What Part Did Societe Generale Play In Stanford Scheme?
The U.S. Department of Justice is looking into whether or not Societe Generale was involved with Texan financier Sir Allen Stanford’s $7 billion Ponzi scheme, according to the Wall Street Journal. According to the article, investigators are trying to determine if the French bank ignored red flags perpetuating the scheme.
In particular, the investigation is targeting a Swiss bank account held by one of the Stanford Financial Group companies at SG Private Banking (Swiss) SA, a subsidiary of Societe Generale. Apparently, the account held investors’ funds, which were used to pay bribes to an Antiguan auditor and to make deposits into Sir Allen’s personal accounts. The looming question is whether Societe Generale ignored the red flags of the unusual banking transactions, by neglecting to follow due diligence procedures and make an inquiry into the matter.
Federal prosecutors involved with Stanford’s criminal case have said that he “secretly funneled more than $100 million of investors’ money through his numbered Societe Generale account in Switzerland to his personal bank accounts for the payment of bribes and lavish personal expenditures.” Sir Allen, as he was known, had a penchant for luxury trappings, private jets, buying houses in the Caribbean and other places and sponsoring cricket matches, golf tournaments and tennis matches.
The account in question was an SG Private Banking account numbered 108731, with the account holder being the Stanford Financial Group. Prosecutors in Stanford’s criminal case have said that 108731 was a secret account, not on the company books and could only be accessed by Stanford himself or his chief financial officer, James Davis.
If it is determined that the bank looked the other way when criminal activity was occurring in one of its accounts, the bank could face prosecution for money laundering, conspiracy or fraud charges. Others say that it would be highly unusual for a bank to be criminally prosecuted because its employees failed to discover the underlying criminal activity.
Last January, U.S. District Judge David Hittner in Houston, Texas said that Stanford was not fit to stand trial. It was ordered that he be weaned off of the anti-anxiety and anti-depressant medications that he had become addicted to so that psychiatrists would pronounce that he was fit to stand trial.