New York – News that the SEC has charged Stanford Financial Group CEO Allen Stanford with an $8.0 billion fraud suit and has raided his Houston offices, hit the wires this week. In December, Pershing LLC, Stanford’s clearing agent, stopped processing wire transfers for the firm, because there was not “a reasonable level of transparency” in the wiring instructions according to a Wall Street Journal article today. The SEC charges that the returns that were claimed by Stanford Group were not possible. During the week of February 9, 2009, Stanford informed customers that they would be unable to redeem there unmatured CDs for two months.Stanford’s literature described its funds as being audited by Antiguan authorities every year, but the SEC alleges that the funds were only reviewed by Allen Stanford and his CFO James Davis. As well as being a near constant lobbying presence in Washington, Stanford Research is perhaps the largest and oldest policy research firm in Washington. This resulted when, in 2004, Stanford Research absorbed industry-leading policy research form Washington Research Group.
The firm’s research offering consists of a fundamental research product which offers perspectives on individual companies, sector-specific topics, as well as a governmental policy research arm, which is primarily comprised on the old Washington Research Group.
Stanford’s analysts, which number 35, provide coverage of consumer, media, energy, financial institutions, healthcare, technology and water/environment sectors.
On the policy research front, Stanford has 8 policy analysts, covering fiscal and monetary policy, trade policy, national defense policy, agricultural policy and transportations policy. The highest profile analyst in the group is probably Lyle Gramley, who is widely viewed as a monetary policy expert and was one of the seven Governors of the Federal Reserve Board from 1980 to 1985. Mr. Gramley also served as a member of the President’s Council of Economic Advisers (CEA), prior to his appointment to the Federal Reserve Board.
In retrospect, one wonders whether there was any conflict of interest involved in running a top level Washington policy research group at the same time as providing political donations and running lobbying efforts in the capital. As we have suggested in previous blogs, it seems likely that the regulators will be much more aggressive in both enforcement and interpretation of current laws going forward.