Complex cases like Stanford's that couldn't be quickly resolved were discouraged by enforcement higher-ups, the IG's report said.
The report by Inspector General David Kotz said his office's examination didn't find that the reluctance of the SEC's Fort Worth enforcement attorneys to investigate Stanford was tied to "any improper professional, social or financial relationship on the part of any former or current SEC employee."
The IG's office did find evidence, however, that "institutional influence" within the enforcement division contributed to the repeated decisions not to conduct a thorough investigation of Stanford, the report says. Senior agency officials in the Fort Worth office believed they were being judged on the number of cases they brought, and told their enforcement staff that novel or complex cases -- as opposed to "quick-hit" cases -- were discouraged, the IG's inquiry found.
The SEC's Fort Worth office in 1997 began conducting examinations of sales of certificates of deposit by Antigua-based Stanford International Bank, which promised outsized returns, the inquiry found. It said the examiners made numerous efforts after each exam to convince the Fort Worth enforcement officials to open a full investigation of Stanford, but "no meaningful effort" was made until late 2005.
Kotz's investigation also found that a former head of enforcement in the Fort Worth office played "a significant role in multiple decisions over the years to quash investigations of Stanford."
The former official, who wasn't named, sought to legally represent Stanford on three occasions after the official left the agency and went into private law practice. The official did represent Stanford briefly in 2006, the report says.
The SEC's civil fraud charges filed last year against Stanford accused the brash billionaire, a larger-than-life figure in the Caribbean, of luring investors with promises of improbable high returns on the CDs and other investments.
Last June, Stanford was indicted and jailed on Justice Department charges that his international banking empire was really a pyramid scheme built on lies, bluster and bribery. Stanford is disputing the charges, which in the criminal case could send him to prison for up to 250 years if convicted.