Federal authorities are considering whether to prosecute a former securities regulator in Fort Worth who repeatedly quashed investigations of R. Allen

WASHINGTON – Federal authorities are considering whether to prosecute a former securities regulator in Fort Worth who repeatedly quashed investigations of R. Allen Stanford's offshore banking empire.

Securities and Exchange Commission Inspector General David Kotz reported earlier this year that Spencer C. Barasch had “a significant role” in decisions not to formally investigate Stanford, who the SEC has since accused of running an $8 billion Ponzi scheme.

Kotz told lawmakers Wednesday that his office has “had discussions with criminal authorities about whether there would be any criminal action arising because of that.”

Kotz's report, issued earlier this year, also said that Barasch later represented Stanford despite ethics laws against doing so.

Under questioning from Sen. Jim Bunning, R-Ky., Kotz said he'd learned the SEC would ask the State Bar of Texas to investigate Barasch for disciplinary violations.

“If you don't get the Justice Department involved in this, shame on you as the inspector general,” Bunning said. "That, to me, is criminal negligence. And the sooner they get him before a U.S. court, the better I will like it."

Officials at Barasch's law firm, Andrews Kurth, couldn't immediately be reached for comment.

Kotz delivered his testimony during a hearing of the Senate Banking Committee that examined how the SEC's Fort Worth office missed several opportunities to stop Stanford's alleged scheme before it grew larger.

SEC officials said they would implement all of Kotz's recommendations, including increasing coordination between the SEC's examiners and enforcement staff.

The inspector general's report said that SEC examiners in Fort Worth suspected as early as 1997 that Stanford was probably operating a massive Ponzi scheme through certificates of deposit marketed to Americans and investors in other countries.

However, the Fort Worth enforcement staff didn't formally investigate those concerns until 2006, by which time the amount invested in Stanford's CDs had grown much larger.

In Feb. 2009, the SEC accused Stanford and three of his firms of fraud and other securities violations for operating a “massive Ponzi scheme” estimated at $8 billion. The Justice Department also has filed criminal charges against an Antiguan banking regulator who allegedly conspired with Stanford to obstruct SEC investigations over the years.

Rose Romero, the director of the SEC's Fort Worth division, told lawmakers Wednesday that the SEC has notified other Stanford executives and financial advisers “that we intend to recommend fraud charges against them.”