Were The Losses To Investors Caused By SEC Negligence?

Allen Stanford’s investors have filed suit against the U.S. Securities and Exchange Commission (SEC) claiming that the regulator’s negligence and misconduct caused their losses, according to an article in Investment News. The eight investors filed their case in federal court in Dallas, Texas alleging that the SEC should have investigated Stanford earlier and detected what the agency later concluded was a “massive” Ponzi scheme.

A report issued by the SEC’s inspector general faulted the agency’s Fort Worth office and some of its employees for failing to take action against the indicted Stanford sooner. The lawyer for the group of investors, Edward Gonzales III out of Baton Rouge, Louisiana, stated in the petition, “But for the negligent acts and omissions, misconduct and breaches of duty by Spencer Barasch, a former SEC regional enforcement director, the negligent supervision of Barasch by his supervisors, and other inexcusable acts of negligence by SEC employees, the plaintiffs would not have made and lost their investments.” The eight investors who lost $18.7 million live in southern Louisiana where Stanford had a large trust operation.

The SEC seized Stanford’s operations in February 2009 for fraud. Investors who bought certificates of deposit at the indicted financier’s Antigua based International Bank lost more than $7 billion, according to the SEC. The first meaningful probe of Stanford was in 2005, even though examiners had suspected him of operating a Ponzi scheme eight years earlier and after the Fort Worth office conducted four reviews of the Houston based Stanford Financial beginning in 1997 they had concluded that the purported returns on the CD’s were highly unlikely, according to internal reports.

Contact Us
Contact Us: (800) 259-9010