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 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.


  1. Ante todo quiero agradecerte la iniciativa de publicar tus impresiones sobre la situación financiera del Stanford Bank. Espero que recibas profesionalmente un inmenso retorno tanto en prestigio como en cartera de clientes, lo mereces por tener la valentía de anticipar todo lo que inevitablemente sucedería.
    Seguí con detenimiento la entrevista de hoy en CNN, yo estoy en Venezuela.
    Lamentablemente no domino el inglés como para aprovechar toda la información que ofreces en el blog. El caso es que tengo dudas sobre lo que está ocurriendo en Antigua. Si bien el banco está cerrado, imagino que de alguna forma sería positivo que los afectados se aglutinaran. ¿Existe esta agrupación de afectados, de manera activa y formal?
    Saludos cordiales.

  2. 02 27 09
    Well YOU have been CORRECT. The problem: The U.S. regulatory sector - loaded with "Bodies" - more interested in if their paychecks ar in the bank every two weeks. I believe, any investigation should be focused on these "BOXES" & what goes on from hour to hour. Remember EQUITY FUNDING. I believe we all heard, "It will NEVER HAPPEN AGAIN." I'm a savvy BUY SIDE Trader - we have all been cheated - except that the "CROOKS" have blanket immunity" from prosecution/disbarment.
    Law Ed

  3. Promises to Meet Payroll Are not Honored/Allegations of Fraud and Attempts to Deliberately Mislead Employees and Harm Investors Levied at Receiver

    Calls and emails to the court-appointed receiver today regarding why payroll for the 3,000 plus employees of Stanford Financial Group were not returned.

    Employees in all U. S. offices were told by the Receiver that “Payroll would be met and benefits were still in effect” as part of their initial communication to employees (in person) as they closed offices. Funds for payroll are reportedly in Stanford’s Treasury department, employees were called in to process payroll, but the Receiver has not approved the transfer of funds to meet this payroll obligation. Funds should have been transferred into employee bank accounts at midnight tonight, and paper checks mailed tomorrow.

    Stanford employees were told they were not terminated last week, that in fact “it was business as usual” per the Receiver’s email to global Stanford employees. “Consider it a paid vacation,” a Stanford employee was told in Memphis, Tennessee. This means employees were not able to begin the process to file for unemployment or make other arrangements with creditors that their income had been suspended.

    In fact, many employees were called in to assist the Receiver in many departments. All employees have been working under the assumption that the Receiver would honor the commitment made to meet payroll. Were these employees called back under false pretenses? Funds are in-house to pay employees per Receiver’s promise – Receiver now apologizes for the hardship. Why is Receiver now denying to release the monies? Arethe lawyers and other “outside experts” hired by the Receiver being paid with funds promised to meet payroll?

    While criminal charges against Allen Stanford or Jim Davis have not been filed, most employees feel that a crime has been committed against them by the Receiver. Intentionally misleading and making false statements to employees (who are not under suspicion) should not be allowed by an entity acting on behalf of a federal agency. These employees are contacting their local, state and federal elected officials for relief and to investigate the actions and compensation agreement of the Receiver.

    It is alleged that the Receiver gets paid based on the amount of assets preserved, leading one to conclude that an obvious conflict of interest exists as it relates tousing assets to pay employees. Sources have indicated that Cigna, the health insurance provider, has not received payment and many employees were denied treatment today by their physicians due to refusal by Cigna. This nonpayment of the premium could mean that employees of Stanford are no eligible for COBRA benefits.

    Many are remarking that the SEC has acted in haste to shut down Stanford offices in more than 25 U.S. cities, as a small percentage of CD purchasers are actually investors domiciled in the United States. Why put thousands of employees out of work on a suspicion? Most employees worked to support the U.S. Broker Dealer, the majority of whose assets are custodied at Pershing, an insured and regulated entity owned by the Bank of New York Mellon. SEC needed a compelling headline and destroyed hard-working Americans’ lives in the process, just as they have frightened and hurt innocent investors who had zero monies with Stanford Intl Bank.

    The current Administration, the Department of Labor and elected state representatives must act to demand promises made by the Receiver are kept with regards to payroll obligations due to Stanford employees. Employees were not allowed to make provisions to care for their families due to stated commitments made to employees in person.

    Stanford employees have been wronged by sweeping and, as yet unproven, allegations made and the ensuing closing of offices. A second victimization is occurring right now. Why wait until 9 pm EST to advise that payroll will not be met? Are employees terminated and therefore free to collect unemployment? What about 401K plans? Deferred Comp? When applying for creditor new employment, will the Receiver verify employment or will they continue not to answer the phone? When will employees be allowed to retrieve personal effects from their offices? The message on the receiver’s web site does not address any of these real issues–and seems deliberately vague and once again prevents employees from making provisions to keep their homes and take care of their families.

    Employees are having babies, burying loved ones and trying to cope with the news that their jobs have been eliminated in the worst recession in their lifetimes. Tragically, health insurance premiums, life insurance payments and other benefits these employees have paid for, are not being honored. Employee’s payroll of February 15 included deductions from their checks for 401K plans. These monies have yet to be added to employees 401k accounts. Who has this money? Employees have received no communication for more than one week since Receiver took over (except for the one that stated “business as usual,”) and in fact, Receiver and Stanford HR only responded when employees began bouncing expense checks and calling with inquiries today.

    Where is the media coverage of this tragic and unfair situation?

  4. Hi, congratulations for the info in you Blog, yes good is true, the case Stanford is the main motive of the depression in USA and in Latin American, my question is; low that argues, figures Stanford, are toxics or harmful, for the people than save the money in Stanford Bank? and, Than measures take the justice of U.S.?

  5. thanks alex for your hard work
    I work for sir allen in st croix. I have not been paid. but I have been asked to keep working as my job is to protect and maintain an asset.
    Where is my insurance where is my 401k and roth
    will i ever get all the money I put into those saving plans.we were almost forced into the 401k plan told we had to contribute.I have a 1 year contract running until May 26 2009 can I excpect to get paid till then?

  6. Dear anon,
    Sorry I didn't see your post until, now. You might get paid, since you have a legitimate claim on the estate. I'm not sure when.
    Your savings may be depends where it is and what it is invested in.