Tag Archives: Stanford Financial

Ponzi-Scheme Whistleblower Ordered By Corrupt Arbitration Panel to Pay a Criminal Organization $107,782

Just how corrupt and pervasively dysfunctional is private arbitration in America right now?

Via Felix Salmon, the Financial Times reports that more than five years ago a lady by the name of Leyla Basagoitia who worked at the Ponzi scheme known as Stanford Financial quit her job and alerted the SEC and the NASD (now called FINRA) her suspicions about the criminal fraud going on.
Rather than having her day in court, instead Ms. Basagoitia was forced into a kangaroo arbitration and forced by the arbitrators to pay the criminal organization she tried to blow the  whistle on $107,782.

So in part because of NASD’s arbitrators, the fraud was allowed to continue for years longer until it finally collapsed on its own weight last month.

As the article notes:

Ms Basagoitia told an arbitration panel at the National Association of Securities Dealers in October 2003 that she suspected Stanford Group Company, one of Sir Allen’s key businesses, was “engaged in a Ponzi scheme to defraud its clients”, according to case documents. In 2007, the NASD became the Financial Industry Regulatory Authority.
In a nine-point critique, Ms Basagoitia pointed to many concerns cited last week by the SEC in its charges against Sir Allen’s businesses, including allegations about the lack of a credible auditor, mis-selling of products and the promise of consistently high returns that did not “correspond to the reality of the markets”.
Ms. Basagoitia’s allegations were denied by Stanford Group Company and dismissed by the dispute resolution panel. She was ordered to pay Stanford $107,782 in damages, in repayment of a loan advanced to her while an employee of the company.

Great work again by the Financial Times, in particular to reporters Robert Cookson and Michael Peel in London and Joanna Chung in New York.
PS: I had my moment in the famous pink pages of the Financial Times last year. Have a look at the end of this article.

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