wmlro.com: Stanford International - news ain't what it used to be

It's a headline to grab attention - and it did. With its over-use of capital letters, the big number pushed right up front and the bit about pleading guilty, there are a couple of words that are easy to overlook:

Stanford Financial Group CFO Pleads Guilty to Charges Related to $7 Billion Scheme to Defraud Investors

That's what the Department of Justice wrote. Note "charges related to."

He's pleaded guilty to a number of minor charges - and the best the DoJ can do is estimate that he might have to surrender USD1,000 million. But then again, the DoJ claimed that Madoff had made off with USD50,000 million, then 65,000 million and, at trial admitted that the figure was more like USD13,000 million.In this case, however, James Davis has agreed to forfeit that USD1,000 million - but it's described as "preliminary."

The DoJ is still not entirely sure of its ground: although an announcement issued last night says "James M. Davis, 60, the former chief financial officer of Houston-based Stanford Financial Group (SFG), pleaded guilty today to fraud and obstruction charges related to a USD7,000 million scheme to defraud investors."

But when it talks about detail, it hides behind the caveat "According to the plea documents" which is repeated throughout the release.

So, what does the DoJ say Davis has admitted?

"According to Court documents" he and his conspirators (who have been charged with various offences but not convicted) misrepresented that certain CDs were being scrutinised (i.e. approved) by Antigua's Financial Services Regulatory Commission - but knew this to be false because he was bribing an official of the FSRC to prevent proper examination. Misrepresentations were also admitted in relation to who managed the money, and what money there was, plus made up false reports on the returns on investment. Oh, and they bought CDs worth USD7,000 million.

But there's nothing about losing USD7,000 million. That's so far nothing more than showboating. It appears that the strongest case the DOJ has is that the various participants allegedly claimed that investments were held in "well-managed, safe and secure" investments - when in fact they were not, and that the vast majority of the funds were not, as claimed, managed by so-called "global money managers."