Thursday, August 19, 2009
Baton Rouge, Louisiana
STANFORD REGULATORY SCREW UPS MAY COST
LOUISIANA TAXPAYERS HUNDREDS OF MILLIONS
Hundreds of irate Sanford investors converged on Baton Rouge this week to protest their financial losses from what they charge was a giant Ponzi scheme by this international investment firm. Their wrath is directed both at the Stanford group for undertaking the massive financial fraud, and federal regulators, including the Securities and Exchange Commission, for not providing proper regulatory oversight. But a strong case can be made that there is major culpability on the part of a state agency, the Office of Financial Institutions. And we are talking about Louisiana taxpayers being potentially hit with a bill that could approach $850 million.
Here is the question that several lawyers representing Sanford victims will soon allege: Did Louisiana regulators allow the Stanford Group to set up a dubious, one-of-a-kind trust to handle vast investments, but then never bothered to properly monitor just what was being done with the money and whether Stanford were playing by the rules?
Everyone has heard of a “Bank and Trust”. Well there are also provisions under Louisiana law to form just a “Trust,” with no bank involved. And the law is quite specific as to what a Trust can and cannot do. Here is the exact wording: “A trust company does not have the power to solicit, receive, or accept money or its equivalent on deposit, or lend money, except in transactions reasonably related to and derived from its service as fiduciary.” Not one word there about selling CDs from Latin American banks. Continue reading “Jim Brown on the cost of regulatory capture: More shit for Louisiana taxpayers to shovel courtesy of the Office of Financial Institutions”