Allen Stanford Financial Scandal

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Case Details:

Case Code : FINC069
Case Length : 21 pages
Period : 2009-2010
Pub. Date : 2011
Teaching Note : Not Available
Organization : Stanford Financial Group, Stanford International Bank, Stanford Group Company, Stanford Capital Management
Industry : Finance Services
Countries : US and Antigua

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"We have seen very little in the way of senior officer or boardroom-level prosecutions of the people on Wall Street who brought this country to the brink of financial ruin. Why is that?" 1

-- - Edward Kaufman, a Democratic Senator on the Judiciary Committee, September, 2010


Hard on the heels of the massive financial scam by Bernard Madoff2 (Madoff), which came to light on December 10, 2008, another major scandal broke out -- involving Robert Allen Stanford3 (Stanford), Chairman of the Stanford Financial Group (SFG) of Companies. The Stanford scam, which was exposed in February 2009, barely nine weeks after the Madoff scam, hit as many as 30,000 investors spread out across 130 countries. It was revealed that Stanford and his group including key executives of the SFG and other group companies had been running a Ponzi scheme4 for more than 13 years before they were exposed

On February 17, 2009, federal agents and officers

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

entered the upscale Galleria District, Houston, Texas, US-based head office of SFG and took control of the whole building. Marshalls covered the building and tons of documents were seized by the officers. Customers, who were not allowed in, were shocked when they came to know from a notice stuck on the main door that the group was under the management of a Receiver.

Introduction cont... - Next Page>>

Finance | Case Study in Management, Operations, Strategies, Business Ethics, Case Studies

1] Jean Eaglesham, "SEC Under Fire Over Stanford Fraud Inquiry,", September 23, 2010
2] Bernard Madoff (Madoff) was a prominent Wall Street trader and former Chairman of National Association of Securities Dealers Automated Quotations (NASDAQ). He confessed to a US$ 50 billion fraud on December 10, 2008.
3] Allen Stanford, the owner of SFG, is a citizen of the US as well as Antigua, West Indies.
4] A Ponzi scheme is a fraudulent investment in which old investors get returns from money invested by new investors rather than from any actual return or profit.

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