WSJ – Standford prosecution promises to be more than Madoff

The scheme Stanford is accused of is rather different from the one Madoff perpetrated. While Bernie promised modest returns, Stanford’s Certificates of Deposit issued through his bank in Antigua offered rates far above what was available in the market. While Madoff admitted that his investment advisory business was a sham, Stanford’s attorney has put the blame squarely on the SEC for undermining an otherwise successful operation. No fraud here, and he will be found not-guilty, according to his lawyer, Dick Deguerin.

Perhaps the most important difference between the two cases is that Stanford is accused of working with others, while Madoff proclaims that he acted alone. Thus, while investigators are still puzzling through how Bernie pulled it off, the issue for Stanford will be whether other executives at his firm will work to bring him down by cutting deals with the Department of Justice. Much like the Enron and WorldCom cases, which now seem like ancient history, the government has a Chief Financial Officer as its star cooperating witness: James Davis. Whether others will join him remains to be seen, and if other defendants enter into plea bargains the pressure on Stanford will build.

What makes the Stanford case particularly interesting is the indictment Leroy King, the former head of Antigua’s Financial Services Regulatory Commission (FSRC) that was responsible for monitoring Stanford International Bank, Ltd., from which issued the CDs. King is accused of having deposited cash into accounts in the United States, and then withdrawing hundreds of thousands of dollars from investment accounts after the SEC seized the firm. The government alleges that these were bribes from Stanford to keep King from reviewing the Antiguan Bank’s financials and, even worse, to entice him to be less than cooperative when the SEC sought the FSRC’s assistance.

WSJ Law Blog
6/21/9