by Brian Mahany
A recent Reuters article sheds light on how Sir Allen Stanford was able to avoid detection and arrest for well over a decade. When finally arrested in 2009, Stanford was believed to have presided over one of the largest Ponzi schemes ever – $7 billion in misappropriated funds. Unlike the Madoff case where much of the money will be recovered and distributed to victims, Stanford’s victims are likely to see very little. Now, published reports say lawyers and law enforcement officers may have helped him hide his criminal empire.
According to the Reuters article, the feds suspected as early as 1997 that Stanford was operating a Ponzi scheme. How come, then, it took 12 years before he was arrested? During that time, prosecutors say he defrauded 30,000 investors from 113 different countries. Although Bernie Madoff’s Ponzi scheme was the largest in terms of dollars taken, Stanford has the dubious “honor” of having the most victims.
Particularly troubling are allegations that Stanford was assisted by well known securities attorney Thomas Sjoblom. According to published reports, Sjoblom is a former SEC enforcement division attorney with many ties inside the agency. Reuters says that the Justice Department has been investigating him for possible obstruction of justice, witness tampering and conspiracy for his actions in trying to derail the SEC’s investigation of Stanford.
Sjoblom has not charged yet, although one news article says that he offered to testify against Stanford in return for immunity. Apparently the Justice Department rejected that offer meaning that he could still be the target of an investigation.
There has long been a revolving door between securities regulators and the private sector. Many SEC lawyers leave government service and immediately take high paying legal jobs defending the folks they once regulated. While there are rules to prevent government regulators from immediately representing the some companies and individuals they once investigated, nothing prevents these same former regulators from exploiting their contacts within the agency they just left.
In addition to Sjoblom’s potential problems with Stanford, another SEC employee is in trouble to over the Stanford debacle. Spencer Barasch, former enforcement chief of San Antonio’s SEC branch, agreed to pay a $50,000 fine for violating federal ethics regulations. The government says that he took a job with Stanford shortly after leaving the SEC. Particularly troubling are the allegations that he 3 times vetoed requests by SEC examiners to audit Stanford. Any one of those vetoes may have caused billions in losses to investors.
Whether or not Sjoblom is charged with any criminal wrongdoing remains to be seen. One thing is clear, however. The revolving door between the regulators and those they regulate causes a crisis in confidence within the agency and public. There needs to be increased post employment disclosure and tighter limitations on what former enforcement regulators can do once they leave government service.
As we have seen in both Stanford and Madoff, waiting for the SEC to take action could take years. If you believe you are the victim of fraud, act quickly. Very often, the first in line are the only ones to get paid 100 cents on the dollar for their losses.
The securities fraud lawyers at Mahany & Ertl have helped many victims of investment fraud and Ponzi schemes get back their hard earned money. If you are the victim of any type of fraud, contact us immediately. All calls are held in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in most jurisdictions.