“A MERE INDEX FUND? HAH! MY MONEY’S INVESTED OFFSHORE BY A GUY WHOSE FAMILY HAD A COLLEGE NAMED AFTER IT!”

2/18/09

The SEC has accused financier R. Allen Stanford (Ever notice how big time financiers, e.g., J. Paul Getty, H. Lamar Hunt, J. Robert Vesco, R. Allen Stanford, tend to use a first initial and a complete middle name? Perhaps this is one of the techniques they learn in Big Time Financier School, but I digress.) of massive financial fraud involving selling of non-federally insured CDs of offshore banks and investing the proceeds into opaque assets that may or may not have existed while assuring investors that their money was invested in liquid, relatively safe assets. The Stanford scheme, of course, sounds all too familiar in the wake of the Madoff scandal. There are some differences, some substantive, some not so substantive, between the Stanford scheme:

--The scale of the Stanford scheme, at least at this writing, seems to be far smaller.

--The Stanford scam (again, at least at this writing), does not appear to be a naked Ponzi scheme, like the Madoff caper.

--The appearance of the perps. Bernie Madoff could look positively avuncular. Allen Stanford, on the other hand, has a smarmy appearance that can best be described as a cross between a cheshire cat, Alfred E. Neuman, and a villain on a Three Stooges episode. One does not like to judge people by appearance, but, having been in or around the money business for my entire adult life, I have learned that you simply don’t trust people with certain looks about them. Stanford’s appearance screamed “Crook!”

Other than, that, though, the Madoff and Stanford schemes were remarkably similar. Both featured high living characters who used the trappings of wealth, and a deep understanding of the appeals to vanity to which all humans, but especially Americans, it seems, are most vulnerable, as their main selling points. Both supposedly delivered “returns” that were remarkably consistent and lacking in credibility. Both Madoff and Stanford cultivated and achieved degrees of political influence. Both were multinational in their reach, though Madoff’s non-American “investors” tended to be from Europe and Stanford’s tended to be from Latin America. Both involved victims that were, for the most part, wealthy and, at least according to the SEC definition, “sophisticated” (though Stanford’s “investors,” in general, appeared to be slightly less upscale than Madoff’s) and should have known better. My attitude toward both sets of victims is the same: If my supply of compassion were inexhaustible (It’s not yet.), I would expend some on these people. But if one’s idea of investing is giving one’s money to some charlatan because one’s equally gullible and gormless friends have done so, the mountebank has an exotic address (in Stanford’s case, Antigua) and the imprimatur of some foreign power (Stanford was “Sir Allen, having been knighted in Antigua in 2006.), and the jackanapes who lusts after your dough looks like he has money, one deserve what one gets.


What makes Stanford’s scheme so notable, coming in the wake of Madoff’s rip-off, is the perhaps obvious question: How more of these are yet to surface? Given that the main attraction of both these imperious imbroglios was snob appeal, and given the typical wealthy American’s (and, to be fair, wealthy foreigner’s) fondness for snobbishly looking down his proboscis at his fellow man, I suspect plenty.