Stanford whistleblowers had concerns since 2005

HOUSTON (Reuters) - For Mark Tidwell and Charles Rawl, former employees who filed a whistleblower lawsuit against Texas billionaire Allen Stanford’s financial empire, the alarm bells first rang in May 2005, when some clients got a letter from the U.S. Securities and Exchange Commission.

Tidwell and Rawl’s concerns that Stanford was falsifying the returns of about $8 billion in certificates of deposit were eventually heeded by the SEC, which on Tuesday accused Stanford in a civil complaint of “massive ongoing fraud.”

But at the time, the SEC inquiry came out of the blue, Tidwell and Rawl told Reuters in an interview at a law office in Houston on Thursday.

Clients “just got this FedEx package from the SEC,” said Tidwell, 40, who was a Stanford senior vice president before he left the company in 2007, along with Rawl.

“We asked what it was about and they assured us that it was just a routine inquiry, it was not any big deal, do not be alarmed,” Tidwell said.

Fast-forward to the summer of 2006, when Tidwell said he was given instructions to clean up the files on Stanford’s international bank clients and remove any non-official documentation and “any sticky notes.”

A few weeks later, Tidwell learned that the SEC was still investigating Stanford, even though he was given assurances that they were not.

To make matters worse clients began calling to inquire about discrepancies between the published performance statistics of Stanford investments and the ones that showed up on clients’ statements.

“We found out there was bad math,” Tidwell said. “Management was aware but not really going to change anything.”

The discrepancies also grabbed the attention of the SEC. In their complaint filed this week, they point to claims by the Antiguan-based Stanford International Bank that its investment portfolio lost 1.3 percent over a period that the S&P 500 plummeted nearly 40 percent.

Rawl said that when he confronted his managers about the performance discrepancies, he was told of ongoing discussions at the “highest level of management” about “whether or not we were going to let this sleeping dog lie.”

On March 28, 2007, Stanford managers gave a presentation aimed at quelling concerns of employees like Rawl and Tidwell, but “I saw that the numbers were still wrong and that they were trying to mislead us in that meeting,” Tidwell said.

A manager began the meeting with orders not to put their concerns in writing, which also sounded alarm bells, Rawl said.

According to Rawl, the manager said “you can’t put these things in writing or in an email because someday the SEC might get a hold of that and say what’s going on here?”

Over a year later, Stanford’s portfolio of assets, estimated by the company at $50 billion, is in the hands of a federally-appointed receiver, and the fate of the thousands of investors who trusted Stanford with their money is unknown.

Editing by Bernard Orr