Former securities regulator might face prosecution

WASHINGTON (CMC):

United States Federal authorities are considering whether to prosecute a former securities regulator in Texas, who repeatedly quashed investigations of Allen Stanford's offshore banking empire.

Securities and Exchange Com-mission Inspector General David Kotz told lawmakers Wednesday that his office has "had discussions with criminal authorities about whether there would be any criminal action arising" because of the "significant role" that Spencer C. Barasch played in decisions not to formally investigate Stanford, who the SEC has since accused of running a US$7-billion Ponzi scheme.

Kotz's report, issued earlier this year, also said that Barasch later represented Stanford, despite ethics laws against doing so.

Under questioning, Kotz said he had learned the SEC would ask the State Bar of Texas to investigate Barasch for disciplinary violations.

Kotz delivered his testimony during a hearing of the Senate Banking Committee that examined how the SEC's Fort Worth office missed several opportunities to stop Stanford's alleged scheme before it grew larger.

SEC officials said they would implement all of Kotz's recommendations, including increasing coordination between the SEC's examiners and enforcement staff.

Suspected Stanford since '97

In February 2009, the SEC accused Stanford and three of his firms of fraud and other securities violations for operating a "massive Ponzi scheme", estimated at US$7 billion, using the Antigua-based Stanford Investment Bank among other companies in the group.

The Justice Department also has filed criminal charges against an Antiguan banking regulator who allegedly conspired with Stanford to obstruct SEC investigations over the years.