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

Allen Stanford Asks Judge to Dismiss SEC Lawsuit Alleging Fraud

R. Allen Stanford asked a judge to throw out the U.S. Securities and Exchange Commission lawsuit accusing him of running a $7 billion Ponzi scheme, claiming the agency failed to state a case.

The SEC didn’t meet the minimum requirements for laying out the fraud case, attorneys for Stanford and businesses including his Antigua-based Stanford International Bank Ltd. said yesterday in papers filed with U.S. District Judge David Godbey in Dallas. The SEC sued last February, alleging Stanford oversaw a “massive” fraud centered on the sale of certificates of deposit through the bank.

“We’ve looked really hard at the latest complaint, and it’s 32 pages long but it doesn’t really have any specifics about what Allen Stanford said, to whom he said it or how the SEC even has jurisdiction over the CDs, because they’re not securities,” Stanford lawyer Christina Sarchio said yesterday in a phone interview.

Stanford also has been criminally indicted by a grand jury in Houston. He has denied all allegations of wrongdoing. Stanford is being held without bail in a Houston jail, awaiting a criminal trial scheduled for Jan. 24, 2011.

On Feb. 17, Godbey denied as moot an earlier defense bid to dismiss the litigation, citing revisions made by the SEC in an amended complaint.

Kevin Callahan, a spokesman for the commission, declined to comment on Stanford’s motion in an e-mail. “We stand by the allegations in our complaint,” he said.