Sense on Cents

Allen Stanford and Whitey Bulger

Are Allen Stanford and Whitey Bulger two peas in a pod? For those unfamiliar with Whitey, he is Boston’s greatest gangster, a government informant who simultaneously continued to run his gangland activities, one of the FBI’s Most Wanted, and still on the lam. The Martin Scorsese film, The Departed, was largely based on Whitey and his boys. If Whitey dealt in drugs and murder, is Stanford Financial, operated by Allen Stanford, a financial version of a government cover totally run amuck?  

 We all know the SEC totally dropped the ball in the oversight of the Bernie Madoff Ponzi scheme. On the heels of that and to alleviate massive pressure on the commission, the SEC quickly moved on Allen Stanford. 

MAJOR hat tip to MC of Investor Rebellion in sharing with me a story broken by the BBC, Stanford Drug Informer Role Claim:

Evidence has emerged that the Texan who bankrolled English cricket may have been a US government informer.

Sir Allen Stanford, who is accused of bank fraud, is the subject of an investigation by the BBC’s Panorama.

Sources told Panorama that if he was a paid anti-drug agency informer, that could explain why a 2006 probe into his financial dealings was quietly dropped.

Sir Allen vigorously denies allegations of financial wrongdoing, despite a massive shortfall in his bank’s assets.

But the British receiver of his failed Stanford International Bank – based in Antigua – told Panorama that the books clearly show the deficit.

If in fact this development is accurate, has the U.S. government, via the DEA, facilitated a Ponzi scheme?  I am not so naive as to think that there aren’t massive undercover operations ongoing regularly to infiltrate and expose illicit activities. However, if in fact that were the case, how did the DEA lose control of Stanford’s investment activities? Is this situation an indication that the Obama administration will not partake of these types of undercover operations? Is there a massive in-house brawl currently ongoing between the DEA and the SEC? 

The BBC reports:

Secret documents seen by Panorama show both governments knew in 1990 that the Texan was a former bankrupt and his first bank was suspected of involvement with Latin American money-launderers.

In 1999, both the British and the Americans were aware of the facts surrounding a cheque for $3.1m (£2.05m) that Sir Allen paid to the Drug Enforcement Administration (DEA).

It was drug money originally paid in to Stanford International Bank by agents acting for a feared Mexican drug lord known as the ‘Lord of the Heavens’.

The cheque was proof that Stanford International Bank had been used to launder Mexican drug money – whether or not Sir Allen knew it at the time.

On 17 February of this year, the US Securities and Exchange Commission (SEC) accused Sir Allen of running a multi-billion dollar Ponzi fraud – when cash from new depositors is used to pay dividends to old depositors – civil charges he has denied.

Two and a half months after the SEC filing, the Texan has not yet faced criminal charges.

He was initially investigated by the SEC for running a possible Ponzi fraud in the summer of 2006, but by the winter of that year the inquiry was stopped.

Is this another version of the Whitey Bulger story in which the criminal turned informant continues to operate his own illicit activities? Whitey is now on the lam and his FBI protection, John J. Connolly, is cooling his heels in a federal penitentiary.

The intrigue of this situation is surreal, but the natural and instinctive question has to be: if Uncle Sam (DEA) provided cover for Allen Stanford in the pursuit of illicit drug related activities, did Uncle Sam also provide cover for Bernie Madoff as well? 

LD