US SEC judge rules Stanford executives are liable

Aug 5 (Reuters) - In a victory for federal regulators, an administrative judge has found three former executives who worked for Allen Stanford's now-defunct brokerage liable for fraud and said they should banned from the industry. 

 The ruling comes more than a year after Stanford was sentenced to 110 years in prison for bilking investors through a Ponzi scheme with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua.

 In her ruling, Securities and Exchange Commission Judge Carol Fox Foelak described as "egregious" the conduct of former Stanford Group Co. chief compliance officer Bernerd Young, former president Daniel Bogar and Jason Green, a former head of the private client group.

 Foelak also ordered the three executives to pay fines and forfeit ill-gotten profits.

 The SEC's case against the three executives did not allege they actually knew about Stanford's Ponzi scheme.

 Instead, it hinged on whether they sufficiently ensured that marketing materials and other disclosures were adequate for investors.

 All three executives have vigorously denied any wrongdoing.

 Young, who was previously a regulator with the group now known as the Financial Industry Regulatory Authority, told Reuters in the summer of 2012 that he took due diligence steps including reviewing quarterly financial statements and reading annual reports about the bank.

 But he said in the exclusive interview that Antiguan privacy laws kept him from seeing more details about the investment portfolio, so he relied on the bank's compliance experts.

 "If there is such a thing as a...perfect scam, this was the perfect scam," Young told Reuters last year.

 Foelak ordered Young, Bogar and Green to each pay a $260,000 civil penalty.

 In addition, Young was ordered to return roughly $592,000 plus interest. Bogar was ordered to forfeit about $1.5 million, and Green must pay $2.6 million.

 Lawyers for both Young and Bogar said they were disappointed in the judge's ruling and are still considering their options.

 If they decide to appeal, the case would first go before the full five-member SEC.

 "Mr. Young...is deeply troubled by the initial decision's disturbing implications for the securities compliance industry and the newer and more Draconian standards that compliance officers may be facing," said Randle Henderson, Young's attorney.

 "The decision demonstrates the real danger to compliance officers relying upon advice of independent outside counsel, fully licensed and qualified accounting firms and the audited financial opinions they issue, and the sovereign financial regulatory agencies of foreign countries."

 Thomas Taylor, a lawyer for Bogar, said that while he felt his client got a "full and fair hearing," he disagreed with her outcome profoundly.

 An attorney for Green could not be immediately reached.

 Friday's ruling by the administrative judge marked the second big trial victory for the SEC in one week.

 On Thursday, a jury in New York found former Goldman Sachs Group Inc. vice president Fabrice Tourre liable for federal securities law violations for his role in a complex mortgage deal that cost investors $1 billion when it failed.

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Ex-Stanford adviser: Moreno lost $20 million

Written by Leslie Turk
Monday, January 30, 2012

Lafayette businessman Mike Moreno got more than half of his money out of Stanford Group but still had $20 million invested in the company when regulators shut it down in February 2009, according to court testimony last week.

Allen Stanford, 61, is on trial in Houston, accused of masterminding a $7 billion Ponzi scheme centred on the sale of so-called CDs at the Stanford International Bank, based on Antigua. Court testimony in the fraud trial of Allen Stanford revealed Moreno’s substantial losses. Jason Green, a former Baton Rouge-based financial adviser, testified that Moreno tried to pull his money out before the company crashed, but his request was denied. Bloomberg reported
Friday on the on-going trial:

A former Stanford Group Co. executive told a jury that one client of R. Allen Stanford’s securities brokerage lost at least $20 million before the business was closed by U.S. regulators.

Jason Green, who led Stanford Group’s private-client group, offered the figure while being cross-examined by the defense on the fifth day of Stanford’s investor fraud trial in federal court in Houston.

Stanford’s lawyers have said that customers who bought the certificates of deposit issued by Antigua-based Stanford International Bank Ltd. and sold by the brokerage were able to withdraw every penny of their money until the Securities and Exchange Commission sued in February 2009.

Asked by defense attorney Ali Fazel if anybody had not gotten their money back before then, Green replied, “Yes, one person I know of specifically” was denied $20 million. Green later identified the client as Michael [stet] Moreno, who had residences in Lafayette, Louisiana, and in Houston.

As the Insider previously reported, Moreno was among 49 investors Stanford receiver Ralph Janvey listed in July 2009 court filings who either cashed out some of their holdings before Stanford was shut down or moved their money into non-Stanford accounts. Those 49 investors took out a total of $494 million, $47 million of that withdrawn out by Moreno. Green testified that Moreno needed the money to settle tax obligations, according to Bloomberg.

Moreno, [Green] said, entrusted Stanford’s business with almost $50 million before withdrawing some of those funds to address a tax obligation. The $20 million withdrawal request was made shortly before Stanford stopped allowing clients to redeem CDs before their maturity date to stanch the outflow of capital as the global financial crisis deepened.

Receiver Janvey tried unsuccessfully in 2009 to claw back Moreno and other investors’ proceeds. Read more on that here.

In their opening last week, prosecutors said Stanford treated the savings of thousands of investors as his “personal piggy bank” to buy two airlines, build a cricket team and stadium, funnel money to a Swiss bank account and otherwise live a life of luxury on the Caribbean island of Antigua, The New York Times reported.

Stanford faces 14 charges of defrauding nearly 30,000 investors from 113 countries.

Moreno said in mid-October that he has been living temporarily in Dallas, raising $300 million to start a new fracking company.