R. Allen Stanford – Don’t Worry, Be Happy

by Darren

R. Allen Stanford, the chairman of Stanford International Bank was apparently heavily influenced by the work of singer Bobby McPherin, who once famously sang “Don’t Worry, Be Happy.” He wooed prospective customers by touting his CDs as being as safe as, if not safer than, government backed securities.

The siren song of safety and a decent return was enough to attract investors who were concerned with preservation of capital. One such investor was Pedro, a 62 year old from Mexico City. The software engineer put $150,000 into Stanford International CDs.

“Security was the key aspect,” he said “They told me that they had insurance. The broker told me not to worry and that the bank was safe.”

Confusion from customers was likely due to the fact that bank CDs that are FDIC-insured carry a $250,000 guarantee from the government. The CDs being marketed by Stanford held no such guarantee.

The SEC has now charged Stanford, 58, with running a “massive, ongoing fraud.” Prosecutors have received numerous complaints about Allen, but didn’t act until publicity from the Bernard Madoff Ponzi scheme caused them to intensify efforts.

The SEC began a formal probe of Stanford’s activities in October 2006 that culminated in charges being brought against him on February 17th.

The SEC says delays in the case were often a result of jurisdictional problems related to the complexity of the scheme.

The company has been sued several times for operating a Ponzi scheme. They settled the cases.