Fox Business Breaks Stanford Whistleblower Story

Although I tend to write about national and international issues, I cannot help but notice an important story that broke out very close to home and is having an impact through out the world of finance. Allen Stanford, who has been accused of being a "Mini Madoff" has dominated the headlines of finance newspapers for weeks and people have been trying to get a handle on the full extent of the damage he has done. Fox Business Network, in a recent interview with Stanford whistleblower Leyla Wydler has helped significantly in that effort. The network was the first to break with the Wydler interview.

Being interviewed by Fox's Adam Shapiro, with her attorney Mike Falick, Wydler went into detail about "what she knew," "when she knew it," and the efforts she took to get the word out to others.

This important interview included:

• Wydler’s attorney Mike Falick on the response they got from the NASD, now FINRA, during their lawsuit: “We were told by FINRA that our document request was irrelevant. Obviously, the document request was highly relevant, and had we gotten those documents not only would Leyla have won her case, but maybe 30,000 people wouldn’t have lost their life savings."
  
• On being pressured to bring more deposits to Stanford Financial’s off shore bank: “I was constantly bombarded with emails, telling us to bring more deposits into the bank. Management, and the managers there, they would be sending us emails and they even had scorecards and make teams within the offices, to see who would bring more deposits in.”


• On why she questioned Stanford Financial’s off shore CDs: “I knew they were not FDIC insured, I looked at their financial statements their financials were not audited by US reputable account firm, instead it was done by an unknown firm in Antigua, to me that was a red flag. I was not going to put my clients into a CD that seemed safe and very liquid when in fact it was not."


• On why she was terminated from Stanford Financial Group: “In 2000, I was recruited to work for Stanford as a broker. As a broker dealer, and not to sell their offshore product, which was at the bank in Antigua. I went through arbitration back in 2002 when I was terminated, I was working for Stanford since 2000 until 2002, and it was mainly because I was terminated because of my reluctance to sell those CDs.”


• On how the NASD, now FINRA, reacted when she claimed that Allen Stanford was running a Ponzi Scheme: “I guess indifferent, you know they didn’t even do their due diligence and say ‘Ok, I would like to see their portfolio appraisal and be verified by a 3rd party and to prove her wrong’.”


• On going to the SEC in 2004: “I had a list of everything, all my concerns. I wrote down a document and sent it to them and I told them these are my concerns, this is what happened, look into it, this might save people’s savings in the future, because we can stop this. And it was just sent to them, and that’s it.”


• On how much money would have been saved in NASD, now FINRA, would have listened to her: “When I left I believe that there was about a billion dollars in the bank and it ended at 7.2 billion.”

It was a "must see" interview and provided the kind of information that, if the regulators had been doing their job, would have saved people billions of dollars.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

After Receiving 150 Year Sentence, Madoff Debates an Appeal

Bernie Madoff, the scam king of the decade, was sentenced to 150 years in prison and according to his attorney, Ira Sorkin, he is uncertain about whether or not he will appeal this sentence. Bernie Madoff’s lead attorney spoke to Fox Business Network and said that “we haven’t made the decision yet” to appeal and that Ruth Madoff’s settlement “took a long time to work out.”

In a coup for the Fox Business Network, Sorkin tackled some tough questions:

• On appealing Madoff's 150 year settlement: “We haven’t made that decision yet.”



• On the significant wait for Ruth Madoff to make a deal regarding the surrender of a majority of the assets: “We came to a settlement with the government that took a long time to work out. It was a compromise.”



• On the amount of money recovered following the $50 billion Ponzi scheme:“More than $1 to 2 billion has been recovered.”

The question many are asking, is why wouldn't he appeal, what is essentially is, a life sentence? It could be that Madoff's attempt to get a more lenient sentence of 12 years based on the average lifespan for a man his age, fell on deaf ears. It could be that that Madoff's wife was vulnerable to possible jail time herself and feels it may be time to simply catch their breath. There are also his sons, Mark and Andrew, who worked for their father's firm and have been pleading innocent since the story broke. Maybe, quietly going away for 150 years, will make it possible for this chapter to close for them.

Unfortunately for Madoff and his attorney, they do not have 150 years to make a decision. In fact, they have only ten days from the day he received his sentence and soon his time will be measured in hours.

For the time being, Sorkin is making the case that he and his client are involved in the recovery process. For example, in the Fox Business interview, Sorkin acknowledged that there are assets in other parts of the world, citing France specifically, stating “There are assets overseas, and as we said in court yesterday, we are assisting the government -- my firm and one of my partners -- in recovering assets that are located overseas, which the U.S. attorneys office cannot recover on their own."

I would guess that Madoff is going to pursue an appeal in order to keep the door for a lighter sentence open. After all, I assume he can always change his mind on the appeal if his attorney asks for it, but he cannot force the government to give him more time to choose to pursue such.

Hearing the sentiments of those who are his victims makes me think that prison may be the safest place he could possibly be. So many have been terribly and profoundly impacted by this scam master. I don't know if that reality will be as inspiring as the hope of living beyond his sentence.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

The Stanford Financial Group Web Begins to Spread

As someone who lives in Houston and monitors financial articles, I have been particularly interested in the Stanford Financial story. Today, the Fox Business Channel has taken the lead on providing information on this hot topic.

Today I read that "Laura Pendergest-Holt, Stanford Financial Group’s chief investment officer, is likely to be indicted on Tuesday on criminal charges" at FoxBusiness.com. The total scope of the indictment is unknown at the time of this writing, but the article points out that "At minimum, the indictment will be on a charge of obstruction of justice, though her legal team thinks there could be a number of other charges brought against her as well." Knowing the way the government has pursued these type of cases, we can expect more, maybe many more. It is through the leveraging of these charges that the government gets pleas and information on others involved.

Pendergest-Holt is joining the firm’s founder, Chairman and CEO Robert Allen Stanford in the brewing hot water. Stanford, and three of his companies, have been charged by the Securities Exchange Commission (SEC) of orchestrating an $8 billion fraud related to a Certificate of Deposit program. Although he has not yet been charged with any crime at this point, accusations are flying and it seems to be a question of "when" and not "if" he will be facing charges. The indictment of Pendergest-Hold cannot bode well for Stanford.

In fact, the focus on Pendergest-Holt first, could be a part of the government's efforts to make sure that the bigger penalties fall on Stanford. It is not at all unusual for the government to go after the underlings in criminal cases first in order to assure a conviction and to get a heavy sentence for the ring leader.

Pendergest-Holt is the youngest of the Stanford senior executives and, at 35, may seem to be an unlikely central character in this story, but her knowledge of the inner workings of the firm and the relationships that drive it, makes her a very connected personality in this drama and a potentially attractive target to the government indeed.

Historically, an $8 billion fraud case would be considered massive and virtually unheard of; but thanks to the era of Bernie Madoff and his $50 billion Ponzi scheme, the Stanford story has largely been under the radar screen. Fortunately, Fox Business is being serious in its due diligence. Fox's prowess is a story in itself. Increasingly the new cable business network is becoming the leading network and is putting its older competitors (CNBC and Bloomberg) on notice, on the importance of being first.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. Eric Bolling of Fox News and Fox Business says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Madoff Stays Free

If you listened to the business pundits, you knew Madoff was going to jail. After all, he is accused of stealing over $50 billion from his victims. To make matters worse, FBI agents discovered checks made out in Madoff's apartment to family members in what appears to be an attempt to hide his wealth. To the surprise of pundits, neighbors, victims, and more, Madoff is not going anywhere. He remains in his comfortable New York City apartment.

It seems odd that a person who is in such a terrible mess would find any day to be a "good one." But considering the pressure he is currently under, he probably feels as giddy as a kid at the amusement park. This was a close one. Fox News is reporting Madoff could stay in this apartment for years as they proceed through the legal process, but I wonder how he can afford to do such. His apartment is very expensive, he is under house arrest (making it difficult for him to "get a job"), and he doesn't strike me as the type that would start a home business.

Bloomberg reports that "U.S. Magistrate Judge Ronald Ellis in Manhattan today said Madoff, arrested last month for running an alleged $50 billion Ponzi scheme, may continue to live under house arrest in his Manhattan apartment on the Upper East Side. Ellis imposed new conditions, ordering Madoff to compile an inventory of all items in his home and barring him from transferring property." So although he remains far more free than he would be in jail, he is far from off the hook and, in fact, he has additional requirements on his release.

Everything from a TV remote to every spoon in his kitchen will have to be made accounted for, put on the records, and stay in his possession until the issues surrounding his case are settled. He will be spending months getting this job done. Furthermore, he has every incentive to drag this process on in order to delay the judicial process.

What I find odd about Madoff is that he is so incredibly cool. He acts as though he was slapped with a parking ticket and not the type of crime that could keep him in jail for the rest of his life. Don't get me wrong, I'm not impressed. In fact, I think that his apparent detachment from this reality may be an indication of serious mental health issues. Imagine if he wins his case due to being not guilty, due to insanity. Anything is possible and it would make quite a news day.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Madoff Destroys Himself and Others

Bernard Madoff enjoyed one of the most trusted names on Wall Street. "Enjoyed" is definitely past tense. Madoff has sat on a committee of academics, regulators and executives formed in 2000 by former Securities and Exchange Commission Chairman Arthur Levitt to assist the agency on new stock-market rules in response to the growth of electronic trading. Madoff has led the trading committee at the Securities Industry Association, Wall Street’s biggest trade group, and has served as chairman of the Nasdaq Stock Market. Madoff was the quintessential insider, which is how he was able to go so deep into a far reaching "Ponzi scheme" (to use his own words). Everyone who was someone on both sides of Wall Street -- regulators and investors alike -- knew the 70 year old Madoff as an authority with enormous personal credibility.

Now, Bloomberg reports that Madoff is "alleged to be (a central part of) a Ponzi scheme that cost investors $50 billion, after he subjected it to oversight two years ago, people familiar with the case said." Did the regulators dismiss the normal level of due diligence that they would require for such investments because of Madoff's reputation? That, I'm sure is one of many questions that will be asked.

Bloomberg also reports that Madoff is "operating what he told his sons was a long-running Ponzi scheme in the New York-based firm’s business advising rich people, hedge funds and institutions. His ability to avoid detection may fuel debate about the SEC’s effectiveness and the adequacy of its resources for policing money managers. "

Ironically, Madoff was accused of illegal activities in the early 1990s but was found to had been operating legally in the raising of over $400 million in an unregistered securities deal. I wonder if they will want to look at that deal again, considering how far reaching this current scam is and its financial impact. $50 billion is no small amount (yes, you keep seeing BILLION).

Madoff got clean with his sons first and they, in turn, turned him in to authorities. They are completely distancing themselves from him and are declaring their innocence.

Madoff has invested huge amounts of money into the politicians who appoint the regulators. Furthermore, he has been in a regulatory role over the years. On the surface, he appeared to be the kind of person that would require anything but extensive scrutiny. Maybe, in order to protect those who would easily trust such individuals, such financial managers should be under additional scrutiny. I'm sure that will be part of future debates as well. In the mean time...buyer beware!

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.