Another financial criminal is on his way to prison, where he will likely spend the rest of his life for running a $7 billion investment scam. R. Allen Stanford was sentenced on Thursday to 110 years in prison for operating a Ponzi scheme that promised investors safe investments and above average returns on their money.
Stanford's conviction comes after a lengthy trial, where it was determined he used proceeds from new investors to pay off people who had been earlier participants. The program offered certificate of deposit-like investments through offshore banks he owned in Antigua and Barbuda.
But much of the money was used to pay for a lavish lifestyle, including a 112-foot yacht, six airplanes and expensive homes.
Stanford, of course, was a small operator compared to Bernard Madoff, who in March 2009 pleaded guilty to bilking investors out of an estimated $65 billion in a similar scheme. Madoff is serving a 150-year sentence without the possibility of parole.
In many cases, the victims of Madoff and Stanford were elderly investors seeking to enhance the return they were getting on the deposits. As these cases and many others proved, a low interest rate environment, which currently exists, is a perfect breeding ground for fraud.
The Securities and Exchange Commission reported Tuesday that it charged 14 sales agents with misleading investors and illegally selling securities as part of a $415 million Ponzi scheme, small potatoes when compared to the frauds of Madoff and Stanford.
The SEC accuses the sales agents of falsely promising investor returns as high as 12 to 14 percent in periods as short as a few weeks. The agents were selling investments offered by Agape World Inc. The president of the company, Nicholas Cosmo, was convicted of fraud and sentenced to 300 months in prison.
“These sales agents raked in commissions without regard for investors or any apparent concern for Agape's financial distress and inability to meet investor redemptions,” said Andrew Calamari, acting regional director of the SEC's New York regional office.
It is estimated the sales agents collected as much as $52 million in commissions. Many of the victims in the Ponzi scheme were elderly investors seeking to generate higher rates of return.
In an effort to be proactive in battling elder financial fraud, the Investor Protection Trust, along with other consumer groups, launched a study to determine if financial abuse of seniors is truly on the rise. It surveyed securities regulators, adult protective services workers, medical professionals and law enforcement officials to determine the scope of these crimes. Nearly all respondents — 99 percent — said older Americans are “very vulnerable” or “somewhat vulnerable” to financial swindles.
“The message from those on the front lines of investor protection is clear: Swindles targeting older Americans are a bigger problem today than ever before," said Don Blandin, president of Investor Protection Trust, a nonprofit organization devoted to investor education. "We want to head off financial swindles before the damage is done.”
To that end, Investor Protection Trust has begun working with medical professionals, investment advisers and other front-line professionals to detect telltale signs of financial fraud and work with families and regulators to address the situation before it becomes a financial crisis.
A study last year by MetLife estimates $2.9 billion a year is lost to elder financial abuse.