Posts Tagged ‘fraud’

Sir Allen Stanford makes cricket look stupid. And is there a common thread to the latest frauds?

February 19, 2009

A nice cartoon from an article in today’s FT. Well now we know where all of his money came from! It appears that he made his initial fortune in Texan real estate, then evolved the insurance and real estate business started by his grandfather in 1932 into a wealth management business with clients globally.

His Stanford Financial Group business based in Texas, with the banking division registered and located in Antigua (as Stanford International Bank, having been initially started in Montserrat under a different name).

I speculate here, but could all of his splashing out on sponsoring sporting events and sports stars, and especially the cricket world, have been part of some way to keep his mind off of any financial problems his organisation was facing? What probably started on a very small scale, I assume, grew and grew further and further out of Stanford and his associates’ control. (That is pure speculation on my part)

Is there a common thread to recently uncovered frauds?

Stanford:

  • Business named after him.
  • Audited by very small firm of accountants.
  • Offering improbably high returns.

Madoff:

  • Business named after himself.
  • Audited by very small firm of accountants.
  • Offering improbably high returns.

I will end with some questions… Ignoring the name idea, why do affluent investors get drawn into these sorts of frauds? If someone is offering you 10% returns on your investments, while the average return available in the market is around 5%, does that not ring alarm bells? Or is it simply greed? Also, do regulators ever check that an audit firm’s size is likely to enable it to carry out an audit to a sufficiently high standard? Would it not make sense that if some $50bn dollar business is audited by MickeyMouse LLP that it is placed under extra scrutiny?

Update:

Sir Allen is also suspected of laundering money for the drug barons of the notorious Gulf cartel, and that one of his private jets was detained as part a Mexican investigation last year. Telegraph report.

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