Corporate Scandal Stanford Essay

2597 Words Apr 9th, 2012 11 Pages
What Went Wrong: Case Study of a Selected Corporate Scandal
“In Texas, Robert Allen Stanford appeared to be yet another flamboyant billionaire. But in the breezy Caribbean money haven of Antigua, he was lord of an influential financial fief, decorated with a knighthood, courted by government officials and basking in the spotlight of sports and charity events on which he generously showered his fortune.” This quote from an article in The New York Times portrays the life of Mr. Stanford, owner of the Stanford Financial Group that was shut down in 2009 for what regulators describe as “massive ongoing fraud”. Stanford Financial Group, with headquarters in Houston, Texas, was a privately held international group of companies that provided
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There are many similarities between both cases, even though the case involving the Stanford Group was much smaller in terms of the magnitude of the fraud ($7 billion as compared to $50 billion). Both companies based their earnings on the attractive returns that they offered their clients. Although Madoff “did not promise spectacular short-term investment returns […], his investors’ phony account statements showed moderate, but consistently positive returns – even during turbulent market conditions”. In addition, both Madoff and Stanford were keen on making their names gain prestige, having reached the financial world as supposed experts and successful risk managers and connoisseurs of the best investment portfolios. As was demonstrated with time, both were simply swindlers of great preparation, cunning, and talent to have been able to deceive so many people as well as high-level institutions. Moreover, both Madoff and Stanford were able to establish in their personal lives a significant fame and acclaim as men of elevated social sensibility and responsibility, each in their respective environment, as philanthropists and benefactors of social, cultural and sports activities that gave them recognition and credibility in social circles where they were able to attract clients from the highest social classes. That is to say, both used the mechanism developed by Alan Greenspan and Robert J. Shriller known as “irrational exuberance”. Under

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