The SEC is harshly criticised for being ineffective, lazy, and dumb, and a report that’s expected to be released soon might confirm that it’s all true.
The SEC Inspector, General David Kotz, released a report this past spring that accused the SEC of messing up the investigation of Allen R. Stanford.
The damning report, accusing the SEC of gross negligence, was released on the same day that the SEC announced that they were charging Goldman Sachs with fraud.
Senator David Vitter, a Republican from Louisiana, sums up what happened nicely.
“This isn’t just one major disappointing scandal, it’s really three, it’s the original Stanford Ponzi scheme fraud, which is horrible,… on top of that it’s the inaction by the SEC, which I think is absolutely scandalous.”
“And on top of that, number three, is this conscious effort… by the SEC to cover its tracks.”
Of course only a few people noticed the convenient coincidence. But the SEC watchdog is about to release a report on the suspicious timing, which will include whether or not anything fishy was going on inside the SEC to purposely halt the investigation.
Like, encouraging the regulators to avoid complicated investigations, for example.
- The SEC encouraged only “quick hit” cases to boost their stats (numbers) and make it seem like they were effective. During the previous decades the Fort Worth office operated within a broader SEC culture where novel and complex cases such as the Stanford scheme were not encouraged because officials were evaluated by the number of cases they brought. Instead, staff were focused on bringing a number of “quick hit” smaller cases.
Because why else would this have happened:
- The SEC concluded that Stanford’s fund was a fraud FOUR separate times, yet each time decided not to pursue the investigation. The SEC’s Fort Worth office had examined Stanford in 1997, 1998, 2002 and 2004, “concluding in each case that Stanford’s CDs were likely a Ponzi scheme or a similar fraudulent scheme.”
In that light, the timing of the SEC’s announcement of the Goldman case looks even more desperate and guilt-ridden.
Kotz: The timing “strains credulity.”
Only something so big as the shocking charges against Goldman Sachs could have covered up the embarrassing details about the SEC’s mis-handling of Stanford’s ponzi scheme that Kotz revealed in his report. But now, with the bank’s settlement months behind them, they’re coming out, and the SEC is owning up to them.
Today, the SEC admitted with “regret” that it had suspected as early as 1997 that Stanford was running a Ponzi scheme, but did nothing to stop it until late 2005.
“The shortcoming occurred because there wasn’t sufficient follow-up to get as much evidence as we could have.”
The SEC seems to agree, or at least they’re not making an effort to deny any of this. Instead, the agency is now trying to redeem themselves by bringing new charges against the ponzi schemer.
The US government intends to file new charges against several executives involved in Allen Stanford’s multi-billion dollar Ponzi scheme, a US Securities and Exchange official said Wednesday.
But after all this, what’s to say the re-do isn’t just a save-face move that will end up wasting more time and taxpayer money?