Corporate Scandal Stanford
What Went Wrong: Case Study of a Selected Corporate Scandal
“In Texas, Robert Allen Stanford appeared to be yet another flamboyant billionaire. But in the breezy Caribbean money haven of Antigua, he was lord of an influential financial fief, decorated with a knighthood, courted by government officials and basking in the spotlight of sports and charity events on which he generously showered his fortune.” This quote from an article in The New York Times portrays the life of Mr. Stanford, owner of the Stanford Financial Group that was shut down in 2009 for what regulators describe as “massive ongoing fraud”. Stanford Financial Group, with headquarters in Houston, Texas, was a privately held international group of companies that provided financial services including investment, banking and research. It was said to hold “$8.5 billion in deposits at its bank and […] about $50 billion in assets in its wealth management affiliate”. Stanford International Bank, based in Antigua, offered its clients astonishingly high interest rates on credit deposits that were sometimes more than double the rates offered by other banks. It was said to have 30 000 clients in 131 countries with significant presence in Colombia, Ecuador, Mexico, Panama, Peru and Venezuela, as well as the Caribbean.
“Stanford's CDs, which require a minimum investment of $50,000, offer tantalizing interest rates. The current rate on a one-year CD is roughly 4.5%, according to the bank's Web site. The average at U.S. banks is about 2%, notes research firm Bankrate.com (RATE). A year ago, the offshore bank sold five-year CDs that yielded 7.03%; the industry average hovered around 3.9%.”
The corporation was shut down and accused by the U.S. Securities and Exchange Commission (SEC) of defrauding investors in what is called a Ponzi scheme of $7 billion. A Ponzi scheme, as defined by the SEC is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new
“In Texas, Robert Allen Stanford appeared to be yet another flamboyant billionaire. But in the breezy Caribbean money haven of Antigua, he was lord of an influential financial fief, decorated with a knighthood, courted by government officials and basking in the spotlight of sports and charity events on which he generously showered his fortune.” This quote from an article in The New York Times portrays the life of Mr. Stanford, owner of the Stanford Financial Group that was shut down in 2009 for what regulators describe as “massive ongoing fraud”. Stanford Financial Group, with headquarters in Houston, Texas, was a privately held international group of companies that provided financial services including investment, banking and research. It was said to hold “$8.5 billion in deposits at its bank and […] about $50 billion in assets in its wealth management affiliate”. Stanford International Bank, based in Antigua, offered its clients astonishingly high interest rates on credit deposits that were sometimes more than double the rates offered by other banks. It was said to have 30 000 clients in 131 countries with significant presence in Colombia, Ecuador, Mexico, Panama, Peru and Venezuela, as well as the Caribbean.
“Stanford's CDs, which require a minimum investment of $50,000, offer tantalizing interest rates. The current rate on a one-year CD is roughly 4.5%, according to the bank's Web site. The average at U.S. banks is about 2%, notes research firm Bankrate.com (RATE). A year ago, the offshore bank sold five-year CDs that yielded 7.03%; the industry average hovered around 3.9%.”
The corporation was shut down and accused by the U.S. Securities and Exchange Commission (SEC) of defrauding investors in what is called a Ponzi scheme of $7 billion. A Ponzi scheme, as defined by the SEC is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new
References: * Goldstein, Matthiew. “Is Stanford Financial’s Offer Too Good to Be True?” Bloomberg Businessweek. 11 Feb. 2009. Web. 2 Mar. 2012 <http://www.businessweek.com/magazine/content/09_08/b4120022131798.htm> * Rothfeld, Michael * "Ponzi Schemes." "Ponzi" Schemes. U.S. Securities and Exchange Commission. Web. 02 Mar. 2012. <http://www.sec.gov/answers/ponzi.htm> * Shriller, Robert J [ 2 ]. Goldstein, Matthiew. “Is Stanford Financial’s Offer Too Good to Be True?” Bloomberg Businessweek. 11 Feb. 2009. Web. 2 Mar. 2012 [ 3 ] [ 4 ]. Thomas, Clive. "Stabroek News - Daily Guyana News." Stabroek News. 29 Mar. 2009. Web. 03 Mar. 2012. [ 5 ] [ 6 ]. "Ponzi Schemes." "Ponzi" Schemes. U.S. Securities and Exchange Commission. Web. 02 Mar. 2012. [ 7 ] [ 8 ]. Goldstein, Matthiew. “Is Stanford Financial’s Offer Too Good to Be True?” Bloomberg Businessweek. 11 Feb. 2009. Web. 2 Mar. 2012 [ 9 ] [ 10 ]. Thomas, Clive. "Stabroek News - Daily Guyana News." Stabroek News. 29 Mar. 2009. Web. 03 Mar. 2012. [ 11 ] [ 12 ]. "Ponzi Schemes." "Ponzi" Schemes. U.S. Securities and Exchange Commission. Web. 02 Mar. 2012. [ 13 ]