The state’s role in the operation of accused swindler Allen Stanford stinks. As reported in a detailed story in the Miami Herald on Sunday, Florida regulators allowed Mr. Stanford to set up a dubious, one-of-a-kind office to handle vast investments, but never bothered to find out what he was doing with the money or whether he was playing by the rules.
If they had actually performed due diligence — in other words, done their job — they might have caught Mr. Stanford, or at least closed his shop, before he managed to get away with the nearly $7 billion that prosecutors say he unlawfully diverted. In fact, if they had possessed even a slight regard for the wellbeing of potential customers, they would not have given Mr. Stanford a clean bill of health to begin with.
Consider: The state’s chief banking counsel warned his bosses against approving the Stanford operation. “There was no lawful way that office should have been opened,” Richard Donelan told the Herald. He says he argued in vain that the kind of company Mr. Stanford wanted to run — a foreign trust office that could take in money without reporting purchases — did not conform to Florida law.
Mr. Stanford already had a shady reputation. Years before, he had voluntarily surrendered his banking license to British authorities in a controversy involving a bank he owned in the island of Montserrat.
The Miami office, which took in $600 million from customers in the first six years, was exempt from reporting amounts of money sent overseas. This made it unlike other Stanford companies around the country. In Texas — not known for zealous regulation — the Stanford office was not allowed to handle money, much less bypass minimum standards of supervision.
All of this raises the question of why Mr. Stanford was given preferential treatment.
Even the routine practices of the office should have set off multiple alarm bells. The Herald found that state regulators in 2001 duly noted that local documents recording the sale of certificates of deposit — the amounts of money the office raked in — would be burned after the figures were shipped to an office in Antigua, famous for its banking secrecy. And no one became suspicious? Amazing.
Members of the Florida Cabinet, including Attorney General Bill McCollum and Chief Financial Officer Alex Sink, should be alarmed over the failure of the state’s regulatory apparatus. A state grand jury armed with subpoena power should also be convened to find out why Mr. Stanford’s operation flourished while fortunes vanished and regulators slept.
— The Miami Herald
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