- - Tuesday, July 4, 2017


If the name Allen Stanford doesn’t ring a bell, it should. He’s up there with Willie Sutton, Jordan Belfort and Bernie Madoff, yet you don’t hear much about him, an odd turn of events given he defrauded investors of more than $7 billion through the worst Ponzi scheme, save for Madoff’s, in U.S. history.

When Stanford’s empire collapsed it left behind 21,000 victims, typically middle-class Americans looking for a safe place to protect their savings, taking billions from teachers, nurses, and first responders. Those he conned — including thousands who placed their entire retirement savings in the Antigua-based Stanford International Bank — are still waiting after eight years to be made whole. To date, they’ve received less than 5 cents on the dollar.

What Stanford did was to sell phony certificates of deposit to investors — some of whom entrusted him with their entire savings. They should have been more careful. Never putting all your eggs in one basket is a lesson people seem to have to learn over and over again. Nevertheless, and the need for due diligence aside, Stanford was a slick operator and his presentation was, it’s been said, quite convincing. The certificates of deposit were even sold through a Texas investment adviser registered with the Securities and Exchange Commission and supported by a top-notch salesforce across the U.S.

To do all this he needed partners like the Canada-based Toronto Dominion Bank which gave him access to U.S. accounts and the ability to trade in dollars. For almost 20 years beginning in 1991 TD Bank providing its services and helped move billions into accounts he controlled. It says it conducted ordinary and routine monitoring of its relationship with Stanford International Bank but that claim just doesn’t stand up to scrutiny. Responsible parties would have tumbled onto the scheme if it had. At least that’s what some of the people who’ve examined the case over the last eight years think.

“Ponzi schemes involving the loss of billions of dollars to thousands of victims are not and cannot be perpetrated in a vacuum,” said attorney Peter Morgenstern, who serves as a member of and counsel to the Official Stanford Investors Committee. He is one of the attorneys representing the Stanford victims. “The financial institutions we sued for facilitating this massive fraud, including TD Bank, HSBC, and Societe Generale, provided critical financial services to Allen Stanford and his companies for many years, and had a unique insight into the nuts and bolts of this criminal operation. They should be held accountable for the billions of dollars in losses suffered by these innocent victims.”

It was suspicious from the start. Antigua had been flagged by federal regulators and Congress as a money-laundering haven. Stanford had a track record of bankruptcy and legal violations dating back to the 1980s. The SEC investigated him numerous times and was aware as early as 1997 he was likely operating a Ponzi scheme. The Office of the Comptroller of the Currency issued advisories regarding his violation of banking laws in Florida and California. The National Association of Securities Dealers, U.S. Customs, and others investigated his operations and all concluded some element of criminal activity appeared to be present.

Stanford’s investors were not the superrich. Approximately 80 percent of them invested less than $500,000 — which may be why they are still waiting for compensation. It’s worth noting TD Bank — and another of Stanford’s international partners, Societe General — still will not admit to any wrongdoing despite the ways their assistance made what he did possible.

Pending lawsuits — which the aforementioned institutions have fought every step of the way — allege TD Bank and SocGen played “an essential role” in Stanford’s schemes through various interactions with him. The plaintiffs’ claims they knew or should have known what Stanford was up to appear to have considerable merit yet no one can find relief.

It’s been eight years. It’s time for the U.S. governmen — which has tools at its disposal that, correctly employed, could generate a more cooperative attitude from TD Bank and SocGen as regards a settlement — to step in. Federal banking regulators should toughen the rules to keep major institutions from looking the other way and may want to examine closely TD Bank’s efforts to expand its reach into the U.S. through its proposed purchase of U.S.-based Scottrade Bank.

U.S. law needs to be tough enough to discourage major financial institutions, especially those based overseas but operating in the U.S., from claiming they were merely neutral intermediaries in order to avoid being held liable for the fraud. That’s like allowing them to claim they were just following orders, something the civilized world decided long ago was not an excuse bad actors could use to justify their behavior. Stanford’s victims are still waiting for their justice. They should not have to wait much longer.

• Peter Roff is a former senior political writer for United Press International who can be seen regularly offering commentary and analysis on the One America News network.

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