TAKING STOCK: Inept regulators

Dear Mr. Berko: Almost 10 years ago, my folks invested $145,000 in a high-yield certificate of deposit offered by Allen Stanford and lost it all. My dad was so upset that he had a nervous breakdown over this loss. How is it possible that frauds such as Stanford and Bernard Madoff could get away with their illegal activities for so long and not get caught until lots of trusting people like my dad got hurt very badly? The reason for this writing is that our home and auto insurance agent told me that a government agency called Financial Underwriters Regulatory Corp. may be partially reimbursing investors for their CD losses. Can you tell me and my dad what to do from here? And isn't the government supposed to prevent scams such as this? -LH, Minneapolis Dear LH: Your insurance agent is referring to the Financial Industry Regulatory Authority, a bootless, self-important regulatory agency that couldn't stop a chicken from crossing the street. FINRA is staffed by gaggles of insipid government lawyers and accountants whom private industry wouldn't deign to hire. And no, they won't reimburse your dad's losses. FINRA couldn't reimburse my granddaughter's piggy bank. For decades, Bernie Madoff ran a Ponzi scheme so well that investors were begging him to steal their money. And in 2009, Bernie pleaded guilty to the biggest Ponzi scheme in the history of our galaxy. However, it took Harry Markopolos, a widely respected forensic accountant, 10 years to convince FINRA that Bernie was a crook. Red flags were as visible as flares, but tens of billions of dollars were lost as FINRA and the Securities and Exchange Commission, in typical Keystone Cops fashion, stepped on their thumbs for a decade before taking action. Bernie's inmate number is 61727-054, if you want his autograph, which may have future value. Allen Stanford also ran a Ponzi scheme, selling high-yield CDs from his Antigua bank. He fleeced $8 billion from 28,000 investors and was sentenced to federal prison in June 2012. U.S. District Judge Robert Scola recently ruled that the SEC knew that Stanford was running a Ponzi scheme as early as 1997 and wouldn't take action. Again, the red flags at FINRA and SEC headquarters were posted on every wall and ignored. However, that's par for government work. Allen's inmate number is 35017-183, if you want his autograph, too. For years, evidence of their shenanigans was plain as cake, and in the face of incontrovertible evidence of wrongdoing, not a single stupid at FINRA or the SEC raised a voice in acknowledgment. How could such obvious fraud continue for years? Some observers suggest that Bernie and Allen used a portion of their huge cash flows to make certain the right regulators didn't regulate. And a stockbroker for whom I have no respect bragged to me six years ago that his firm knows how to handle FINRA lawyers to make problems disappear. FINRA does have some successes, but they're always after the fact; thousands of investors must first lose millions before FINRA decides to act. But there is a dim light at the end of the tunnel. You may be able to sue the SEC, an equally useless regulatory agency, headed by Mary Jo White, who, some say, has the personality of a constipated troll. Judge Scola recently ruled that two of Stanford's victims can proceed with a claim against that SEC. Scola noted that SEC accountants and lawyers were told in 1997, 1998, 2003 and 2004 that Stanford was running a Ponzi scheme. However, these bureaucrats declined to report their conclusions until 2009. Scola contends that the SEC had a public duty and obligation to report these findings, which would have prevented thousands of investors from losing their kits and caboodles. The SEC and FINRA were frequently told that Bernie and Allen were, for years, milking the masses with impunity. And I can only wonder how much that impunity cost. Meanwhile, you can write to U.S. District Judge Robert Scola at 400 N. Miami Ave., Miami, FL 33128. His office can give you the information your dad needs to proceed. -------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. ©Copyright 2014 Creators.com Published: Tue, Oct 07, 2014