By Angela Shaw
April 17, 2019 at 5:00 am ET
When Allen Stanford was arrested a decade ago for executing a $7.2 billion Ponzi scheme — the second largest in U.S. history — it was a glimpse of hope for the almost 5,000 Americans (21,000 worldwide) affected by his egregious financial crimes.
Ten years later, that glimpse of hope has completely diminished for the thousands of teachers, nurses, firefighters and middle-class American families who have suffered almost $2 billion in losses.
However, Stanford did not act in isolation. Two prominent financial institutions, Toronto-Dominion Bank and Société Générale played a significant role in the scheme by allowing a U.S. brokerage firm (Stanford Group Co.) to sell fraudulent CDs to U.S. investors and maintaining multiple accounts for Stanford and his associates.
Stanford’s victims, 80 percent of which had $250,000 in investment losses, have recovered next to nothing in recent years. In fact, they have seen and can expect to see pennies on the dollar unless things change.
But simply having a hand in causing thousands of ordinary Americans to lose the majority of their savings was not enough for these multinational financial institutions. Both TD Bank and SocGen have dodged accountability every step of the way by fighting the victims’ lawsuits, which appear to be the sole mechanism by which they can hope to recover their savings.
If average Americans cannot rely on the banks to protect their hard-earned and heavily relied-upon investments, there is only one last place they can look to for justice. Our lawmakers are responsible for protecting us by conducting oversight to ensure that federal law is appropriate and punishing the kind of behavior TD Bank and SocGen have been alleged to practice.
Congress could and should be doing more to right the wrongs of these banks and help secure meaningful recoveries for the Main Street investors that had their lives turned upside down. In addition to examining how TD Bank and SocGen dealt with money linked to Stanford’s scheme, Congress should investigate why the effort to recover savings is not working and what can be done to help the process along.
The victims’ lawsuits correctly point out that the banks either knowingly enabled and aided SIB in the sale of fraudulent CDs or were negligent in performing due diligence, reviews of SIB activities and Know Your Customer requirements. Either way, the burden of this multibillion-dollar fraud should not lie with the victims.
Instead, as thousands of Main Street investors that were misled into believing Stanford International Bank’s fraudulent CDs were “safe” and are now bearing the consequences of big banks’ neglect and self-interest, TD Bank and SocGen are going about business as usual. In fact, TD Bank reported an annual gross profit of $30.2 billion for 2018, while SocGen reported an annual gross profit of $24.2 billion for 2018.
This is a trend we have seen time and time again. These big banks are quick to take savings from average American mom and pop investors but are reluctant to protect the hard-earned money these investors rely on for retirement, their children’s education and unexpected life expenses.
Both Sens. Bill Cassidy (R-La.) and John Kennedy (R-La.) took a stride toward justice when they recently wrote a letter to SocGen, confronting the bank about its alleged involvement in the scheme and subsequent refusal to release $210 million recoveries to victims.
However, while this may spark some hope for the thousands of victims, this is just a start. There is still much work to be done, and with the help of our elected officials, the average American citizens caught in the crosshairs of fraud and big banks’ self-interest could see some of their rightful savings returned.
Angela Shaw is the director and co-founder of the Alliance for Investor Protection, a nonprofit investor advocacy organization based in Dallas, Texas.
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