OCT. 28 PONZI NEWS AND NOTES: Tom Petters Trial To Open; Employee Of Sir Allen Stanford Purportedly Criticized, Ostracized, Fired For Being Too Honest

NEWS: In the world of high finance, Tom Petters was Bernard Madoff before Bernard Madoff was Bernard Madoff — at least with respect to shocking headlines about Ponzi schemes.

Jury selection is under way in Minnesota in the Petters case. The allegations that Petters presided over a $3.65 billion Ponzi were unfathomable in September 2008. The allegations dwarfed the August 2008 assertions by the U.S. Secret Service that Florida pitchman Andy Bowdoin of AdSurfDaily Inc. had operated a then-unfathomable $100 million Ponzi scheme.

But with Madoff’s overnight ascent to the stratosphere of infamy in December 2008 amid allegations that he had operated a $50 billion Ponzi scheme, Petters faded from the headlines.

Bowdoin would have faded, too, except he could not stop doing things such as comparing the Secret Service and federal prosecutors to the 9/11 terrorists; taking the 5th Amendment at a hearing his company requested to present evidence that it was not a Ponzi scheme, even as his supporters agreed he was “too honest” to testify; announcing a $200 million deal with a penny-stock company few people ever had heard of (while the penny-stock firm continued its practice of not publishing verifiable financial information and Bowdoin was awaiting a ruling on whether unaudited financial information he had supplied the court was reliable enough to make the Ponzi allegations go away); trying to sell members of AdSurfDaily VOIP telephone service after the Ponzi ruling went against him; negotiating with federal prosecutors; submitting to the forfeiture less than a month after prosecutors filed a second forfeiture complaint that asserted his wife and family had benefited from the illegal actions of his company and that Bowdoin had not reported a purported theft of $1 million by “Russian” hackers to authorities; and trying to get back in the case about six weeks later by saying he’d changed his mind, fired his attorneys and now was relying on a mysterious “group” of amateur attorneys to help him do his legal bidding.

Not even Petters, who owned Polaroid and operated what prosecutors described as a multibillion-dollar Ponzi scheme involving a separate electronics company, could top Bowdoin in terms of relentless strangeness.

Petters, however, easily topped Bowdoin in terms of the size of the alleged Ponzi he operated. And now the Petters trial is set to begin. One of the expected defenses in the case is a Bowdoin-like assertion that his hands were clean.

Will it fly with jurors?

Read pretrial Petters’ coverage by Reuters.

Read this column by Jon Tevlin in the Star Tribune of Minneapolis/St. Paul. It includes comments from Barry Minkow, whose life once took a Ponzi turn.

NOTE: Sir Allen Stanford now is accused of running a Ponzi that was larger than even the alleged Petters’ Ponzi. Stanford’s alleged crimes also are dwarfed by the Madoff Ponzi.

Stanford was regarded as a sort of king of Caribbean banking, perhaps particularly on the island nation of Antigua.

Federal prosecutors say ASD’s Bowdoin told the Secret Service that the company had $1 million in an account under a different name on Antigua. The claim was strange, considering that Bowdoin had told members in 2007 that he could not pay them because his purported advertising company had become insolvent after it overpaid members and was looted by the previously mentioned “Russian” hackers.

The claim became Ãœber Strange in 2008, when Bowdoin asked a federal judge to free up $2 million from the tens of millions of dollars seized because ASD could not pay its hosting bill or rent or employees and had no money to implement a compliance plan — while apparently forgetting he had told the Secret Service about the $1 million on deposit in Antigua.

Some of Bowdoin’s friends and employees remained staunch allies, always willing to support the company, call the prosecutors Nazis, diss doubters and even work for free to demonstrate their loyalty to the boss.

An employee of Allen Stanford had a different idea about how to behave when a company’s words could not be reconciled with its actions.

Charles Satterfield, an investment adviser, couldn’t make sense of things in the months after he joined Stanford Financial Group in 2005 as managing director of fixed income.

Stanford stressed sales of its CD, regardless of the profiles of its customers. Old ladies were to be sold CDs. Young mothers were to be sold CDs. All people in between were to be sold CDs — at the virtual exclusion of all other financial products that perhaps were better suited for the unique situations of individual customers.

On a business trip? Sell the CD. Sitting down with Grandpa or Junior? Sell the CD.

When Satterfield asked his bosses to reduce their instructions to writing, he was fired the next day.

He told the Financial Industry Regulatory Authority (FINRA) in 2007 that some strange things were going on inside Stanford Financial Group. The company said no — that Satterfield had gotten it all wrong, that he was incompetent and disgruntled.

Satterfield was described as disloyal, incapable of recognizing that tremendous growth at companies causes problems and that the problems sort themselves out in the end.

The experience of Charles Satterfield at Stanford will sound like a familiar refrain to many people who have followed the AdSurfDaily saga and observed a pattern of dissing critics as though they were simpletons, marginalizing their voices and authoring ad hominem attacks — before ostracizing them completely and banning them to the hinterlands.

Read this column on Charles Satterfield by Al Lewis of Dow Jones Newswires, as it appears in the Denver Post. It is an eye-opener.

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3 Responses to “OCT. 28 PONZI NEWS AND NOTES: Tom Petters Trial To Open; Employee Of Sir Allen Stanford Purportedly Criticized, Ostracized, Fired For Being Too Honest”

  1. The column in the Star Tribune by Jon Tevlin and the column by Al Lewis of Dow Jones Newswires are both excellent reading. Thanks for including them in your continuing excellent writing and reporting.

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  2. http://www.denverpost.com/business/ci_13651540

    The Denver Post link you posted is particularly apt. While the heads of these schemes have fame or credibility, it would appear to have been difficult for anyone else to achieve any intervention by the appropriate authorities.

    The recent flood of ponzi prosecutions seems to be a sign that the authorities are finally taking fraud issues more seriously, irrespective of who the leader or owner is. The prosecution of SIR Allen Stanford is a good example.

    The recent discovery of SEC incompetance in the Madoff case may well have served as a serious warning to the authorities to take their responsibilities to the investing public more seriously and not to turn a blind eye because the “leader” is an acclaimed figure in business or anywhere else.

    With so many ponzi prosecutions pending, we can only live in hope.

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  3. alasycia: The Denver Post link you posted is particularly apt.

    Hi alasycia,

    I seem to recall you had an interest in some of the weird happenings in the Florida real-estate market, considering all the financial upheaval in the state right now.

    If you have a moment, check out this story in the St. Petersburg Times. A man who was being foreclosed on had a lawyer and didn’t even know it:

    http://www.tampabay.com/news/business/realestate/agent-accused-of-real-estate-fraud-at-center-of-bizarre-condo-foreclosure/1047538

    The article in the Times is very instructive.

    Regards,

    Patrick

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