Stanford's donations still stain lawmakers' hands

American Lawmakers Hypocrisy

These so-called lawmakers should make sure their hands are clean before coming to the table. It would appear that in this situation they all forget to wash.

They should be putting their own house in order before making demands on SIPC and making sure that they - and every other US politician who benefited from Stanford's generosity (with the money he stole from his victims) - pay back the stolen funds.

Could it be that these US politicians think that if they can get SIPC paid out (mostly to the American victims) the whole situation will die down and the pressure will be off them to do the right thing? Because let's face it not one of these "lawmakers" gives a fig about the International Victims whose stolen money they so readily took and now refuse to return, and not one of these politicians have mentioned that apart from the 4,000 US victims, there are another 20,000+ International victims who they do not fight for.

Then again, the International Victims can't be counted on to vote for them, so why should these political hypocrites bother about spending the International Victims stolen money while they sit on their fat backsides in Washington??


By LOREN STEFFY, HOUSTON CHRONICLE
Published 07:31 p.m., Thursday, December 8, 2011

In the battle over insurance coverage for investors who lost money in the collapse of Stanford Financial's U.S. brokerage, it's difficult to know who's on investors' side.

Recently, 27 lawmakers sent a letter to the Securities Investor Protection Corp., which is funded by the brokerage industry and overseen by the government, demanding that SIPC cover investors for their losses. SIPC granted similar coverage to clients of Bernard Madoff and the recently bankrupted commodities trader MF Global.

The 23 Republicans and four Democrats threatened to convene hearings in Washington next week if SIPC didn't act.

That, apparently, is easier than living up to their own shortcomings.

Seven of the lawmakers who signed the letter received campaign contributions from Stanford. Only two - Rep. Michael McCaul, R-Austin, and Rep. Rep. Charles Boustany, R-La. - returned the money. Five others - Republicans Pete Sessions of Dallas, Lamar Smith of San Antonio and Vern Buchanan and Ileana Ros-Lehtinen of Florida, as well as Democrat Steve Cohen of Tennessee - owe Stanford's estate money, according to the court-appointed receiver in the company's bankruptcy.

The firm's namesake, R. Allen Stanford, liked to spread cash around Washington. The receiver has been trying to recover political donations for almost two years. About $1.8 million remains outstanding, and only about $142,000, has been returned.

Even more disturbing, five committees of the two political parties - the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the National Republican Congressional Committee, the Republican National Committee and the National Republican Senatorial Committee - have refused to return a combined $1.6 million.

In other words, while lawmakers are quick to call on the brokerage industry to insure the losses of Stanford's investors, they are far less willing to demand the same of themselves or their political parties.

Many of the elected officials who received campaign contributions from Stanford - including both Texas senators and Sessions - donated them to charity. That, however, doesn't let the politicians off the hook.

If Stanford was a fraud as the government contends, then the money is stolen. Donating stolen money doesn't eliminate the potential theft. Even if no theft is proved, the receiver is operating under a court order to recover money on behalf of investors, and donating it doesn't absolve lawmakers of the court's order.

Meanwhile, the Securities and Exchange Commission, which is charged with overseeing SIPC, ordered the fund to pay investors in June. So far, it hasn't. As recently as last week, SIPC's chairman sent a letter to one member of Congress saying SIPC disagrees with the SEC's decision.

Sen. David Vitter, R-La., had been trying to arrange some sort of settlement between the SEC and SIPC. Those efforts apparently fell through.

"The SEC needs to take definite action before the end of the year, and I'm afraid that's going to mean suing SIPC," he told SEC Chairman Mary Schapiro.

The SEC, of course, is making up for past mistakes. Having bungled earlier investigations into Stanford, it then took more than two years to reach a decision on SIPC coverage.

It may be getting tough now, but suing SIPC means investors, who have been strung along for almost three years, must wait even longer to find out if their losses are covered. Sadly, in this case, that's progress.

Revolving door between SEC, law firms spins at dizzying speed

SEC Chairman Mary Schapiro testifies at Congressional hearing in 2010. Evan Vucci/The Associated Press

New database shows more than 200 ex-SEC staff appeared at agency on behalf of corporate clients

When the Securities and Exchange Commission accused Eric Sieracki of securities fraud in 2009, the former Countrywide Financial executive did what many others in trouble with Wall Street’s top cop have done: He hired a former SEC lawyer to defend him.

Between 2006 and 2010, at least 219 former SEC staff appeared before their former agency on behalf of private-sector clients in 800 different matters, according to a new database created by the Project on Government Oversight (POGO) and shared with iWatch News . POGO obtained copies of the ex-SEC employees’ disclosure forms through a Freedom of Information Act request.

Senior SEC officials – particularly those from the enforcement division – have long been able to count on finding a home at a private law firm with a hefty raise after a few years of government service. The new POGO data gives the clearest picture yet of just how much corporate America relies on former SEC staff to handle its legal work before the agency.

Sieracki’s lawyer, Nicolas Morgan at the law firm DLA Piper, has been one of the busiest.

From 1998 to 2005, Morgan held several jobs within the SEC’s enforcement division, including senior trial counsel. From 2006 to 2008, the disclosure forms show that he represented 17 clients in matters before his former employer.

Morgan didn’t respond to a request for comment. In 2010, Sieracki agreed to pay $130,000 to settle the SEC’s case.

The only former SEC lawyer to work on more cases involving the agency was Walter Ricciardi, a former deputy director of enforcement now at the firm Paul, Weiss, Rifkind, Wharton & Garrison. He filed 20 statements in 2009 and 2010, the two years after he left the SEC, according to the database.

In some cases, SEC staffers were barely out the door before telling the agency they would be back to represent private clients.

John Ivascu left his job as a staff attorney in the enforcement division on Jan. 2, 2006. Three days later, he petitioned to represent a client before the agency in a matter involving a financial restatement, the database showed.

Who was that client? As in the overwhelming majority of disclosure forms, the SEC redacted the client’s name.

Some ex-employees failed to file disclosures

The disclosure forms are required by the SEC for all former employees who appear before the agency in the first two years after leaving. They are meant to guard against a former employee from taking a case related to one he or she worked on while at the agency.

But POGO identified several instances where former employees appeared before the agency within the two-year time frame without filing a disclosure.

The most notable was Spencer Barasch, a former assistant director of enforcement in the SEC’s Fort Worth regional office until he left in April 2005 to join the law firm Andrews Kurth.

According to the SEC’s inspector general, while Barasch was still at the SEC, he played a big part in delaying and limiting the agency’s investigation of the $8 billion Ponzi scheme orchestrated by Allen Stanford. After leaving the SEC, Barasch repeatedly attempted to represent Stanford in connection with the regulator’s investigation, even though he was told by the agency’s ethics office that his previous involvement with the Stanford investigation prohibited him from doing so.

Nonetheless, the internal watchdog’s reported that in September 2006—well within two years of his departure—Stanford hired Barasch to “represent it in connection with the SEC’s investigation of Stanford.”

Barasch, who was not available for comment, never filed a disclosure form.

The SEC inspector general, David Kotz, criticized Barasch in written testimony prepared for a congressional hearing Friday about the Stanford fraud.

After the SEC’s ethics office told Barasch in 2009 a third time that he could not represent Stanford, Barasch became upset, Kotz said in his prepared testimony. “When asked during our [inspector general] investigation why he was so insistent on 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’.”

POGO also identified several former SEC staff who noted in their disclosure letters that they had some involvement with a related matter during their time at the agency. In those instances, the employees discussed the matter with an SEC ethics officer and were told they could carry on with the representation.

The job cycle that routinely has former SEC staff appearing in cases back before the regulator within days and weeks of leaving has attracted increased scrutiny from Congress and the SEC’s own inspector general.

Revolving door

One frequent critic of the SEC’s revolving door, Republican Sen. Charles Grassley of Iowa, said the new POGO database shows that restrictions on ex-government workers from other departments “must be made to apply to the financial regulatory agencies. “

“Along with the restrictions, there should be public disclosure of where these former financial regulators are working and what issues they are working on,” Grassley said in an emailed statement. “Transparency is a proven back-stop to enforce ethics rules.”

Last summer, Grassley, then the top Republican on the Senate Finance Committee, asked the SEC inspector general to review the departure of Elizabeth King, an associate director in the SEC’s markets division, who left for the high-frequency trading firm Getco LLC. The lawmaker said the probe was needed so Congress “can more accurately assess the integrity of the SEC’s operations.”

In a June 15, 2010 letter responding to Grassley’s request, Kotz revealed that he was already investigating the SEC’s revolving door policy. iWatch News previously reported that the Washington law firm WilmerHale, and its star, William McLucas, who chairs the securities group there, was a likely target.

McLucas left the agency long ago, and is not required to file disclosure forms. Indeed, it is very likely that POGO’s four-year database identifies just a small percentage of all former SEC staff who regularly appear before the agency.

The Government Accountability Office, the watchdog arm of Congress, is also looking at the revolving door issue at the SEC, with a report due in July.

The SEC did not respond to an iWatch News request for comment. But in testimony during her confirmation hearing in January 2009, Chairman Mary Schapiro indicated a willingness to address the revolving door issue.

Schapiro said then that the SEC must seek to avoid the conflicts created by these employees “walking out the door and going to a firm and leaving everybody to wonder whether they showed some favor to that firm during their time at the SEC.”

SEC Chief Won't Offer Any False Hopes

Mary Schapiro had this to say after running the Securities and Exchange for more than two years: "I'd like to move beyond the question of whether regulation is necessary."

This is the woman who President Obama hired to clean up rampant financial fraud.

This is the regulator who was to inspire confidence following the worst economic crisis since the Great Depression.

This is the pit bull who was to build shattered trust after the SEC blatantly ignored warnings about Ponzi schemer Bernie Madoff and missed so many other white-collar schemes.

But Schapiro went to Dallas last week to tell a bunch of business editors and writers that she wishes she wouldn't have to argue about whether regulation is even necessary.

"The idea that regulation is per se counterproductive, the idea that it is always a net negative, stands reality on its head," she said at an annual conference of the Society of American Business Editors and Writers, or Sabew.

"We have seen over the years what happens when financial markets are poorly regulated--they are prone to crashes, runs, manipulation and fraud. Investors are left unprotected, market structures become unstable and businesses are poorly served."

"This happens over and over again. And yet, despite these lessons, even basic, common-sense regulations are too often bitterly contested affairs."

This reminded me of the time Officer Friendly came to my kindergarten class to explain why we need traffic lights and crossing guards.

Imagine an Attorney General having to defend the existence of drug laws. Or an Army General having to justify guns?

Schapiro is supposed to be the nation's top cop on white-collar crimes, and this is how far she has come?

"Too often, in our discussion about financial reform, advocates have taken extreme positions--that all regulation is intrinsically bad, or inherently good."

Yes, just turn on the TV. Free market, good. Regulation, bad. But when regulators chime into this very simplistic discussion, they allow their opponents to frame all the arguments.

This is especially disappointing following Shapiro's remarks before Sabew in April 2009 in Denver, Colo., where she took questions targeting her agency's absentee-landlord approach to regulation.

"In the short time I've been chairman, I have begun efforts to revitalize the agency," she said then. "I have let it be known far and wide that things must change."

But what has changed? Executives still pay the SEC millions for the privilege of stealing billions, typically without admitting guilt.

And now Schapiro is crying poverty. The SEC could be self-funded through the fees it raises, yet it must go to Congress each year to plead for an annual appropriation.

Last year, it collected nearly $1.5 billion in fees, but received a $1.1 billion appropriation. Schapiro wants to up that to $1.4 billion to hire 780 more people to boost the agency's enforcement efforts and carry out new Dodd-Frank financial reforms. Without the increase, it'll be the same sad story.

"We can get the rules written," Schapiro said. "What we are not going to be able to do is operationalize them."

Republicans in Congress have had an easy time smacking down Schapiro for the SEC's missteps leading up to the financial crisis. Gut the agency. Then complain about its incompetence. It's the American way.

But Schapiro has given her opponents plenty of new ammunition. One example, she's had to explain David Becker, her agency's former top legal counsel. Becker worked on compensation issues for Madoff victims, even though he inherited a Madoff account from his late mother.

Schapiro also leased a million square feet of office space last July for the expanded agency she envisioned. But she did this without first securing the funds from Congress. Now, she's subleasing the space as fast as she can, and much of her new digs remain vacant.

This gives Republicans another chance to bring up one of their favorite topics: government waste.

The worst of it, though, is that instead of being a hard-bitten regulator, Schapiro has apparently become an apologist for regulations.

"Admittedly, individual regulations can be ill- or well-conceived, effective or ineffective," she said. "They impact market participants in different ways; costs and benefits can be hard to measure; and balancing competing interests is a delicate task. And, naturally, those who fear their profits will suffer may decide to fight even the most meaningful reform."

What does Schapiro hope to achieve in parroting the most cliche" sound bytes of her critics, besides her next inside-the-beltway job?

"Where we see the greatest risk to the investing public, that's where we will put our resources," Schapiro said. "We also need to be transparent about what we are not doing so there's not a false sense of comfort that the SEC isn't everywhere, when clearly we won't be."

What Did SEC Learn After Failing to Take Down Stanford Earlier? Um, It Did the Best It Could?

We mentioned this morning that Securities and Exchange Commission Chairman Mary Schapiro was in town speaking to business journalists gathered on the SMU campus. Turns out, during her speech she mentioned something that rings a bell: The failure of the Fort Worth office to shut down Allen Stanford's Ponzi scheme years before the feds finally took action. As you may recall, investors swindled by Pete Sessions's pal filed suit against the SEC only weeks ago in Dallas federal court. We'll get back to that in a second.

Anyway. Said Schapiro, who took the gig in late 2008: What we had here was a failure to communicate. Or, more specifically, the proverbial ball was dropped because of "escalating issues. It was about training our people. It's about how do you focus on what's important and what presents risks to investors, rather than what gets us numbers in the column of examinations done."

Now, back to that suit. With a tip of the cap to Bloomberg News, you'll find on the other side the SEC's motion to dismiss the litigation brought by those who blame the feds -- and, very specifically, Dallas attorney Spencer Barasch, a former SEC enforcement chief in Fort Worth who did some work for Stanford -- for allowing their money to go adios. It was filed yesterday at the Earle Cabell, and long story short, the SEC says, tough, that's the way investigations go:

Federal securities laws give the SEC broad discretion in deciding whether to investigate possible violations and, when wrongdoing is suspected, take enforcement action. This discretion is subject to important policy considerations, including how to best use limited agency resources to enforce the nation's securities laws. The discretionary function exception therefore bars Plaintiffs' claims.

DartezvUSA_MotiontoDismiss

DartezvUSA_MotiontoDismiss

Letter to the editor HOUSTON CHRONICLE

March 14, 2011, 9:27PM

Agencies failed

It has been more than two years since 1,290 Texans lost their life savings in the R. Allen Stanford debacle. Many of the victims were teachers, nurses and firefighters, and these losses reflect most, if not all, of the retirement funds they accumulated over many years of hard work. These Texans relied on the Securities Exchange Commission (SEC) to uphold its federal mandate to protect investors, and despite numerous warnings about Stanford Financial over several years, the SEC failed to act on behalf of investors.

In 2010, SEC Inspector General David Kotz revealed the SEC was aware as early as 1997 that Stanford investors’ funds were in jeopardy of being stolen. It wasn’t until 2004 — seven years after the SEC first became aware of problems at Stanford — that it opened an official investigation. By the time the SEC took action in this case, it was too late for the Stanford victims who had lost virtually everything.

To make matters worse, the Stanford investors were customers of Stanford Group Co. (SGC), a broker-dealer that was a member of the Securities Investor Protection Corp.(SIPC). SIPC allowed SGC to use its seal for brochures, promotional materials and correspondence to give investors additional confidence. “Member SIPC” was adorned on its correspondences to investors, yet to date SIPC, which is under SEC authority, has refused to provide any remedy for Stanford victims. Customers of the Stanford broker dealer have been denied coverage, despite previous cases where investors in similar situations were covered. Skip Swingle, a victim of SGC, aptly warned, “I don’t think it’s just Stanford victims that should be concerned about what’s going on, but everybody.”

On Monday I sent a letter to SEC Chairman Mary Schapiro asking again for an expedited review of this issue. No one can restore all that these victims lost. We cannot replace the trust that was violated, nor can we say that this fraud won’t happen again. What the SEC and SIPC can and should do is live up to the mandate of encouraging investment by establishing customer confidence. If they do not, brokerage firms across the country might reconsider the placement of the SIPC seal, and investors will see it as a symbol of caution, not protection.

— U.S. REP. JOHN CULBERSON,
7th Congressional District of Texas

Stanford victims back bill

Some Baton Rouge-area residents are among thousands of investors supporting federal legislation that would provide partial relief from more than $7 billion in losses allegedly suffered at the hands of Texas financier Robert Allen Stanford.

“We’re super happy, but we’re really nervous at the same time,” Baton Rouge resident Blaine Smith said. “This is such a huge step in the right direction for us.”

Smith said Friday that he lost about $1 million in retirement savings in 2009, when Stanford was shut down by the Securities and Exchange Commission and indicted on federal fraud charges in Houston.

Early last year, thousands of other investors who lost billions to Bernard Madoff of New York recovered more than $500 million from the Securities Investor Protection Corp.

The SIPC is funded by the financial services industry. It provides partial restitution to victims of fraud committed by securities dealers who work for SIPC members.

Madoff, however, had pleaded guilty to federal charges and later was sent to prison for 150 years.

Stanford maintains that he is innocent. He remains in federal custody in Houston, where he is scheduled for trial in January.

Stanford’s chief financial officer, Mississippi resident James M. Davis, has pleaded guilty to felony charges, though. And Davis stated in court that he helped Stanford perpetrate massive frauds against his investors.

Against this backdrop last week, U.S. Rep. John Culberson, R-Houston, was able to move a proposed amendment to the Securities Investor Protection Act of 1970 through a subcommittee of the House Appropriations Committee.

That proposal is narrowly written to provide SIPC coverage for investors defrauded by an SIPC member whose assets were placed under a federal receivership after Jan. 1, 2009, and before March 1, 2009.

Stanford’s assets were placed under receivership in February 2009.

Angela Shaw, who founded the Stanford Victims Coalition in the Dallas area, said Thursday that SEC attorneys helped craft Culberson’s proposal.

That was a surprise because SEC Chairman Mary Schapiro had not yet announced a decision on a request by the Louisiana delegation and other members of Congress for SIPC coverage of Stanford victims.

SEC spokesmen were asked Friday for confirmation of SEC participation in the legislative proposal, but they did not respond.

“The SEC was clearly involved with this new development,” said John Wade, a St. Tammany Parish veterinarian and partner in a pet identification-chip business that lost more than $1 million in retirement funds to Stanford.

“So many people are clinging onto this hope,” Wade said of Culberson’s proposal.

U.S. Rep. Bill Cassidy, R-Baton Rouge, confirmed initial action on Culberson’s proposal, which he described as “encouraging news for Stanford victims who have sought help from the SEC for a year and a half.”

The proposal, however, will not become law unless it first passes the full Appropriations Committee and then is approved by both the House and Senate.

Old anger

The reported SEC support was welcomed by investors and legislators who were furious in April, when the SEC’s Office of Inspector General reported that the SEC’s enforcement division repeatedly ignored early recommendations for action against Stanford.

“The OIG investigation found that the SEC’s Fort Worth office was aware since 1997 that Robert Allen Stanford was likely operating a Ponzi scheme,” the OIG reported.

“We found that over the next 8 years, the SEC’s Fort Worth examination group conducted four examinations of Stanford’s operations, finding in each examination that (certificates of deposit) could not have been ‘legitimate,’ ” Inspector General H. David Kotz wrote.

A Ponzi is an illegal scheme in which no actual investments are made. Instead, money from new investors simply is used to pay earlier investors relatively small fake dividends or fake profits while the schemers convert much of the money to their own uses.

Stanford Group Co. poured much of its investors’ money into Stanford International Bank on the Caribbean island of Antigua, federal prosecutors and SEC attorneys allege in an indictment and civil suit against Robert Allen Stanford.

Those federal attorneys also allege that Stanford, in effect, used the Antiguan facility as his personal piggy bank.

During those important early years, Kotz reported in April, SEC enforcement action was thwarted by a Fort Worth enforcement chief who later attempted repeatedly to gain SEC permission to work for Stanford.

In addition, Kotz reported, the SEC’s own policies encouraged enforcement officers to concentrate on easy, simple cases and avoid complicated, difficult investigations.

Cassidy said the SEC’s “mission statement is to protect investors. They failed, and innocent Louisiana families paid the price.”

“The SEC Inspector General’s report paints a picture of an SEC that was asleep at the wheel and allowed innocent people to be robbed of their hard-earned savings,” said U.S. Sen. Mary Landrieu, D-La. “Congress must continue to press forward to ensure that the victims of this disgraceful Ponzi scheme get the relief they need.”

“The depth of the failure at the SEC in the Stanford investigation is unbelievable,” said U.S. Sen. David Vitter, R-La.

Vitter added that he is pushing for a Senate Banking Committee hearing on Kotz’ report in September because: “The one thing that is clear from the report is that the debt the SEC owes the Stanford victims is enormous.”

U.S. Rep. Charlie Melancon, D-Napoleonville, is one of Vitter’s re-election opponents. But he joined Vitter in seeking SIPC assistance for Stanford investors.

“I urge the SEC to act swiftly in correcting these wrongs, so these families whose retirement and savings were stolen as a result of greed and government failure can begin rebuilding their lives,” Melancon said.

In April, the SEC’s Schapiro said of Kotz’ findings: “We will carefully analyze the report and implement any additional reforms as necessary for effective investor protection.”