business

By Pascal Fletcher

Allen Stanford, the high-flying Texas billionaire with a Caribbean knighthood and a penchant for publicity and cricket, has been brought down to earth with a thud by U.S. fraud charges against him and his companies.

In a self-congratulatory posting on the Stanford Group's website, its founder and chairman credits his grandfather with giving him "the inspiration to dream" and "an unwavering desire to build a business that is second to none." He speaks of "a passion for service and the values that hold us together".

On Tuesday, as U.S. marshals swooped down on Stanford's U.S. headquarters in Houston, federal authorities charged the flamboyant 58-year-old moustachioed financier and three of his companies with a "massive ongoing fraud."

Accusing him of far less altruistic aspirations than those trumpeted on his website, the U.S. Securities and Exchange Commission alleged Stanford and two fellow executives fraudulently sold $8 billion in high-yield certificates of deposit.

The SEC said they and the bank reported "improbable" high returns and gave "false" assurances to investors.

The SEC's revelation that Stanford's business empire -- stretching from the Caribbean island of Antigua to Houston, Miami and Caracas -- was exposed to losses from the alleged Ponzi scheme run by financier Bernard Madoff completes the picture of a finance king who somehow lost his Midas touch along the way.

Before the SEC civil charges were announced, Stanford dismissed the U.S. federal probe as "routine" and triggered by complaints from disgruntled former employees. He said his company was fully compliant with all U.S. regulations and that he would "fight with every breath to continue to uphold our good name."

Only months ago, Stanford, known as "Sir Allen" in Antigua whose authorities knighted him in 2006, was providing fodder for the British tabloids by flying in by helicopter to bankroll international cricket matches in a blaze of publicity.

Now he is out of sight, as his harassed staff in plush company offices from Memphis to Atlanta fend off queries from panicked investors and posses of probing journalists.

CARIBBEAN POTENTATE

Once described as "haughty, arrogant and obnoxious" by Antiguan Prime Minister Baldwin Spencer, Stanford, America's 205th richest man according to Forbes magazine, has often walked a fine line between critics and admirers in a business and sporting empire that reaches well beyond Texas to Europe and across the Caribbean.

Spencer said at the weekend he feared the Stanford scandal would hurt the image of the tiny Caribbean state of Antigua and Barbuda, which has undergone scrutiny in the past for alleged money laundering by Ukrainian and Russian Mafia bankers.

But many local islanders expressed support for the country's biggest investor. "He is the best investor to come into the Caribbean, not only Antigua, but the region," said islander Julian Exeter. "He puts food in the mouth of everyone in Antigua and money in their pocket," he said.

Friends say the financier is as genial as he is thick-skinned.

"Allen enjoys life and is the kind of person that doesn't worry about what other people think," said David LeBoeuf, a Texan who went to school with Stanford. "Larger than life is one way to describe him, but he's also an extremely talented, unique and hard-working individual," he said.
A fifth-generation Texan, Stanford made his first fortune in Houston, snapping up distressed real estate in the early 1980s before inheriting the insurance and real-estate company his grandfather founded in 1932.

Forbes put his personal wealth at $2.2 billion last year and said his list of wealth-management clients includes pro golfer Vijay Singh. He credits his recent success in part to avoiding investments in subprime mortgages that snowballed into a global financial crisis.

Asked by CNBC television in September if it's fun being a billionaire, he smiled and replied, "Yes, yes, yes. I have to say it is fun being a billionaire. But it's hard work."

With dual U.S. and Antiguan-Barbudan citizenship, Stanford has homes sprinkled across the region -- from Antigua to St. Croix in the U.S. Virgin Islands to Miami.

A generous patron of several sports, Stanford financed a $1 million-per-player Twenty20 tournament in November in which his "Stanford Superstars" side of West Indian cricketers became instant millionaires when they beat England's team at his Stanford Cricket Ground in Antigua.

But now, after the SEC charges, the England and West Indies cricket boards have suspended negotiations on future projects with him.

In recent months, he has let staff go in Antigua, closing a cricket office there. There has been a variety of reasons for the cutbacks -- from bad press to the global financial crisis.

Back in the United States, he stirred controversy by claiming family ties to Leland Stanford, who founded Stanford University in the 1890s. The university says there is no genealogical connection between the two and sued Stanford Group in October for infringing on its trademark.

source : reuters

By HARVEY SILVERGLATE

The Securities and Exchange Commission is investigating whether Apple committed securities fraud by failing to inform the public about CEO Steve Jobs's health. This investigation exemplifies how the agency has run amok.

Mr. Jobs has been synonymous with Apple since he revived the struggling company in 1997. A technical, design and marketing genius, Mr. Jobs and his team performed one of the most fabled turnarounds in corporate history. To the horror of his cohorts and Apple's investors, Mr. Jobs was diagnosed with pancreatic cancer in 2004. Despite heavy odds, his surgery appeared successful, and he returned to his post after just two months of recovery.

Over the next two years, however, rumors spread as his weight fluctuated. In June 2008, when a gaunt Mr. Jobs debuted the iPhone 3G, concerns about his health competed for headlines with the latest Apple gadget.

Unsurprisingly, investors began to press for information. At first, Mr. Jobs chalked his weight loss up to a "relatively simple" problem: a hormone imbalance that prevented his body from extracting full nutrition from food. Shortly thereafter, Mr. Jobs admitted the situation was "more complex" than he originally thought and announced he would take a five-month medical leave starting Jan. 14. On Jan. 16, Bloomberg reported that Mr. Jobs might have to undergo a liver transplant to correct complications from his prior cancer treatment.During all of this, Apple's share price swung wildly with each rumor and bit of news. After the announcement of his leave, the company refused to be more specific about his health. Mr. Jobs met persistent inquiries with a snippy, "Why don't you guys leave me alone? Why is this important?"

It was important, of course, to those who had invested in Apple precisely because of Mr. Jobs. His health was surely material information for investors. And under federal securities laws, it is a serious felony -- securities fraud -- for corporate officials to disseminate false material information, or to fail to disclose true material information related to the company's financial prospects. But while the legal meaning of "materiality" has long been the subject of dispute and little regulatory definition, it should not dictate that corporate officers have no right to any privacy.Yet when the severity of Mr. Jobs's health began to leak, the SEC -- whose reputation has suffered mightily in recent months due to Wall Street's cratering and the Madoff scandal -- jumped in to commence a review of the apparently incomplete disclosures.

The SEC's investigation is the latest in a long history not only of incompetence, but of connivance with Department of Justice prosecutors. The absence of a comprehensive definition of "fraud" has enabled the SEC to harass, and the DOJ to prosecute, businessmen who engage in seemingly normal professional behavior. Such investigations and prosecutions -- for "securities fraud" as well as the equally malleable "mail fraud" and "wire fraud" -- have become the hallmark of prosecutorial juggernauts since the mid-1980s. The same technique, based upon an absence of clear definitions, is used against a vast array of people in other fields, from accountants to artists.

And so the feds will investigate whether Apple misled investors by not disclosing the intimate details of Mr. Jobs's latest health scare. But the notion that investors were entitled to every detail, when they knew the CEO's health history and saw his obvious weight loss, is ludicrous. That a man's desire to maintain a shred of privacy under these circumstances can justify a fraud investigation tells us much about the lack of legal precision, not to mention decency, with which federal investigators and prosecutors too often operate.

source : The Wall Street Journal

The head of the agency told a Senate committee investigating the SEC's role in the Madoff scandal that it lacks the resources to follow up on all fraud tips.

by :Julian Cummings
The Securities and Exchange Commission's director of enforcement told a Senate committee Tuesday that the agency lacks the resources to pursue all the leads and tips about possible fraud that come to it.

"The enforcement division receives hundreds of thousands of tips each year (and) while we appreciate and examine every lead we receive, we simply do not have the resources to investigate them all," Linda Thomsen said in her prepared remarks to the Senate Banking Committee.

The hearing was looking into the role the SEC played in investigating Bernard L. Madoff's alleged $50 billion Ponzi scheme. Thomsen appeared along with Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations.

Thomsen, citing an ongoing investigation, largely avoided direct responses to committee members' questions, which included why Madoff was not investigated by the SEC earlier, despite red flags sent to the commission by tipster Henry Markopolos in 2006.

She said the SEC's inspector general is looking into who saw the information provided by Markopolos and whether that investigation was conducted correctly. "Some of the conduct in the prior investigation may itself have resulted in crimes," she said.

The fiery exchange of the day occurred after Thomsen told Sen. Robert Menendez of New Jersey, "We don't turn a blind eye to fraud. If we see it and we suspect it, we pursue it. We don't want fraudsters out there."

Menendez responded loudly, "So, Mr. Madoff was smarter than all of you?"

Also appearing before the committee was John C. Coffee Jr., a professor at Columbia University Law School; Dr. Henry A. Backe Jr., a Madoff investor; Stephen Luparello, interim CEO of FINRA, the nation's largest independent regulator of securities firms; and Stephen P. Harbeck of the Securities Investor Protection Corp.

Thomsen and Luparello agreed with a request from the committee's chairman, Sen. Chris Dodd of Connecticut, to come back every three months to provide updates on the status of regulations and safeguards to avoid fraud.

Madoff faces felony securities fraud charges for allegedly operating a multibillion-dollar Ponzi scheme that resulted in high-profile charities, celebrities, and many other investors losing their investments.

In a Ponzi scheme, money coming in from new investors is paid out to earlier investors as "profits," creating the appearance of a profitable fund.

source : CNNmoney