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SEC IG's Report On Allen Stanford Investigation Underreported

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As big a fan as I am of strong financial regulatory reform, I'm also something of an SEC skeptic, dating back to that time President Barack Obama appointed the wan and ineffective Mary Schapiro to head up the agency. Now, of course, the SEC is doing what it can to out-compete Goldman Sachs for the title of who is best at doing "God's work," so they've embarked on a fraud case against the Wall Street firm, which is in turn putting wind in the sails of reform-minded lawmakers.

The fraud case has gotten the bulk of the media attention, which is good for the SEC, because it means less coverage of the SEC IG's after-action report on the Allen Stanford Ponzi scheme case, which, as Chris Lehmann points out over at The Awl today, "dropped the same day." I'm sure that was just a fluke of coincidence!

Lehmann goes on at length to discuss the sorts of things that escape attention, while the bright light is shining on Goldman:

The shadiness of the Stanford operation first caught the eye of an SEC investigator named Julie Preuitt back in 1997--yes, twelve years ago, in the Clinton era. She investigated the returns Stanford claimed for the fund, pronounced them "absolutely ludicrous," and recommended that the agency launch a formal probe.

The good news is that the SEC's enforcement division tried to do that, eight months after Preuitt's recommendation. The bad news is that when Stanford refused to comply with any of the SEC investigators' requests for documents, they simply let the matter drop

It gets worse, of course. Spencer Barasch, the director of the SEC's Fort Worth office--which had jurisdiction over securities cases in Texas and three other states- reportedly told a fellow SEC attorney that he declined to green light the initial Stanford probe in 1998 after he called Stanford's own attorney, Wayne Secore (himself a former lawyer with the SEC) to ask if there was a case against his client. When Secore, astonishingly enough, replied in the negative, that was evidence enough for Barasch, according to the IG report--though Barasch, solicitous to preserve a reputation for minimal professional competence, told the IG's office that he had no memory of such an exchange, and that it sounded "absurd."

There's many more delightful details about the lengths that Barasch took to give Stanford a leg up, so read the whole thing, and get cynical!

Of course, opponents of reform are hard at work attempting to undermine the SEC in the wake of their action against Goldman Sachs. But you'll notice that their preferred strategy is not to amplify their Stanford failings, but rather to revive an ancient story about how the SEC is full of porn-crazed looky-loos. Because what Wall Street titan wouldn't prefer to keep alive the Stanford investigatory tactic of calling up suspicious figures and asking, "Hey, you guys aren't involved in any gigantic fraud schemes these days, are you? No? Okay, just checking!"

RELATED:
Rich People Things: The SEC Doesn't Care About Your Ponzi Schemes [The Awl]

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