The Securities and Exchange Commission's chief enforcement official says the agency has toughened its efforts to shut down financial misconduct after failing to act quickly in the cases of R. Allen Stanford and Bernard Madoff.
SEC Enforcement Director Robert Khuzami says in testimony prepared for a Senate hearing that "we have moved aggressively" to put in place reforms recommended by the SEC inspector general. The IG found that the SEC knew since 1997 that Stanford likely was operating a Ponzi scheme but waited 12 years to bring fraud charges against the billionaire.
Khuzami also tells the Senate Banking Committee the SEC is working to provide "maximum recovery" to investors hurt in Stanford's alleged $7 billion fraud.
Stanford has been in federal prison since his indictment in June 2009 on criminal charges that his international banking business was really a pyramid scheme. He is disputing the charges. He faces a life sentence if convicted.
The SEC didn't bring civil fraud charges against Stanford until February 2009. SEC Inspector General David Kotz said in a report issued in April that "institutional influence" in the enforcement division was a factor in the agency's repeated decisions not to conduct a full investigation.
The report found that SEC enforcement officials discouraged cases that couldn't be resolved quickly. And it said an SEC enforcement official who helped quash investigations later legally represented Stanford.
The SEC's office in Fort Worth, Texas, had conducted "examination after examination" of Stanford's business over eight years, but "merely watched the alleged fraud grow, and failed to take any action to stop it," Kotz testified at Wednesday's hearing.