Allan Stanford

Platinum alleged that Kroll had failed to find “critical news articles” about the Baynon Investments which showed the leading figures involved with it had been accused of fraud. In court, Kroll were accused of ‘gross negligence’ of the “most extreme and outrageous kind”.

– Platinum Partners

THE NEW YORK HEDGE FUND AND KROLL’S “SHODDY” STANFORD REPORT

In January 2011, a New York hedge fund, Platinum Partners, filed a lawsuit against Kroll Associates for compiling a “shoddy report” that failed to reveal an investment scam that led to the hedge fund loosing millions in Allen Stanford’s massive ‘Ponzi’ scheme.

ref: The StreetSweeper

Platinum had hired Kroll to investigate Stanford’s firm and its largest “feeder fund”, Baynon Investments, before it decided to invest $20 million in the fund.

Platinum alleged that Kroll had failed to find “critical news articles” about the Baynon Investments which showed the leading figures involved with it had been accused of fraud. In court, Kroll were accused of ‘gross negligence’ of the “most extreme and outrageous kind”.

KROLL AND STANFORD – WHO WILL INVESTIGATE THE INVESTIGATORS?

It seems odd that Kroll did not know more about Allen Stanford. In the late 1990s, Stanford hired Kroll’s Miami office to help with a number of internal investigations and to help fend off federal investigators who were raising questions about Stanford’s growing banking empire on the Caribbean island nation of Antigua.

ref: Reuters

Stanford was finally unmasked as a fraudster in 2009 when the Securities and Exchange Commission and federal prosecutors charged the former Texas billionaire with running a $7 billion Ponzi scheme.

In March 2012 Allan Stanford was found guilty of 13 out of 14 charges of fraud, conspiracy, money laundering and the obstruction of justice and sentenced by a Texas court to 110 years in prison in June 2012.

ref: Google

Stanford’s former chief of security, Thomas Raffanello, was accused of ordering the shredding of documents at one of Stanford’s offices in Florida. Raffanello got his job at Stanford five years before largely on the recommendation of Thomas Cash, a former Kroll executive managing director.

ref: Reuters

ref: Reuters

In August 2009, Cash suddenly left Kroll, after running the firm’s investigative team in Latin America and the Caribbean for nearly 15 years. His departure came soon after the National Electrical Contractor’s Association sued Kroll for gross negligence, contending that the firm misled the not-for-profit foundation when it retained Kroll to run a due diligence report on Stanford.

The electrical association lost $2.5 million through Stanford’s activities after Kroll gave the offshore bank a “clean bill of health”. It was Thomas Cash who in April 2007 signed Kroll’s contract with the electrical association to undertake due diligence search on Kroll’s former client.

The National Electrical Contractor’s Association accused Kroll of failing to spot obvious warning signs and of not disclosing a conflict of interest over the employment of Cash who had in the past been hired by Stamford.

In October 2009 the case was ‘quietly’ settled out of court.

ref: ACFCS

THE SOUTH AFRICAN PONZI PAIR

Allen Stanford was not the only fraudster to whom Kroll gave a clean bill of health resulting in investors losing millions.

In June 2007 a New York-based asset management firm employed Kroll to investigate two South Africans, Barry Tannenbaum and David Rees, before it made a large investment with them.

ref: The Guardian

Tannenbaum and Rees had told wealthy potential investors in South Africa that they would get up to a 15 per cent return on their money every 12 weeks by funding their supposed operation to sell the raw ingredients for anti-Aids drugs to pharmaceutical companies.

Kroll’s due diligence however was not very diligent at all, it transpired.

Kroll’s investigation reveal anything wrong with Tannenbaum and Rees’s scheme, indeed Kroll said both men appeared in a “very positive light”. Their report was then passed around thus leading more unwitting investors to put their money into the scheme.

A year later and some 400 South African investors and not seen a Rand in return and the Ponzi pair were under investigation by the South African police.