ROBERT ALLEN STANFORD’S PONZI SCHEME
As I have been writing this book over the last few months, we have seen a few more interesting developments take place in the hedge fund industry. Yet another scandalous Ponzi scheme has unfolded, the hedge fund industry has started showing signs of taking voluntary steps in offering more disclosure, and the stock market has sunk another 15 percent into 2009.
The Securities and Exchange Commission charged that Houston billionaire R. Allen Stanford and three of his companies committed fraud when they promised steady, double-digit returns to investors who bought $8 billion worth of his businesses’ certificates of deposits. Investors were promised an “improbable and unsubstantiated high interest rate,” for the last 15 years, the SEC alleged. Although the Stanford companies promised that investors’ money was in liquid investments, it really invested in illiquid assets, including private equity and real estate, according to court documents. Robert Allen Stanford’s Chief Investment Officer, Laura Pendergast Holt, had no financial services or securities industry experience before joining Stanford companies, and a decade later was managing $15 billion in assets and running a worldwide team of financial analysts.
This time around, the victims were not the high net worth individuals of Palm Beach taking advice from their golfing buddies, but the top golfers in the world taking financial advice from their agents. The red flags that ...