Dear Mr. Berko: Almost 10 years ago, my folks invested $145,000 in a high-yield certificate of deposit offered by Allen Stanford and lost it all. My dad was so upset that he had a nervous breakdown over this loss. How is it possible that frauds such as Stanford and Bernard Madoff could get away with their illegal activities for so long and not get caught until lots of trusting people like my dad got hurt very badly? The reason for this writing is that our home and auto insurance agent told me that a government agency called Financial Underwriters Regulatory Corp. may be partially reimbursing investors for their CD losses. Can you tell me and my dad what to do from here? And isn’t the government supposed to prevent scams such as this?
— LH, Minneapolis
Dear LH: Your insurance agent is referring to the Financial Industry Regulatory Authority, a bootless, self-important regulatory agency that couldn’t stop a chicken from crossing the street. FINRA is staffed by gaggles of insipid government lawyers and accountants whom private industry wouldn’t deign to hire. And no, they won’t reimburse your dad’s losses. FINRA couldn’t reimburse my granddaughter’s piggy bank.
For decades, Bernie Madoff ran a Ponzi scheme so well that investors were begging him to steal their money. And in 2009, Bernie pleaded guilty to the biggest Ponzi scheme in the history of our galaxy. However, it took Harry Markopolos, a widely respected forensic accountant, 10 years to convince FINRA that Bernie was a crook. Red flags were as visible as flares, but tens of billions of dollars were lost as FINRA and the Securities and Exchange Commission, in typical Keystone Cops fashion, stepped on their thumbs for a decade before taking action. Bernie’s inmate number is 61727-054, if you want his autograph, which may have future value.
Ignoring the evidence
Allen Stanford also ran a Ponzi scheme, selling high-yield CDs from his Antigua bank. He fleeced $8 billion from 28,000 investors and was sentenced to federal prison in June 2012. U.S. District Judge Robert Scola recently ruled that the SEC knew that Stanford was running a Ponzi scheme as early as 1997 and wouldn’t take action. Again, the red flags at FINRA and SEC headquarters were posted on every wall and ignored. However, that’s par for government work. Allen’s inmate number is 35017-183, if you want his autograph, too.