Authors: Brian Bailey, Gina Hallman, Matthew Kazor,
ShaVonne Robinson, Daryl Wertz, and Devin Williams
Date: Week 5 Tuesday 22nd January 2013
1-2. 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 low-risk 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...