First there was the Madoff Ponzi scheme scandal, which is the biggest in history. Then the Stanford Group Ponzi scheme scandal broke in 2009. The numbers were mind-boggling, but the deceit more so. $8 billion dollars stolen from investors. Allen Stanford on the run to parts unknown. Thousands of investors bilked of everything, and it happened because the SEC failed to act on warnings that there was rampant fraud taking place.
Even as I write, investors have not recovered any part of their investments. Assets are still frozen, and Allen Stanford claims to have some memory problems about what actually took place.
Ponzi schemes like the Stanford scheme happen all the time. Salesmen go out and sell fake investments they claim are safe -- Certificates of Deposit in this case. But the money is really invested in illiquid risky investments, and so to feed the cash beast, they have to go out and find more cash to keep the scheme going. Eventually it collapses, investors end up with nothing, and the only ones who seem to benefit are the salesmen who collect their commissions and move on.
This is why Lee Fang's investigative report for Think Progress is so devastating to Mitt Romney. Or at least, it should be.
Let's start with this:
Mitt Romney, his son Tagg, and Romney’s chief fundraiser, Spencer Zwick, have extensive financial and political ties to three men who allegedly participated in an $8.5 billion Ponzi scheme. A few months after the Ponzi scheme collapsed, a firm financed by Mitt Romney and run by his son and chief fundraiser partnered with the three men and created a new “wealth management business” as a subsidiary.
That graphic at the top illustrates all of the ties Romney has with these former Stanford Capital salesmen. But here is a bit more detail:
After news of the Ponzi scheme precipitated the collapse of Stanford in 2009, Taggpartnered with several of Stanford’s North Carolina executives to start a firm called Solamere Advisors. At least three prominent brokers who had worked for Stanford — Tim Bambauer, Deems May, and Brandon Phillips — joined Tagg to help run Solamere Advisors, a wealth management business located in Charlotte, North Carolina. “We are excited to be associated with such a highly capable group of financial advisors with a proven track record of meeting the needs of their clients throughout the Southeast,” said Tagg in a press release announcing Solamere Advisors, which borrows its the name from its parent company, Solamere Capital.
So to review, we have Mitt Romney coughing up $10 million to help start a firm that hired three brokers who sold bogus CDs for Stanford Financial and made some decent money on the deal, too. Not only that, but Spencer Zwick the lead fundraiser for Romney's campaign is a principal in the Solamere Capital firm along with these Stanford brokers. Spencer Zwick does business as SJZ, LLC, and has been paid over $2 million in fees by the Romney campaign.
I'm sure Republicans will simply shrug this off as a tempest in a teapot. They might get away with that, but for Romney's campaign platform, which promises to repeal the Dodd-Frank financial regulatory law. As Fang notes:
The revelation about Romney’s ties to the Stanford ponzi scheme unmask the risks associated with removing new investor protections. The Dodd-Frank Wall Street Reform law, a reform Romney says he will repeal if he wins the presidency, attempts to address future Ponzi schemes by enacting new protections for whistleblowers to alert authorities when they find evidence of fraud. The law also creates a new Investor Advocate and Investor Advisory Committee within the Securities and Exchange Commission to detect and investigate future Ponzi schemes.
Mike Hudson, a reporter with iWatch News and author of a new book about how predatory Wall Street practices created the financial crisis, told ThinkProgress that Dodd-Frank “could be a game changer that helps the SEC identify and shut down Ponzis and Ponzi-like schemes.” But on the campaign trail, Romney, a fierce critic of efforts to reign in Wall Street practices, has called new investor protections like Dodd-Frank “extraordinarily burdensome.”
Oh yes. Burdensome, indeed, especially if one wants to be (at the very least) an accessory to fraud and still have a career in the financial industry after that.
Mitt Romney has a problem. A big problem, particularly in light of the ongoing Occupy protests. As Matt Taibbi pointed out last week, it's not banking they're protesting, it's cheating, and it would appear as though Republicans have a leading Presidential candidate who has no problem being in business with cheaters, and worse yet, supports giving them the tools with which to continue cheating.
This is one they cannot and should not shrug off, and we shouldn't let them.