Fraud-Government Feedback Loop

Sophisticated swindlers know where to go for protection. Allen Stanford certainly did. He went straight to members of Congress and regulators.

“Stanford built a wide-ranging political network of high-level politicians and operatives. He gave millions of dollars to lawmakers across the spectrum…..

To his clients, he sent annual reports that contained – besides fake returns on investments – pictures of him posing with Senators, Congressmen and other dignitaries. …

This was all part of a far-reaching effort to burnish his brand and sell more CDs. The political networking helped him reassure customers, as well as on occasion giving a push in the right direction to proposed legislation he had an interest in. High-end political allies gave him the appearance of legitimacy while protecting his interests to the extent they could. ….

The CD sales provided the funds Stanford used to finance his political alliances and hire lobbyists and former regulators. The allies and lawyers, in turn, helped protect the scheme. In this way the fraud and the government connections formed a feedback loop. The more money he took in, the more protection he acquired, which allowed him to go on with the fraud and take in more money. Without the political connections and the protection, he would not have survived so long…..”

From Ponzi Regulation

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Tags: fraud, Politics, Ponzi scheme