy jobs... and year after year the same scheme plays out and no one seems to be able to bring Justice, Accountability, or Real Action from the SEC to do what the Duty of the SEC is....
Links
Sheila M. Gowan - Proskauer Rose - Iviewit
http://www.free-press-release.com/news-iviewit-trillion-fed-suit-defendant-proskauer-rose-sued-in-global-class-action-re-stanford-ponzi-1252249099.html
Standford - Proskauer Rose - Thomas Sjoblom
http://www.proskauersucks.com/2010/01/thomas-v-sjoblom-allen-stanford.html
Madoff - Proskauer Rose
http://www.proskauerrosesucks.com/2010/02/proskauer-rose-madoff-mary-shapiro-sec.html
Showing posts with label R. Allen Stanford. Show all posts
Showing posts with label R. Allen Stanford. Show all posts
Thursday, March 18, 2010
Sunday, January 3, 2010
Proskauer Rose Seems to Be In ALL the Big Scandals -
"Madoff, Dreier and Allen Stanford Ponzi Links to the Iviewit Affairs with proskauer all around.
At the heart of the unearthing of several of the largest financial scams in history, Bernard Madoff, Sir Allen Stanford and Marc S. Dreier, again we find the law firm Proskauer and their Iviewit referrals and co-conspirators such as Joao and other defendants in my lawsuit, central figures as indicated in the Crime Chart.
Again, perhaps these schemes are the money laundering schemes for the royalties from the stolen technologies, a place to park bribe money like Swiss bank accounts, perhaps including those recently involved in scandal with UBS whereby the names are soon to be released or just to hide the ill gained profits.
As you can imagine because my dreams and inventions have become realities for the world in transforming virtually all digital imaging and video applications, placing Multi-Media as a more important component of the digital world now than even the operating system, i.e. Microsoft’s Windows. Without the ability to play rich multi-media the operating system would have little use.
The amount of converted royalties generated from the technologies over the past decade, including invention of wholly new markets, is beyond imagination and had to be laundered somehow; recent scandals may provide the explanation.
The Sir Allen Stanford Financial Fraud and Ties to Proskauer
The Stanford Ponzi investigation may be the card that knocks down the house of cards at Proskauer. Uncovering of the $65 Billion Madoff Ponzi led the SEC & FBI to intensify investigations into Stanford; I quote the Times Online for the Committee,
‘Perhaps the most alarming is that Stanford Investment Bank has exposure to losses from the Madoff fraud scheme despite the bank's public assurance to the contrary’, said the SEC.
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5759709.ece
The Wall Street Journal reported that CFO of Stanford Financial Group, James Davis, also involved in the $7 Billion Ponzi, pled Guilty to Federal charges while appearing to implicate counsel Proskauer & Partner Thomas Sjoblom orchestrating a plan to Obstruct SEC & FBI investigations into Stanford & more. Further information reveals blood oaths between regulators and Stanford to conceal the fraud from regulatory agencies and Stanford’s possible involvement with the number one MEXICAN DRUG CARTEL with Proskauer dead center and alleged in the crimes and Cover-Up crimes.
I have submitted in my Prepared Statement links to the Wall Street Journal and other articles relating to these links for the Committees further review.
http://blogs.wsj.com/law/2009/08/28/sjoblom-proskauer-rose-face-fallout-from-stanford-affair/
Ironically, Sjoblom worked for the SEC & now is implicated in FBI & SEC actions, advising client Stanford employees on “how” to lie to the SEC and further obstructive acts. Huffington Post on Feb 20, 09 claims, Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford's company's Antigua affiliate, told authorities that he ‘disaffirmed’ everything he had told them to date...Sjoblom spent nearly 20 years at the SEC, & served as an Asst Chief Litigation Counsel in the SEC's Division of Enforcement from 1987-1999.
http://www.huffingtonpost.com/charles-h-green/mini-madoff-scandal-scale_b_168486.html
The Committee should note the close proximity of dates between the Iviewit inventions and Proskauer’s acquisition of Sjoblom.
The Bernard Madoff Financial Fraud and Ties to Proskauer
If I may read again into the record from Bloomberg on Jan 14, 09,
The week after Bernard Madoff was charged with running a $50 billion Ponzi scheme, Proskauer Rose…offered a telephone briefing on the scandal for its wealthy clients. With only a day’s notice, 1,300 Madoff investors dialed in. ‘This is a financial 9/11 for our clients’, said Proskauer litigation partner Gregg Mashberg…‘People are dying for information.’
http://www.bloomberg.com/apps/news?pid=20601103&sid=aO32KOhrPtRw&refer=us
Following the “client” call, investigations began into major “clients” involved in Madoff, Proskauer having perhaps the most Madoff “clients”, many who originally claimed to be victims may now be accomplice.
From Fox Business, I quote, SEC OIG delivered a stinging report on Madoff harshly criticizing lax regulators for overlooking the Madoff information from WHISTLEBLOWERS & others inside the SEC, for years. http://www.foxbusiness.com/story/markets/industries/government/report-set-criticize-sec-madoff-scheme/
Proskauer has further ties to Madoff according to TPM, in 2004 an SEC attorney, Genevievette Walker-Lightfoot, notified the SEC of the Ponzi but was forced out of her job, the SEC later settling a claim filed by Lightfoot. Upon termination, Lightfoot turned over the Madoff file to Jacqueline Wood who then presumably buried the report that could have exposed the Ponzi in 04. The SEC OIG’s 477 page report mentions Wood of Proskauer throughout the entire report as a key figure in the regulatory failures, along with possible collusion of Madoff family members who married into the SEC. http://www.sec.gov/news/studies/2009/oig-509.pdf
TPM reports that after leaving the SEC, Wood took a Proskauer Partnership and I submit linkage for this Committee’s review in my Prepared Statement @ TPM @ http://tpmcafe.talkingpointsmemo.com/talk/blogs/mrs_panstreppon/2009/07/bernie-madoff-sec-investigator.php?ref=reccafe .
According to Memphis Daily News, Laura Pendergest-Holt ( Wood ), Stanford’s CIO, criminally charged in the Stanford investigation, then filed a civil suit against Proskauer & Sjoblom claiming they “hung her out to dry” before the SEC.
Meanwhile, Sjoblom solicited a multi-million dollar retainer from now arrested Stanford Chairman, Allen Stanford, the night before the events with Holt took place at the SEC. http://www.memphisdailynews.com/editorial/Article.aspx?id=41707
The Wall Street Journal reports filing of a Class Action suit against Sjoblom & Proskauer in TX after Davis’ incriminating plea agreement implicating Proskauer, the Class Action seeking damages for the entire $7 Billion under TX Law in damages for Proskauer’s role Aiding & Abetting the Stanford Ponzi, I quote the Wall Street Journal Legal Blog by Amir Efrati,
The suit, filed in federal court in Dallas, says Sjoblom and Proskauer Rose are liable for $7 billion in damages for aiding and abetting Stanford’s alleged fraud…The civil suit is largely based on a plea agreement that we mentioned in this post yesterday, which focuses in part on the alleged actions of Sjoblom, who became outside counsel for Stanford’s international bank based in Antigua in the Caribbean starting in 2005.
http://blogs.wsj.com/law/2009/08/28/sjoblom-proskauer-rose-face-fallout-from-stanford-affair/
The Marc S. Dreier Financial Fraud and Ties to the Proskauer Law Firm
Another defendant in the Iviewit Lawsuit, convicted felon Marc S. Dreier, found orchestrating yet another bizarre Ponzi and in the Dreier scheme, we find yet again another former Proskauer Partner, Sheila M. Gowan, now acting as bankruptcy trustee in the suit as reported by the Wall Street Journal, attached to my Prepared Statement.
http://blogs.wsj.com/law/2009/01/02/former-ausa-selected-as-bankruptcy-trustee-in-dreier-case.
As already mentioned herein, Raymond Joao, the rival to Edison with patent applications dated in 1900, perhaps even claiming he invented electricity prior to Edison, then left Meltzer to Dreier, impersonating me as the inventor of my technologies.
It is fitting to note, or joke, here that Dreier was also caught in his scheme using fake and fraudulent names and representations of himself fraudulently impersonating others while trying to Launder stolen money into Canada.
It is known that during that time Raymond Joao made several deals and sales regarding inventions in his name, although details remain sketchy and under investigation.
http://74.125.155.132/search?q=cache:ktIVkVh6K68J:www.iviewit.tv/20091005%2520NY%2520Judiciary%2520Committee%2520Prepared%2520Statement.doc+site://www.iviewit.tv+question&cd=2&hl=en&ct=clnk&gl=us
Scandals
www.DeniedPatent.com
Proskauer
At the heart of the unearthing of several of the largest financial scams in history, Bernard Madoff, Sir Allen Stanford and Marc S. Dreier, again we find the law firm Proskauer and their Iviewit referrals and co-conspirators such as Joao and other defendants in my lawsuit, central figures as indicated in the Crime Chart.
Again, perhaps these schemes are the money laundering schemes for the royalties from the stolen technologies, a place to park bribe money like Swiss bank accounts, perhaps including those recently involved in scandal with UBS whereby the names are soon to be released or just to hide the ill gained profits.
As you can imagine because my dreams and inventions have become realities for the world in transforming virtually all digital imaging and video applications, placing Multi-Media as a more important component of the digital world now than even the operating system, i.e. Microsoft’s Windows. Without the ability to play rich multi-media the operating system would have little use.
The amount of converted royalties generated from the technologies over the past decade, including invention of wholly new markets, is beyond imagination and had to be laundered somehow; recent scandals may provide the explanation.
The Sir Allen Stanford Financial Fraud and Ties to Proskauer
The Stanford Ponzi investigation may be the card that knocks down the house of cards at Proskauer. Uncovering of the $65 Billion Madoff Ponzi led the SEC & FBI to intensify investigations into Stanford; I quote the Times Online for the Committee,
‘Perhaps the most alarming is that Stanford Investment Bank has exposure to losses from the Madoff fraud scheme despite the bank's public assurance to the contrary’, said the SEC.
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5759709.ece
The Wall Street Journal reported that CFO of Stanford Financial Group, James Davis, also involved in the $7 Billion Ponzi, pled Guilty to Federal charges while appearing to implicate counsel Proskauer & Partner Thomas Sjoblom orchestrating a plan to Obstruct SEC & FBI investigations into Stanford & more. Further information reveals blood oaths between regulators and Stanford to conceal the fraud from regulatory agencies and Stanford’s possible involvement with the number one MEXICAN DRUG CARTEL with Proskauer dead center and alleged in the crimes and Cover-Up crimes.
I have submitted in my Prepared Statement links to the Wall Street Journal and other articles relating to these links for the Committees further review.
http://blogs.wsj.com/law/2009/08/28/sjoblom-proskauer-rose-face-fallout-from-stanford-affair/
Ironically, Sjoblom worked for the SEC & now is implicated in FBI & SEC actions, advising client Stanford employees on “how” to lie to the SEC and further obstructive acts. Huffington Post on Feb 20, 09 claims, Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford's company's Antigua affiliate, told authorities that he ‘disaffirmed’ everything he had told them to date...Sjoblom spent nearly 20 years at the SEC, & served as an Asst Chief Litigation Counsel in the SEC's Division of Enforcement from 1987-1999.
http://www.huffingtonpost.com/charles-h-green/mini-madoff-scandal-scale_b_168486.html
The Committee should note the close proximity of dates between the Iviewit inventions and Proskauer’s acquisition of Sjoblom.
The Bernard Madoff Financial Fraud and Ties to Proskauer
If I may read again into the record from Bloomberg on Jan 14, 09,
The week after Bernard Madoff was charged with running a $50 billion Ponzi scheme, Proskauer Rose…offered a telephone briefing on the scandal for its wealthy clients. With only a day’s notice, 1,300 Madoff investors dialed in. ‘This is a financial 9/11 for our clients’, said Proskauer litigation partner Gregg Mashberg…‘People are dying for information.’
http://www.bloomberg.com/apps/news?pid=20601103&sid=aO32KOhrPtRw&refer=us
Following the “client” call, investigations began into major “clients” involved in Madoff, Proskauer having perhaps the most Madoff “clients”, many who originally claimed to be victims may now be accomplice.
From Fox Business, I quote, SEC OIG delivered a stinging report on Madoff harshly criticizing lax regulators for overlooking the Madoff information from WHISTLEBLOWERS & others inside the SEC, for years. http://www.foxbusiness.com/story/markets/industries/government/report-set-criticize-sec-madoff-scheme/
Proskauer has further ties to Madoff according to TPM, in 2004 an SEC attorney, Genevievette Walker-Lightfoot, notified the SEC of the Ponzi but was forced out of her job, the SEC later settling a claim filed by Lightfoot. Upon termination, Lightfoot turned over the Madoff file to Jacqueline Wood who then presumably buried the report that could have exposed the Ponzi in 04. The SEC OIG’s 477 page report mentions Wood of Proskauer throughout the entire report as a key figure in the regulatory failures, along with possible collusion of Madoff family members who married into the SEC. http://www.sec.gov/news/studies/2009/oig-509.pdf
TPM reports that after leaving the SEC, Wood took a Proskauer Partnership and I submit linkage for this Committee’s review in my Prepared Statement @ TPM @ http://tpmcafe.talkingpointsmemo.com/talk/blogs/mrs_panstreppon/2009/07/bernie-madoff-sec-investigator.php?ref=reccafe .
According to Memphis Daily News, Laura Pendergest-Holt ( Wood ), Stanford’s CIO, criminally charged in the Stanford investigation, then filed a civil suit against Proskauer & Sjoblom claiming they “hung her out to dry” before the SEC.
Meanwhile, Sjoblom solicited a multi-million dollar retainer from now arrested Stanford Chairman, Allen Stanford, the night before the events with Holt took place at the SEC. http://www.memphisdailynews.com/editorial/Article.aspx?id=41707
The Wall Street Journal reports filing of a Class Action suit against Sjoblom & Proskauer in TX after Davis’ incriminating plea agreement implicating Proskauer, the Class Action seeking damages for the entire $7 Billion under TX Law in damages for Proskauer’s role Aiding & Abetting the Stanford Ponzi, I quote the Wall Street Journal Legal Blog by Amir Efrati,
The suit, filed in federal court in Dallas, says Sjoblom and Proskauer Rose are liable for $7 billion in damages for aiding and abetting Stanford’s alleged fraud…The civil suit is largely based on a plea agreement that we mentioned in this post yesterday, which focuses in part on the alleged actions of Sjoblom, who became outside counsel for Stanford’s international bank based in Antigua in the Caribbean starting in 2005.
http://blogs.wsj.com/law/2009/08/28/sjoblom-proskauer-rose-face-fallout-from-stanford-affair/
The Marc S. Dreier Financial Fraud and Ties to the Proskauer Law Firm
Another defendant in the Iviewit Lawsuit, convicted felon Marc S. Dreier, found orchestrating yet another bizarre Ponzi and in the Dreier scheme, we find yet again another former Proskauer Partner, Sheila M. Gowan, now acting as bankruptcy trustee in the suit as reported by the Wall Street Journal, attached to my Prepared Statement.
http://blogs.wsj.com/law/2009/01/02/former-ausa-selected-as-bankruptcy-trustee-in-dreier-case.
As already mentioned herein, Raymond Joao, the rival to Edison with patent applications dated in 1900, perhaps even claiming he invented electricity prior to Edison, then left Meltzer to Dreier, impersonating me as the inventor of my technologies.
It is fitting to note, or joke, here that Dreier was also caught in his scheme using fake and fraudulent names and representations of himself fraudulently impersonating others while trying to Launder stolen money into Canada.
It is known that during that time Raymond Joao made several deals and sales regarding inventions in his name, although details remain sketchy and under investigation.
http://74.125.155.132/search?q=cache:ktIVkVh6K68J:www.iviewit.tv/20091005%2520NY%2520Judiciary%2520Committee%2520Prepared%2520Statement.doc+site://www.iviewit.tv+question&cd=2&hl=en&ct=clnk&gl=us
Scandals
www.DeniedPatent.com
Proskauer
Monday, December 7, 2009
Former Stanford CFO: Firm Had Blood Oaths, Bribes, Fake Profits
"HOUSTON (AP) -- The former finance chief for jailed Texas financier R. Allen Stanford said his boss created a business empire where blood oaths were taken to secure loyalty, bribes were paid from a secret Swiss bank account and investor profits were more fiction than financial genius.
New details about how Stanford allegedly bilked investors out of $7 billion were made public Thursday after James M. Davis, Stanford's former chief financial officer, became the first person to plead guilty in the case.
Davis pleaded guilty in Houston federal court to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. The plea is part of a deal Davis, who has been helping prosecutors, made with the Justice Department in exchange for a possible reduced sentence.
His plea came hours after Stanford was taken from the privately run prison where he is being held outside Houston to a local hospital with an irregular heartbeat and high pulse. Stanford had been set to appear in the same courtroom for a hearing on whether he can get a new attorney. U.S. Marshals spokesman Alfredo Perez said Stanford was undergoing tests at the hospital but declined to give more details.
Davis, 60, only made a brief statement after his hearing.
"I did wrong. I'm sorry. I apologize. I take responsibility for my actions," he told reporters outside the courthouse.
But Davis' 23-page plea agreement provided new details of how Stanford's business began; how he, Stanford and others manufactured profits; and how panic set in as they tried to hold off federal investigators who were closing in on their scheme.
Stanford, Davis and other executives of the now defunct Houston-based Stanford Financial Group are accused of orchestrating a massive Ponzi scheme by advising clients to invest more than $7 billion in certificates of deposit from the Stanford International Bank in the Caribbean island of Antigua.
Investors were promised their investments were safe and were scrutinized by Antigua's bank regulator and an independent auditor.
Stanford claimed higher rates of return on his CDS than those offered by commercial banks in the U.S. and consistent double-digit returns on his bank's investment portfolio.
But Davis said in the court documents that the bank's balance sheets were made up and the work of "reverse engineering."
"Stanford was insistent that (the bank) appear to show a profit each year. Stanford and Davis would collaborate to select a false revenue number ... Stanford, Davis (and other conspirators) would then use the 'budgeted' numbers to develop falsely inflated revenue numbers which would be claimed as the 'actual' revenue numbers to generate the desired Return on Investment," according to the plea agreement.
Asked why Davis defrauded investors for years, David Finn, his attorney, said it was greed.
To protect his scheme, Stanford paid more than $200,000 in bribes, as well as $8,000 for two tickets to the Super Bowl in Houston in 2004, to Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission or FSRC.
King has also been indicted with Stanford and is awaiting extradition to the United States.
Davis said Stanford secured King's loyalty in a most unusual way.
"Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC ... This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of" the bank," according to the plea agreement.
Stanford had Davis get the bribe money from a secret Swiss bank account that was funded by investors' money. The account was also used to make bribes to the bank's outside auditor.
When the U.S. Securities and Exchange Commission began investigating Stanford's bank and contacted King by letter in 2005 and 2006 about its probe, Stanford and others in his company helped King write false and misleading response letters.
"King appeared very stressed. King related that he had again been contacted by the SEC. King asked Davis if 'we were going to make it?' which meant whether the fraud they had been engaged in was going to be exposed. Davis informed King that he thought they were going to be OK," according to the plea agreement.
By mid-2008, Stanford, Davis and other conspirators were "desperately seeking a fraudulent mechanism whereby they could artificially inflate (the bank's) assets" and hide that Stanford had used $2 billion of investor money to make loans to himself, said the plea agreement.
They came up with a bogus real estate deal that falsely inflated a $65 million real estate sale in Antigua into a $3.2 billion bank asset.
By January 2009, the SEC had served subpoenas to Davis, Stanford and other executives about the bank's CD investments.
In February, Davis, Stanford, company lawyers and other executives met in Miami to discuss testimony that Chief Investment Officer Laura Pendergest-Holt and another executive would give to the SEC. At that meeting, Davis revealed that 80 percent of the bank's investment portfolio was made up of grossly overvalued real estate and of $1.6 billion in loans to Stanford, meaning the bank was insolvent.
Stanford at first said the bank had more assets and liabilities but later in private "acknowledged that (the bank's) assets and financial health had been misrepresented to investors and were overstated in (the bank's) financials," according to the plea agreement.
Davis faces up to 30 years in prison when he is sentenced. While a sentencing date of Nov. 20 was set, Finn said he believes that will be delayed.
As part of his plea agreement, Davis was also ordered to forfeit $1 billion in proceeds he made from his illegal actions, although there's little hope Davis can ever retrieve the funds.
Finn said authorities have seized all his client's assets and Davis, who had made between $5 million and $6 million in the last decade, is broke and now doing manual labor on a relative's farm in Michigan, making $10 an hour.
Hittner postponed a hearing scheduled for Thursday in which he would hear arguments about Stanford's legal representation. DeGuerin has asked for permission to quit the case because he doesn't have assurances he will be paid.
Stanford was considered one of the richest men in the U.S. with an estimated net worth of more than $2 billion. But he claims he is now penniless.
Stanford, along with three former company executives, have pleaded not guilty to various charges, including wire and mail fraud, in a 21-count indictment issued June 18. Stanford has been jailed without bond since then, considered a flight risk by Hittner.
http://www.huffingtonpost.com/2009/08/27/former-stanford-cfo-firm_n_270789.html?show_comment_id=29939237#comment_29939237
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New details about how Stanford allegedly bilked investors out of $7 billion were made public Thursday after James M. Davis, Stanford's former chief financial officer, became the first person to plead guilty in the case.
Davis pleaded guilty in Houston federal court to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. The plea is part of a deal Davis, who has been helping prosecutors, made with the Justice Department in exchange for a possible reduced sentence.
His plea came hours after Stanford was taken from the privately run prison where he is being held outside Houston to a local hospital with an irregular heartbeat and high pulse. Stanford had been set to appear in the same courtroom for a hearing on whether he can get a new attorney. U.S. Marshals spokesman Alfredo Perez said Stanford was undergoing tests at the hospital but declined to give more details.
Davis, 60, only made a brief statement after his hearing.
"I did wrong. I'm sorry. I apologize. I take responsibility for my actions," he told reporters outside the courthouse.
But Davis' 23-page plea agreement provided new details of how Stanford's business began; how he, Stanford and others manufactured profits; and how panic set in as they tried to hold off federal investigators who were closing in on their scheme.
Stanford, Davis and other executives of the now defunct Houston-based Stanford Financial Group are accused of orchestrating a massive Ponzi scheme by advising clients to invest more than $7 billion in certificates of deposit from the Stanford International Bank in the Caribbean island of Antigua.
Investors were promised their investments were safe and were scrutinized by Antigua's bank regulator and an independent auditor.
Stanford claimed higher rates of return on his CDS than those offered by commercial banks in the U.S. and consistent double-digit returns on his bank's investment portfolio.
But Davis said in the court documents that the bank's balance sheets were made up and the work of "reverse engineering."
"Stanford was insistent that (the bank) appear to show a profit each year. Stanford and Davis would collaborate to select a false revenue number ... Stanford, Davis (and other conspirators) would then use the 'budgeted' numbers to develop falsely inflated revenue numbers which would be claimed as the 'actual' revenue numbers to generate the desired Return on Investment," according to the plea agreement.
Asked why Davis defrauded investors for years, David Finn, his attorney, said it was greed.
To protect his scheme, Stanford paid more than $200,000 in bribes, as well as $8,000 for two tickets to the Super Bowl in Houston in 2004, to Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission or FSRC.
King has also been indicted with Stanford and is awaiting extradition to the United States.
Davis said Stanford secured King's loyalty in a most unusual way.
"Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC ... This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of" the bank," according to the plea agreement.
Stanford had Davis get the bribe money from a secret Swiss bank account that was funded by investors' money. The account was also used to make bribes to the bank's outside auditor.
When the U.S. Securities and Exchange Commission began investigating Stanford's bank and contacted King by letter in 2005 and 2006 about its probe, Stanford and others in his company helped King write false and misleading response letters.
"King appeared very stressed. King related that he had again been contacted by the SEC. King asked Davis if 'we were going to make it?' which meant whether the fraud they had been engaged in was going to be exposed. Davis informed King that he thought they were going to be OK," according to the plea agreement.
By mid-2008, Stanford, Davis and other conspirators were "desperately seeking a fraudulent mechanism whereby they could artificially inflate (the bank's) assets" and hide that Stanford had used $2 billion of investor money to make loans to himself, said the plea agreement.
They came up with a bogus real estate deal that falsely inflated a $65 million real estate sale in Antigua into a $3.2 billion bank asset.
By January 2009, the SEC had served subpoenas to Davis, Stanford and other executives about the bank's CD investments.
In February, Davis, Stanford, company lawyers and other executives met in Miami to discuss testimony that Chief Investment Officer Laura Pendergest-Holt and another executive would give to the SEC. At that meeting, Davis revealed that 80 percent of the bank's investment portfolio was made up of grossly overvalued real estate and of $1.6 billion in loans to Stanford, meaning the bank was insolvent.
Stanford at first said the bank had more assets and liabilities but later in private "acknowledged that (the bank's) assets and financial health had been misrepresented to investors and were overstated in (the bank's) financials," according to the plea agreement.
Davis faces up to 30 years in prison when he is sentenced. While a sentencing date of Nov. 20 was set, Finn said he believes that will be delayed.
As part of his plea agreement, Davis was also ordered to forfeit $1 billion in proceeds he made from his illegal actions, although there's little hope Davis can ever retrieve the funds.
Finn said authorities have seized all his client's assets and Davis, who had made between $5 million and $6 million in the last decade, is broke and now doing manual labor on a relative's farm in Michigan, making $10 an hour.
Hittner postponed a hearing scheduled for Thursday in which he would hear arguments about Stanford's legal representation. DeGuerin has asked for permission to quit the case because he doesn't have assurances he will be paid.
Stanford was considered one of the richest men in the U.S. with an estimated net worth of more than $2 billion. But he claims he is now penniless.
Stanford, along with three former company executives, have pleaded not guilty to various charges, including wire and mail fraud, in a 21-count indictment issued June 18. Stanford has been jailed without bond since then, considered a flight risk by Hittner.
http://www.huffingtonpost.com/2009/08/27/former-stanford-cfo-firm_n_270789.html?show_comment_id=29939237#comment_29939237
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It is All Coming to the Light ...
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