Investors who say they lost their life savings to accused swindler Allen Stanford told a congressional panel on Monday that US authorities were also to blame, and a former Stanford employee said she warned regulators about him as early as 2003 but was ignored.
“These agencies along with Stanford have robbed me of my American dream,” Craig Nelson, a 55-year-old resident of Magnolia Springs, Alabama, testified at a U.S. Senate Banking Committee field hearing.
“I feel the US government is responsible for my loss,” Nelson said, drawing a standing ovation from an audience of more than 250 Stanford investors in a crowded auditorium.
Stanford is in a Texas jail awaiting trial on 21 criminal charges related to an alleged $7 billion Ponzi scheme involving certificates of deposit issued by his bank in Antigua.
Leyla Wydler, a former Stanford Group financial adviser, said she came forward in 2003 with allegations that Stanford was operating a Ponzi scheme and was largely ignored by securities regulators — including the National Association of Securities Dealers, which became the Financial Industry Regulatory Authority in 2007.
Wydler, who said she made a similar allegation to the SEC in 2004, was hired by the company in 2000 and fired in 2002 for refusing to push the certificates of deposit (CDs) on her clients, she told the hearing.
“The financial advisers who sold CDs were praised and compensated for doing so, and those who did not sell the CDs were fired,” Wydler said.
Rose Romero, regional director in the SEC’s Fort Worth, Texas, office, told the hearing it took years to build a case against Stanford, partly because his operations were designed to avoid scrutiny by regulators.
“Stanford built a veil of secrecy around him,” Romero said, adding that jurisdictional issues also slowed the probe.
The SEC has been criticized for not acting quickly enough to shut down Stanford’s alleged $7 billion fraud. The agency’s internal watchdog said last month the SEC’s efforts to pursue Stanford were hampered by a lack of cooperation by the Texas billionaire and the head of Antigua’s financial regulator.
“The system absolutely failed us and now we are left destitute, defrauded and dependent on others,” said Troy Lillie, a retired Exxon Mobil refinery worker from Maurice, Louisiana.
Louisiana was hit particularly hard because brokers from the firm targeted oil refinery workers.
Stanford, whose fortune was estimated at $2.2 billion by Forbes magazine in 2008, has denied any wrongdoing.
Ralph Janvey, the receiver in the case, was invited to testify but declined, writing in a letter that his testimony might hinder the government’s criminal investigation. He has drawn sharp criticism from Stanford investors.
Republican Senator David Vitter of Louisiana said he plans to ask SEC Chairman Mary Shapiro to request that the federal judge in Dallas replace Janvey.