Former SEC Official Fined For Taking Job With Alleged Ponzi Fraudster Robert Allen Stanford

Robert Allen Stanford (right) celebrating a victory
his cricket team -- the Stanford Superstars -- won
(photo from The New York Times)

The new millenium has largely been a fiscal disaster of epic proportions for the United States. One example of how corruption seized the country's major financial and governmental institutions is the Robert Allen Stanford saga.

A little fresher about "Sir Robert" is in order. Stanford, a dual citizen or Antigua/Barbuda and the United States, was raised and made his initial big stake in Texas, starting with the Houston real estate market. He later moved to the Caribbean, where he opened financial firms under the cozy terms existing in Montserrat and, later, Antigua. He parlayed the firm's products into a bonanza. The Antiguan government was grateful enough to Stanford to award him a knighthood. Shortly after the end of fellow Texan George W. Bush's tenure in the White House, the SEC and FBI discovered gambling was occurring in Sir Robert's casino. In essence, the SEC accused Stanford of operating a Ponzi scheme. The FBI arrested the knighted financier. Stanford has pleaded not guilty to the SEC's accusations. Meanwhile, his defense team, including court-appointed attorneys, are in tumult, according to a post in the Texas Lawyer publication's Tex Parte Blog.

Sir Robert's trial is scheduled to begin January 23rd. In the meantime, the SEC has fined one of its own for taking a job with Stanford. The former SEC official, Spencer C. Barasch, was the head of enforcement in the SEC's Fort Worth, Texas regional office. During his tenure, Barasch squashed three separate probes into Stanford's enterprises. In 2005, Barasch left government employ and eventually wanted to get his share of the Stanford gravy train. To that end, Bararsch offered his services to represent Stanford Financial Group in yet another SEC probe of Sir Robert's activities.

Barasch's reasoning was remarkable, according to a Washington Post report of the former SEC regional enforcement chief's actions. "Every lawyer in Texas and beyond," Barasch told the SEC's investigators, "is going to get rich over this case. Okay?  And I hated being on the sidelines." Alas, the Post article noted that the Justice Department maintained Barasch neglected to pay attention to "a federal ethics law which prohibits former federal officials to represent clients before their former agencies on matters in which (the officials) participated 'personally and substantially' while working for the government."

For this ethical lapse, Barasch agreed to settle for a fifty grand fine, while his attorney continued to claim with a straight face that Barasch was entirely innocent.

Such misunderstandings of ethics remain with us as we struggle through the profound, systemic corruption in America, and financial "wizards" such as Stanford, Bernie Madoff, and a gaggle of former Fannie Mae and Freddie Mac senior executives increasingly resemble Caribbean pirates rather than knights in shining armor.