Apparently the link to Duck Tales and El Pato, the original Veneconomy articles has now been restricted somehow, as bandwidth limits were exceeded.
So you can find Duck Tales and El Pato here, I guess until I see the bill for my server.
I also have the Stanford Annual Reports and at some time I will be posting those to the net, since for some reason the Stanford International Bank website is no longer showing them. But they are large...so I'll keep them on my hard drive for a while.
These are important historical documents and could be part of case study for accountants/auditors sometime in the future.
EDIT: Stanford International Bank Annual Reports and December Letter have been uploaded to SCRIBD and avaliable HERE.
Saturday, February 28, 2009
Thursday, February 26, 2009
In Defense of Stanford
Several media outlets have now upped the tally on the alleged Stanford fraud from $8 billion (which is approximate) to $9.2 billion. We must come to the defense of Stanford on this one. It's really just $8 billion from the Antigua Bank (so far).
The other $1.2 billion arise from another part of the SEC Complaint which refers to a Mutual Fund Wrap program that Stanford Financial started in 2005. For those who don't know, a mutual fund "wrap" is like a Fund of Funds for mutual funds. Invest in one and you diversify over a series of mutual funds, each of which is supposedly also diversified. Double your diversification and double the fees you pay also.
Stanford Financial isn't accused of missappropriating (stealing) that $1.2 billion, but of misrepresenting the performance of the program. The program started in 2005, but Stanford already had a track record, which apparently was carefully "made up". And as they operated this program, they also "enhanced" the returns they were actually made. So the $1.2 billion should still be there for investors, but the $25 million they collected in fees...that maybe they shouldn't have.
This is also what the "disgruntled employees" were complaining about. (I was always wondering about that)
So why would Stanford set up a program like that and fudge the numbers to make a measly $25 million. Well, they brought a lot of advisors on board with it and those advisors were encouraged to...you guessed it...sell Antigua CDs.
I guess it shows where Stanford's real strength lied: in making up numbers.
Someone joked that the much ballyhooed "Stanford Investment Model" (SIM), actually stood for SIMulated.
The other $1.2 billion arise from another part of the SEC Complaint which refers to a Mutual Fund Wrap program that Stanford Financial started in 2005. For those who don't know, a mutual fund "wrap" is like a Fund of Funds for mutual funds. Invest in one and you diversify over a series of mutual funds, each of which is supposedly also diversified. Double your diversification and double the fees you pay also.
Stanford Financial isn't accused of missappropriating (stealing) that $1.2 billion, but of misrepresenting the performance of the program. The program started in 2005, but Stanford already had a track record, which apparently was carefully "made up". And as they operated this program, they also "enhanced" the returns they were actually made. So the $1.2 billion should still be there for investors, but the $25 million they collected in fees...that maybe they shouldn't have.
This is also what the "disgruntled employees" were complaining about. (I was always wondering about that)
So why would Stanford set up a program like that and fudge the numbers to make a measly $25 million. Well, they brought a lot of advisors on board with it and those advisors were encouraged to...you guessed it...sell Antigua CDs.
I guess it shows where Stanford's real strength lied: in making up numbers.
Someone joked that the much ballyhooed "Stanford Investment Model" (SIM), actually stood for SIMulated.
Show Time
I'm back to talking to the media. Thank you for your patience. I've already talked to some print and radio and will be doing CNN in a few mintues.
I've been trying to get back to everyone who emailed originally...and I really want to talk to some of the print people and internet blogs.
So here's an email: interview@dalmady.com, if you still want a piece of this story or if I left you out and that other email you sent was unaswered..
I know it will blow over soon enough and then we can all get back to our respective jobs.
Any help with Stewart is seriously appreciated.
I've been trying to get back to everyone who emailed originally...and I really want to talk to some of the print people and internet blogs.
So here's an email: interview@dalmady.com, if you still want a piece of this story or if I left you out and that other email you sent was unaswered..
I know it will blow over soon enough and then we can all get back to our respective jobs.
Any help with Stewart is seriously appreciated.
Wednesday, February 25, 2009
28,000
That's the approximate number of depositors who were left hanging in Stanford International Bank when it went into recievership by the Antiguan authorities. The receivers plan to get a statement out to every one of these clients so they can check their claim.
That's good news. It would seem that the data integrity has been preserved, at least on the liability side.
It tells us a few more things also. The bank was probably under some stress for redemptions and losing clients, as it had stated back in December 2007, that it had over 50,000 clients and as recently as December 2008 the figure was stated as "over 30,000".
You have to think if we can believe those numbers or not, but assuming they were correct you can see the drain.
What is now being determined is what remains on the asset side. At this point the receiver has already stated that there is "nothing like $8 billion" in the portfolio. Plus the fact that the bank was having trouble with redemptions, and scrambling for cash makes it clear that there weren't many liquid assets left.
But lies work both ways and one can only hope that the bank has some assets also "off the books" which can be seized and used to satisfy creditors. Even if they are illiquid ones. We know from SEC documents that the bank that "Doesn't do loans" actually had lent money to eLandia. There could be more of these deals out there.
Then of course, there are Mr. Stanford's assets, some of which have been seized or frozen. But there is a problem with that also. You see, Stanford International Bank never paid a dividend. So, if Mr. Stanford was receiving compensation from the bank in some other fashion, he needed to report that on his 1040. And while the IRS in normal circumstances can only go back three years to conduct an audit, if there is evidence of fraud, they can go back further. If Mr. Stanford owes US taxes (and apparently he does), the IRS gets first dibs on the seized assets. So, I'd say it's a pretty good bet that Mr. Stanford's filings are no longer gathering dust in the IRS's archives at this point.
That's good news. It would seem that the data integrity has been preserved, at least on the liability side.
It tells us a few more things also. The bank was probably under some stress for redemptions and losing clients, as it had stated back in December 2007, that it had over 50,000 clients and as recently as December 2008 the figure was stated as "over 30,000".
You have to think if we can believe those numbers or not, but assuming they were correct you can see the drain.
What is now being determined is what remains on the asset side. At this point the receiver has already stated that there is "nothing like $8 billion" in the portfolio. Plus the fact that the bank was having trouble with redemptions, and scrambling for cash makes it clear that there weren't many liquid assets left.
But lies work both ways and one can only hope that the bank has some assets also "off the books" which can be seized and used to satisfy creditors. Even if they are illiquid ones. We know from SEC documents that the bank that "Doesn't do loans" actually had lent money to eLandia. There could be more of these deals out there.
Then of course, there are Mr. Stanford's assets, some of which have been seized or frozen. But there is a problem with that also. You see, Stanford International Bank never paid a dividend. So, if Mr. Stanford was receiving compensation from the bank in some other fashion, he needed to report that on his 1040. And while the IRS in normal circumstances can only go back three years to conduct an audit, if there is evidence of fraud, they can go back further. If Mr. Stanford owes US taxes (and apparently he does), the IRS gets first dibs on the seized assets. So, I'd say it's a pretty good bet that Mr. Stanford's filings are no longer gathering dust in the IRS's archives at this point.
Monday, February 23, 2009
Starving the Beast
Ponzi schemes aren’t necessarily born that way. They can start off legit, as long as the model works. They can run with a gap between the value of the assets “in the books” and their “real” or “market” value (is the “market” really “real”?) for a while as long as the assets are performing and there is cash in the bank. For that to happen deposit growth only has to equal or exceed expenses minus investment income.
In a good year the gap may even narrow some. But there comes a point when the gap becomes too large, too obvious and it is filled in with a lie. And the “bank” becomes a beast.
The beast gets hungry. It needs money to cover the lie and it needs souls to bring it that food. So it stretches its tentacles into the world in search of the unsavvy, the trusting, the needy and food. More food. To enlist those souls it gives them what they crave: belonging, self-importance, and material wealth. And it becomes a cult. A cult with a leader, blind faith, and a golden shield.
On CNBC, analyst Mike Holland was reviewing Stanford material and said wisely “This doesn’t pass the smell test”. He’s right. It doesn’t. Mike’s a smart guy and knows this stuff. But the beast doesn’t want Mike’s money. It will never get Mike Holland’s money, so its tentacles never touch him. They go around him and find Johnny Damon. And Johnny isn’t stupid or foolish or even greedy; he doesn’t know what LIBOR is and he shouldn’t have to know; because he’s busy playing ball and earning his deserved rewards. So he sees the smartly dressed woman with the golden shield and the word “bank” and he signs the check. And the beast is fed.
So I wrote “Duck Tales” and I wrote it the way I did because it wanted it to be read. By Mike Holland. And Johnny Damon. And particularly the lost souls. To starve the beast. And maybe spare Mike or Johnny from this beast, or the next.
You see “Duck Tales” isn’t about Stanford or the SEC or how smart I am. It’s about forgiveness, and not judging, and about opening your eyes and seeing through the façade. Because we are all Mike Holland, and Johnny Damon and even Allen Stanford sometimes. So I wrote it for them. And I wrote it for me.
In a good year the gap may even narrow some. But there comes a point when the gap becomes too large, too obvious and it is filled in with a lie. And the “bank” becomes a beast.
The beast gets hungry. It needs money to cover the lie and it needs souls to bring it that food. So it stretches its tentacles into the world in search of the unsavvy, the trusting, the needy and food. More food. To enlist those souls it gives them what they crave: belonging, self-importance, and material wealth. And it becomes a cult. A cult with a leader, blind faith, and a golden shield.
On CNBC, analyst Mike Holland was reviewing Stanford material and said wisely “This doesn’t pass the smell test”. He’s right. It doesn’t. Mike’s a smart guy and knows this stuff. But the beast doesn’t want Mike’s money. It will never get Mike Holland’s money, so its tentacles never touch him. They go around him and find Johnny Damon. And Johnny isn’t stupid or foolish or even greedy; he doesn’t know what LIBOR is and he shouldn’t have to know; because he’s busy playing ball and earning his deserved rewards. So he sees the smartly dressed woman with the golden shield and the word “bank” and he signs the check. And the beast is fed.
So I wrote “Duck Tales” and I wrote it the way I did because it wanted it to be read. By Mike Holland. And Johnny Damon. And particularly the lost souls. To starve the beast. And maybe spare Mike or Johnny from this beast, or the next.
You see “Duck Tales” isn’t about Stanford or the SEC or how smart I am. It’s about forgiveness, and not judging, and about opening your eyes and seeing through the façade. Because we are all Mike Holland, and Johnny Damon and even Allen Stanford sometimes. So I wrote it for them. And I wrote it for me.
Saturday, February 21, 2009
Dirty Job
On “Discovery” there is a program called “Dirty Jobs”, where host Mike Rowe explores people who unblock sewers, shovel manure and other similarly distasteful ventures. It’s quite entertaining and I’ll watch as much as my stomach allows. Invariably, I come to the conclusion that it’s a job I DON’T want. But someone has to do it. Because if not, the sewers back up, the manure piles up, the roaches run free and things get messy and smelly real quick. The cleanup is normally costly and painful. So dirty as they may be, these jobs are important.
In the financial world, the dirty job is the auditor. He’s the maintenance man, he’s the cop. It’s the job I DON’T want. It’s the dirty job. But someone has to do it.
Drilling things down to basics, the auditor doesn’t do the books. That’s the accountant. The auditor checks things. That the money that’s in the books, is actually in the bank (Satyam – talking to you); that the inventory is IN the warehouse, that the portfolio actually EXISTS and so on. There’s a lot more to the auditor than just the accounting, so they’ll also check that the delivery guys don’t have a side business, that the purchasing guy is looking for the best deal out there and so on. You get the idea. They don’t only look for fraud, they also check that things are being done right, so they normally go around asking a lot of questions. Oh, and least I forget, the petty cash. These guys LOVE to check the petty cash till. It’s almost OCD. They usually work in teams, so one guy checks the other, and they rotate from task to task. You get the idea; no one gets too “chummy” or too familiar with any single aspect. It also makes it a bit more interesting for the auditors. They still do the petty cash thing, though.
One thing these guys love is third party confirmation, so they’ll send out little envelopes to the bank, the broker, clients, etc., just to make sure the bank and broker statements, the invoices and the delivery notes are actually correct and not some wild or fraudulent fabrication. Those little envelopes have to be sent back to the AUDITOR and not the company. The reason should be quite obvious, but they still put it all over those envelopes (and people STILL send it to the wrong place).
The “boss” auditor in the organization reports not to the CFO or the comptroller, but to highest level of the organization, usually the board of directors. I think we can understand why. They’re checking everybody else.
However, these guys usually don’t get paid like top-level executives, because it’s just a dirty job. They’re not out there making groundbreaking corporate decisions or on the front line with customers. Maybe it’s not fair, but that’s the way it is.
The “external” auditor checks that the things that the “internal” auditors are doing is right. And they’ll recheck stuff, usually the important stuff – money in the bank (PWC talking to you- Satyam), portfolio at the broker, etc. They do the little envelope thing, too.
And of course, the petty cash. They usually report back to the shareholders, which makes sense ‘cause that is one step UP from the board, in what is called an “audited” report.
They rotate “teams” from client to client and yes; it’s even a good idea to rotate external auditing firms every few years. You get the idea, fresh eyes, and fresh perspectives constantly.
When all this is working correctly, it’s like a smooth running machine humming the background.
Except for one thing: these guys are a PEST. They’re always snooping around asking stupid questions, wasting your time, sending those envelopes and checking the petty cash.
Managers and execs don’t report to these guys and most make a ton more money than they do. So when they come around, you’ll roll your eyes and think what do these guys want now? And you’ll make them wait outside, while you do your “real” job, the one they pay you to do, and the one that reports back to your boss and defines your bonus. Or you’ll let those stupid envelopes pile up on your desk, because you’re swamped and have better things to do. Most of the time this stuff doesn’t matter, just little blips in the background whirr.
So it’s humbling for the auditor, he knows his place in the pecking order and probably who makes what. So when the “big man” says “later” or “don’t worry about that” or “that’s the way we do things around here”, the auditor thinks “what the heck” or “it’s not really important” and “it’s their problem anyway”. And most of the time nothing happens, but sometimes stuff does. It happens. STANFORD happens.
So here’s the thing: auditor guy. It’s your job. It’s a dirty job. I don’t want it. But it’s yours. So do it. And do it well. And if you can’t do it: don’t do it. And if they don’t let you do it: QUIT. And if something smells funny: TELL. Be discerning though, you know what’s important. It’s not the account with $30 in it. Bug us with important questions, interesting questions. And knock it off with petty cash already (ok, ok, we’ll do it sometimes).
Because when the sewers back up and the manure piles up, and everything spills over, you’re going to know why. And you’re not going to like it.
So do your dirty job, do it with pride, do it with honor. It’s important. You guys are the front line of defense against the Stanfords of the world.
And clip this column and take it to your superior. This might be the time to ask for a raise.
P.S. Never been an auditor, so if I messed up the description, forgive me. But I still don’t want your job.
In the financial world, the dirty job is the auditor. He’s the maintenance man, he’s the cop. It’s the job I DON’T want. It’s the dirty job. But someone has to do it.
Drilling things down to basics, the auditor doesn’t do the books. That’s the accountant. The auditor checks things. That the money that’s in the books, is actually in the bank (Satyam – talking to you); that the inventory is IN the warehouse, that the portfolio actually EXISTS and so on. There’s a lot more to the auditor than just the accounting, so they’ll also check that the delivery guys don’t have a side business, that the purchasing guy is looking for the best deal out there and so on. You get the idea. They don’t only look for fraud, they also check that things are being done right, so they normally go around asking a lot of questions. Oh, and least I forget, the petty cash. These guys LOVE to check the petty cash till. It’s almost OCD. They usually work in teams, so one guy checks the other, and they rotate from task to task. You get the idea; no one gets too “chummy” or too familiar with any single aspect. It also makes it a bit more interesting for the auditors. They still do the petty cash thing, though.
One thing these guys love is third party confirmation, so they’ll send out little envelopes to the bank, the broker, clients, etc., just to make sure the bank and broker statements, the invoices and the delivery notes are actually correct and not some wild or fraudulent fabrication. Those little envelopes have to be sent back to the AUDITOR and not the company. The reason should be quite obvious, but they still put it all over those envelopes (and people STILL send it to the wrong place).
The “boss” auditor in the organization reports not to the CFO or the comptroller, but to highest level of the organization, usually the board of directors. I think we can understand why. They’re checking everybody else.
However, these guys usually don’t get paid like top-level executives, because it’s just a dirty job. They’re not out there making groundbreaking corporate decisions or on the front line with customers. Maybe it’s not fair, but that’s the way it is.
The “external” auditor checks that the things that the “internal” auditors are doing is right. And they’ll recheck stuff, usually the important stuff – money in the bank (PWC talking to you- Satyam), portfolio at the broker, etc. They do the little envelope thing, too.
And of course, the petty cash. They usually report back to the shareholders, which makes sense ‘cause that is one step UP from the board, in what is called an “audited” report.
They rotate “teams” from client to client and yes; it’s even a good idea to rotate external auditing firms every few years. You get the idea, fresh eyes, and fresh perspectives constantly.
When all this is working correctly, it’s like a smooth running machine humming the background.
Except for one thing: these guys are a PEST. They’re always snooping around asking stupid questions, wasting your time, sending those envelopes and checking the petty cash.
Managers and execs don’t report to these guys and most make a ton more money than they do. So when they come around, you’ll roll your eyes and think what do these guys want now? And you’ll make them wait outside, while you do your “real” job, the one they pay you to do, and the one that reports back to your boss and defines your bonus. Or you’ll let those stupid envelopes pile up on your desk, because you’re swamped and have better things to do. Most of the time this stuff doesn’t matter, just little blips in the background whirr.
So it’s humbling for the auditor, he knows his place in the pecking order and probably who makes what. So when the “big man” says “later” or “don’t worry about that” or “that’s the way we do things around here”, the auditor thinks “what the heck” or “it’s not really important” and “it’s their problem anyway”. And most of the time nothing happens, but sometimes stuff does. It happens. STANFORD happens.
So here’s the thing: auditor guy. It’s your job. It’s a dirty job. I don’t want it. But it’s yours. So do it. And do it well. And if you can’t do it: don’t do it. And if they don’t let you do it: QUIT. And if something smells funny: TELL. Be discerning though, you know what’s important. It’s not the account with $30 in it. Bug us with important questions, interesting questions. And knock it off with petty cash already (ok, ok, we’ll do it sometimes).
Because when the sewers back up and the manure piles up, and everything spills over, you’re going to know why. And you’re not going to like it.
So do your dirty job, do it with pride, do it with honor. It’s important. You guys are the front line of defense against the Stanfords of the world.
And clip this column and take it to your superior. This might be the time to ask for a raise.
P.S. Never been an auditor, so if I messed up the description, forgive me. But I still don’t want your job.
Thursday, February 19, 2009
Shutting it Down
Time for me to get back to work. Thanks guys. I'm declining all audio and video requests. That's radio, TV and telephone. I can't. It's too much. I know at this point I'll be getting questions that maybe I don't want to answer honestly or just can't answer 'cause I didn't do that part of the research. I'm a really bad liar.
I do want everyone who's interested to actually READ "Duck Tales", the first part much more than the second part. The second part we already know about. I didn't write "Stanford International is an $8 billion Ponzi" or "How to catch a thief"; I wrote "Duck Tales" and if you read it you will know the difference.
I'm going to pick up a nice copy of the "Emperor's New Clothes" and display it prominently somewhere around the house. I know I'm going to read it to my grandkids (not yet...PLEASE..LOL).
The story as far as I'm concerned is over. It's moved on. In a number of directions. If you want to read about the story, this is not the place to come. If you want to read some of the crap I've got going through my head, you're more than welcome. I've gotten some accolades for my writing these days (somebody actually called it a "gift" LOL), so that's something I will do. But not about Stanford, specifically. Other stuff. Related or not. It's my blog. LOL. I'll try to make it entertaining, Promise.
I'll also advise here when I'm going to be doing interviews, IF anyone is still interested after a while (I'm thinking a week). That will allow me to catch up on my work (did I say I love my job?) and why not...the story too. Then whatever.
The stuff on this blog, as far as I'm concerned is copyright-free. Feel free to use it. Copy/paste etc. I really don't know how that works. I don't know about the stuff that's linked out to other blogs, I'll check with my friends, new and old. Some will tell me I'm crazy, I guess.
I've found this to be a great way to communicate. I get to tell my own story...my way. Not within someone else's context. Personally, I think it's groundbreaking...and I hadn't realized up to now.
I will be writing about that.
I know you don't get opportunities like this in life very often. I really want to take advantage of it in a constructive way.
Shut Down...
P.S. But Jon...you know I'm waiting for you! (I am SO full of myself).
I do want everyone who's interested to actually READ "Duck Tales", the first part much more than the second part. The second part we already know about. I didn't write "Stanford International is an $8 billion Ponzi" or "How to catch a thief"; I wrote "Duck Tales" and if you read it you will know the difference.
I'm going to pick up a nice copy of the "Emperor's New Clothes" and display it prominently somewhere around the house. I know I'm going to read it to my grandkids (not yet...PLEASE..LOL).
The story as far as I'm concerned is over. It's moved on. In a number of directions. If you want to read about the story, this is not the place to come. If you want to read some of the crap I've got going through my head, you're more than welcome. I've gotten some accolades for my writing these days (somebody actually called it a "gift" LOL), so that's something I will do. But not about Stanford, specifically. Other stuff. Related or not. It's my blog. LOL. I'll try to make it entertaining, Promise.
I'll also advise here when I'm going to be doing interviews, IF anyone is still interested after a while (I'm thinking a week). That will allow me to catch up on my work (did I say I love my job?) and why not...the story too. Then whatever.
The stuff on this blog, as far as I'm concerned is copyright-free. Feel free to use it. Copy/paste etc. I really don't know how that works. I don't know about the stuff that's linked out to other blogs, I'll check with my friends, new and old. Some will tell me I'm crazy, I guess.
I've found this to be a great way to communicate. I get to tell my own story...my way. Not within someone else's context. Personally, I think it's groundbreaking...and I hadn't realized up to now.
I will be writing about that.
I know you don't get opportunities like this in life very often. I really want to take advantage of it in a constructive way.
Shut Down...
P.S. But Jon...you know I'm waiting for you! (I am SO full of myself).
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