Stanford Financial Group Corporate Scandal 12. In February
Stanford Financial Group Corporate Scandal 12. In February
Stanford Financial Group Corporate Scandal 12. In February of 2009, the Antigua/Texas based global financial group (made up several subsidiaries owned by the same owner) owned by R. Allen Stanford was charged with scamming their customers by the Securities and Exchange Commission. Stanford Financial Group was charged with fraud when deceptively selling consumers $8 billion dollars in deposit certificates. According to The Money Alert, ”A certificate of deposit, or CD, is a type of lowrisk investment that many people use when they want a small return on their investment without having to worry about losing their money” (1). The firm ensured its customers/investors an unrealistically large return on their certificates of deposit. According to Zachary Goldfarb, “Stanford International Bank offered CDs paying anywhere from 7.45 percent to 10 percent annual interest rates” (16). Stanford Financial also lied to their customers on how their money was being invested. Customers were told that their deposits were invested in easily sellable securities, however in actuality the customer’s deposits were invested in dubious real estate and private equity holdings. The investment portfolio of the company was kept secret from their customers and was only known by R. Allen Stanford and James M. Davis (the Chief Finical Officer). 3. There are a variety of rules the Stanford Group broke. The culprits are the executive officers of Stanford Group and their use of one subsidiary, Stanford Investment Bank (SIB) and several other companies within the group, the company executives were charged with fraud. The fraudulent act that got them caught was, via SIB Stanford Group was fabricating high returns on CDs. Using fictitious CDs created by SIB, Stanford group faked high returns by using one of their subsidiaries as faux investors to entice other investors, thus swelling the numbers they would present to potential investors. The various members of the company were also charged with counts of obstruction of an SEC investigation. Once Stanford Group was under investigation various other violations were discovered. (huffington post) Laundry list of SEC acts the company violated (pulled directly from the complaint document): By engaging in the conduct described in this Complaint, defendants Stanford, Davis, PendergestHolt, sm, SGC, and Stanford Capital, directly or indirectly, singly or in concert, have engaged, and unless enjoined and restrained, will again engage in transactions acts, practices, and courses of business that constitute violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.c. §§ 77e(a), 77e(c) and 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], and Exchange Act Rule 10b5 [17 C.F.R. § 240.10b5] or, in the alternative, have aided and abetted such violations. In addition, through their conduct .
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