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Ponzi mastermind Allen Stanford investigated ex-State Department official, records show


This news story was published on November 30, 2012.
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By Murray Waas, McClatchy Newspapers –

WASHINGTON — In 2006, Allen Stanford had yet to be identified as the mastermind of one of the largest and longest-running Ponzi schemes in U.S. history, but he faced mounting pressure.

Federal securities examiners were pushing for an investigation into his investment operation, which tens of thousands of soon-to-be victims had entrusted with nearly $7 billion. Some of the Texas financier’s own employees were threatening to tell authorities what they knew about his fraud.

Stanford was so concerned that a former senior State Department official named Jonathan Winer might expose his colossal con game that he ordered an investigation into Winer’s private life, according to Stanford’s previously secret records obtained by McClatchy Newspapers.

Kroll Inc., an international corporate intelligence firm that Stanford had retained for over a decade, obliged. Tom Cash, a Miami-based managing director of Kroll, soon informed Stanford in an email that he was looking into whether Winer’s ex-wife was a lesbian, according to the internal documents obtained by McClatchy.

Winer “is pure cockroach,” Stanford emailed back, encouraging Cash to try to unseal Winer’s divorce records. “Go after him as hard on as many fronts as possible.”

Winer, who said in an interview that Kroll’s characterization of his ex-wife was “patently absurd,” wasn’t the company’s only target.

The documents show that Kroll also investigated and passed to Stanford personal information about several of his former employees, his defrauded investors, other U.S. government officials and journalists who were questioning his bank’s financial stability. Stanford used the information to silence and discredit several of them.

Stanford is serving a 110-year jail sentence after having been found guilty in March of 13 federal fraud charges related to the scheme he ran from his offshore bank, Stanford International Bank, once located on the Caribbean island of Antigua.

The newly obtained documents shed light on some of the steps Stanford took to elude law enforcement officials for years. By the time his scheme was uncovered in 2009, nearly all of the cash that he fleeced from investors had disappeared. The records also show how Kroll stepped into ethically questionable territory as it foraged for damaging or embarrassing information that might be used to intimidate or smear Stanford’s perceived adversaries.

Kroll, which has been referred to as Wall Street’s “private eye,” says its employees had no clue they were helping to conceal the second-biggest Ponzi scheme in U.S. history.

The disclosures regarding Kroll’s work for Stanford come as a string of governmental investigations and private lawsuits surrounding those who allegedly aided Stanford’s Ponzi scheme heat up. Even though Stanford is in jail, the Justice Department and the Securities and Exchange Commission are still investigating the conduct of other lawyers and accounting firms who worked for Stanford, according to people close to the inquiries. A federally appointed court receiver also has been attempting to claw back money for defrauded investors, suing several law firms and accounting firms for work they did for Stanford.

SEC examiners concluded as early as 1997 that Stanford was running a massive Ponzi scheme, agency records show. But Stanford was able to stall the opening of any formal inquiry for a full decade, much like the man behind the only bigger U.S. Ponzi scheme, Bernard Madoff.

Federal law enforcement officials, private lawyers seeking to recover money for victims and even some of Stanford’s former aides say that his fraud likely would have been discovered years earlier if it hadn’t been for the collective assistance of respected law firms, accountants and Kroll.

Kroll, the law firms and accountants have said they acted in good faith, but were duped themselves.

Citing “legal reasons,” Kroll said it could not comment on “these specific events,” but added that “none of the individuals associated with the investigation six years ago are currently employees of Kroll.”

Cash left Kroll in 2009.

The firm said it “takes active steps to ensure that the company conducts its business activities in compliance with the laws of the countries in which it operates.”

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