Blaine Smith considered Jason Green, a former director at the Stanford Group’s Baton Rouge office, his friend. Smith says he and his wife regularly attended Wednesday night Bible study at Green’s Country Club of Louisiana home.
“How are you not going to think that that guy’s honest?” Smith says of Green, who was a prominent figure in Baton Rouge society circles, in a feature from the current issue of Business Report.
In 2013, Green was found liable for his role in Allen Stanford’s multibillion-dollar Ponzi scheme. While regulators did not allege that Green knew about the scam, an administrative law judge found that he didn’t do enough to ensure Stanford’s marketing materials and disclosures were adequate. Green denied wrongdoing.
Smith lost more than $1 million investing in Stanford’s bogus CDs. He has been forced to go back to work at a time in his life when he expected to be retired. Without subpoena power and the ability to personally investigate the main headquarters and Stanford’s bank in Antigua, he can’t think of much he could have done to sniff out the fraud.
Chad Olivier, a certified financial planner in Baton Rouge, says he lost many potential clients to the Stanford CD, despite his warnings that it was based in a foreign country and not insured by the Federal Deposit Insurance Corp.
When asked by Business Report what investors can do to protect themselves from scammers, Olivier says it’s important to make sure the adviser is providing an overall strategy, not just selling a product.
“Find out how they get paid and when they will contact you to discuss the planning and management of the account,” he adds. “And if it seems too good to be true then it probably is.”
Smith stresses that investors should try to find out how much of a commission is being paid to their broker. If it’s out of line with industry standards, as those paid by Stanford turned out to be, that’s a major red flag, he says.
But Smith bristles at the popular notion that the returns on the Stanford CDs were so consistently high and “too good to be true” that the fraud should have been obvious. He says his returns fluctuated with market conditions as one would expect. In 2008, he says his Stanford CD was giving him about a 5% return, which hardly seemed outrageous compared to other CDs on the market that he says were getting 4%.
Donald Andrews, dean of Southern University’s College of Business, says the lack of financial literacy among the general public makes many people susceptible to fraud.
Read the full feature, which includes 10 tips and strategies that investors can employ to avoid being the next victim. Send your comments to editors@businessreport.com.
