Stanford Financial: A Madoff in the making?
With the investing world still reeling over the fallout from Bernard Madoff’s alleged $50 billion Ponzi scheme, another multibillion-dollar scandal is starting to unravel, said Matthew Goldstein in BusinessWeek. Federal regulators this week charged Stanford with fraud in connection with the sale of $8 billion in certificates of deposit. The CDs, issued by an Antigua-based subsidiary of the company, pay more than twice the going rate on U.S. CDs, even though the stocks, real estate, and commodities supposedly backing them have all dramatically declined in value.
Several unusual features of Stanford’s CD sales operation have caught investigators’ interest, said Dionne Searcey in The Wall Street Journal. CDs are generally a low-profit-margin business that nets little income for the brokers who sell them. But Stanford pays “unusually high” commissions for CD sales. Investigators are also checking into reports that Stanford “has been recently advising clients that they can’t redeem their CDs for two months.” Such delays in redemption often precede the collapse of a Ponzi scheme.
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