Stanford Financial scandal

After the newspaper’s initially slow reaction in 2009 to the breaking news that R. Allen Stanford’s financial empire was nothing more than a multi-billion dollar Ponzi scheme, I was asked to move over and catch us up. My mission was to mix daily — sometimes hourly — breaking news with larger enterprise stories showing how central Memphis was to the Stanford Financial companies, as well as the impact the unfolding collapse was having on the area. Allen Stanford’s top two lieutenants, James Davis and Laura Pendergest-Holt, were based in the opulent Memphis office, and the company was able to build a huge footprint in Memphis by using some of the area’s most respected financial professionals and institutions to lure investors into what ultimately was revealed as a con game.

But the news also struck hard at the companies, organizations and charities around Memphis who had forged relationships with Stanford. The huge commitments the company made to Memphis included a sponsorship of the 51-year-old PGA Tour event that has long been one of the city’s most cherished institutions and a decision to base Stanford’s charitable arm, the Stanford Foundation, in Memphis.

As local investors who were lured by the Memphis operation of Stanford Financial Group take stock of their personal financial wreckage, financial advisers in town are balancing the temptation to say “I told you so” with a larger desire to help people reassemble their financial lives.

It was Feb. 17 and Dr. Shibendra Das was at the Crescent Center in East Memphis on another matter when word spread that there was a commotion on the third floor. Das, 74, knew that floor well — it was the physically symbolic home of the wealth he had built since coming to the U.S. from India more than 40 years ago.

According to SEC documents, brokers were promised as much as 2 percent commissions on those CDs, with another 1 percent going to Stanford. Industry standard for CDs, according to financial professionals, is usually a fraction of that — for a $100,000 CD, one-tenth of 1 percent is common.

So, while most brokers might hope to earn $100 for selling a $100,000 CD, Stanford’s brokers could pull $2,000 commissions. That adds up fast. That also meant that the already-remarkable rates of return promised on the CDs — often 2 or 3 percent above standard market rates — came despite very high expenses.

Even as employees of Stanford Financial Group return to the lavish offices at the Crescent Center in East Memphis to retrieve personal items, they remain in limbo.

They are unsure whether they will receive another paycheck, unable to file for unemployment benefits and frustrated that the Securities and Exchange Commission and the court-appointed receiver are not providing more detailed information.

For Memphians who saw Texas financier R. Allen Stanford bring his lavish operation to town, attract millions of dollars into an allegedly fraudulent investment scheme and attach himself to some of the city’s most cherished institutions, Friday’s indictment and ordered jailing provide the first steps toward justice.

Leave a Reply