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Robert Allen Stanford And The Ponzi Scheme

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Numerous news outlets have covered the story of Robert Allen Stanford and the Ponzi scheme perpetrated by Stanford International Bank (“SIB”). Given the extent of the fraudulent misdeeds, questionable involvement of the Securities and Exchange Commission (SEC), and the ultimate price paid by the victims, Mr. Stanford’s scheme has received far less media attention than its close equivalent represented in the Ponzi scheme orchestrated by Bernard Madoff that was uncovered only months before the Stanford scheme surfaced. In a brief historical recap on the life and business ventures of Mr. Stanford, Matthew Goldstein discusses Mr. Stanford’s interesting career background, beginning with a failed business venture as the owner of a chain of health …show more content…

The company, along with SIB, the offshore bank in Antigua, was wholly owned by Mr. Stanford through his ownership of Stanford Financial Group. SFG claimed to serve over 50,000 investors in over 100 countries with assets totaling $8.5 billion. The company headquarters was in Uptown Houston, Texas and had offices in several countries around the world (Carvajal, Monroe, Pattillo, & Wynter, 2009). SIB claimed to be able to offer investors a higher return on certificates of deposit (CDs) than its competitors. The supporting evidence for SIB’s ability to offer such high returns (often many percentage points higher) was based on false and misleading information. Mr. Stanford, along with his CIO and CFO, intentionally misrepresented the financial performance and security of SIB in order to lure investors. “Information in SIB’s financial statements and annual reports to investors about the bank’s investment portfolio bore no relationship to the actual performance of the bank investments.” (SEC v. Stanford International Bank, Ltd. et al, …show more content…

Stanford’s scheme were working class citizens who wanted a safe investment and dependable return. However, their confidence in the seemingly safe certificates of deposit, that were in fact too good to be true, cost many their lifetime savings. In addition to the attractive return being offered to investors, SIB offered financial advisers a substantial commission which led to the further detriment of the victims. SIB recognized that a hefty commission would attract established financial advisers and incentivize aggressive sales tactics (SEC v. Stanford International Bank, Ltd. Et al,

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