Stanford scam bilked Jews out of millions
September 23, 2009
By Todd Bensman
SAN ANTONIO, Texas - Over the past 15 years, Kadima, a Jewish charity in Mexico City, has helped developmentally
disabled Jews live to their fullest potential. The charity, which has 250 beneficiaries, offers day care for
adults with Downs Syndrome, and provides job training and placement for the mentally handicapped.
To ensure that the aid would be there despite the frequent turmoil in Mexico's economy, for years the charity has
vigorously raised funds, and has scrimped and saved wherever possible. "What we really wanted to do with the money
is to make sure the institution can go for another 10 years," said Sofie Freiman, head of Kadima's fundraising
efforts. "It was a great deal of money for an institution that relies on donations by other people. It took us 13
years to save it."
By 2009, Kadima had amassed enough money that its directors planned to expand the clinic and start up new programs.
Now, most of that money is gone. The charity had invested its nest egg with R. Allen Stanford's Houston-based
Stanford Financial Group, which, according to U.S. prosecutors and the Securities and Exchange Commission, was an
$8 billion Ponzi scheme. The alleged Stanford fraud is the world's second biggest Ponzi scheme, after the $65
billion Bernard L. Madoff case.
It has been widely reported that Madoff wiped out the fortunes of many wealthy Jewish families and charities. Now
a GlobalPost Passport investigation reveals that, as a victim of Stanford, Kadima was far from alone among the
Jewish communities of Latin America.
According to numerous interviews with victims, community leaders and lawyers representing them, Stanford laid
financial waste to Jewish organizations and individuals of every income level. A lawyer representing Latin American
victims estimates that half of the one billion dollars lost in Mexico came from the capital's 40,000-strong Jewish
population. The smaller Jewish community of Caracas, Venezuela also appears to have been hit hard.
In both cities, Stanford - who was called Sir Allen after being knighted by the Antiguan prime minister in 2006 -
mounted aggressive advertising campaigns and hired Jewish salesmen, who used their connections and trust within the
community to bring in money.
The same way that many American Jews entrusted Madoff with their fortunes, many Latino Jews were so confident in
the consistently high returns from Stanford's investments that they invested substantial portions of their savings
with him.
And while he had many victims from other faiths, as a single ethnic group, the Jewish population was
disproportionately hurt by the scandal. Many Christians were among his victims as well. Stanford is a graduate of
Baylor University, a Baptist institute in Waco, Texas. He reportedly prayed with his sales force and used Christian
connections to raise money. Nonetheless, the Jewish community is asking, did he deliberately target Jews? Or were
they merely easy prey?
"This is where it's most painful, because they knew exactly who they were hurting," said Sofie Freiman, head of
Kadima's fundraising efforts. Stanford's salesmen "targeted the Jewish community because they knew all these
people. This is why we were hit. We are deeply hurt by this fraud and not just because we lost money."
It is well known that the $65 billion Madoff Ponzi operation exploited a phenomenon known to criminologists as
"ethnic affinity crime" to gain the trust necessary to lure investments from thousands of American Jewish
institutions and families. Madoff's exploitation of fellow American Jews has resonated as a caveat to future
unsuspecting investors, not to be taken in by their own kind.
But dozens of interviews with Stanford victims and their lawyers show the scheme in Mexico alone left a trail
cluttered with damage: Jewish schools struggling to pay teachers; widows and retirees without the means to
support themselves; young married couples without wedding endowments; and once-wealthy families bereft of
prosperity built over lifetimes. Childrens' college funds are gone. After-hours day care facilities are
struggling, along with libraries and synagogues as donations from hard-hit donors dry up.
"Everybody knows somebody who got hurt," said Monika Unikel, a Jewish Mexican who conducts walking tours of a
historic Jewish neighborhood. "In Mexico, so many Jews lost everything. A lot of widows and institutions lost
their money from that. Each one has an individual story to tell, but no one has written it."
In Venezuela, the Jewish community of 14,000 reports many similar misfortunes from investing in Stanford, also
the result of the company's strategy to hire trusted Jewish sales people from the community.
Chief Rabbi Penchas Brener, who represents Caracas' largest synagogue, acknowledged that he lost $50,000 to
Stanford from the endowment of an important local foundation he heads. That's a substantial sum in a country
where per capita income is less than a third of that in the U.S.
"I don't know how hard it hit the community, but I know it hit," Brener told GlobalPost.
Easy Prey
The Texas born Stanford's rise was nearly as abrupt as his fall. He had owned several gyms in Waco, Texas that
went bankrupt in the 1980s. Afterwards, he emerged as a financier who grew an investment banking empire, based
in Antigua and Houston. By the time he landed on the Forbes 500 list, he was known as a colorful multi millionaire
aficionado of mansions, cricket, fancy cars and women - including exes to whom he paid lavish alimony.
In February 2009, the U.S. Securities and Exchange Commission filed a civil suit alleging that Stanford's
operations were fraudulent. Subsequently, Stanford and all of its subsidiaries collapsed, leaving investors with
between $6 billion and $8 billion in worthless paper. He is now in federal custody facing 21 counts of conspiracy,
fraud, bribery and obstruction of justice. He insists he is innocent.
To clients, Stanford had peddled seemingly-safe certificates of deposit that paid as much as twice the market
rate. According to the SEC, the assets were in highly-illiquid real estate and private equity investments. The
firm's victims were more far-flung internationally than Madoff's, the bulk of them in Mexico, South America and
the Caribbean.
As class action lawsuits and criminal indictments move forward, the Stanford strategy of targeting Latin American
Jews is only now beginning to emerge, according to several of the American law firms signing on clients.
San Antonio lawyer Ed Snyder is one of several Texas and New York attorneys representing well over 1,500 Mexican
and Venezuelan victims in various lawsuits against Stanford, a number that is growing fast.
Snyder recounted how he first became aware of this one victim demographic: On his first trip to sign up Mexican
clients in February, he was surprised to encounter furious Hasidic Jews wearing yarmulkes and other religious
attire, speaking Yiddish before switching to Spanish. Subsequent trips to sign up clients and to hear their
stories more than confirmed Snyder's initial impression.
He estimates that out of an estimated one billion dollars lost by some 4,000 Mexicans, about half came from Mexico
City's Jews.
"My perception is that the Jewish community in Mexico City, for various reasons, has been heavily impacted by the
Stanford disaster," Snyder said. "I think what you have here is a situation where that community was specifically
targeted."
The story of Stanford's depredations in Mexico's Jewish community, however, has been slow to emerge because it is
not one that anyone there is eager to tell. Although a number of people agreed to speak privately to GlobalPost,
dozens impacted by the scam declined requests for on-the-record interviews, for fear of repercussions from both
criminals and law enforcement officials. Some believed they were expatriating more money than Mexico legally
allows, via Stanford. Others feared drawing the attention of Mexico's rampant kidnappers, which have so far
largely left the community alone.
"What I can tell you," said Rabbi Marcelo Rittner, who leads one of Mexico City's larger synagogues "is that some
people were really hit hard by this situation. I don't have much to tell you more than that because of
confidentiality."
Jews weren't the only target. A practicing Protestant, he opened meetings with a prayer, the Brisbane Times
reported. He also used his faith to recruit sales representatives, and to lure many of his estimated 30,000
victims worldwide.
There is no evidence that Stanford set out deliberately to target particular religious group, and no motive has
emerged. But there was money to be had in the Jewish community, and he soon discovered them to be easy prey.
Stanford hired a Mexican Jew named David Nanes to open up a sales operation in Mexico ten years ago. Nanes actively
recruited other Jews well known in the community, to devastating effect.
Kadima's chief fundraising officer, Sofie Frieman, described why Stanford was so successful duping Jews: "The
Jewish community is very tight, so if someone comes up with a great idea recommended by another person you know,
you listen," she said.
"It's word of mouth. If your brother and brother-in-law, and the friend of your wife, is making money you might go
ahead and participate. You would never think in your life, if you're a widow, that a nice Jewish boy is going to
fool you in a scam, because you know his mother and you never think he's going to take advantage," she said. "This
is where it's most painful."
A favorite son, or a traitor?
Jewish victims in Mexico almost universally blame their ills on Nanes, who was born and raised in the Jewish
community, married a local woman there and had children there.
According to his Houston lawyer, Stanford hired the 41-year-old MBA about ten years ago to take charge of opening
up Mexico - and more recently, South America - to sales of financial products. When Stanford collapsed earlier this
year, Nanes left Mexico with his family, facing death threats that his lawyer says continue to this day.
Neither U.S. nor Mexican authorities have accused Nanes of any wrongdoing, although serious alleged misdeeds are
detailed at length in the San Antonio class action lawsuit, and in a new book published in Mexico called "The
Paper Empire" by Mexican journalist Gabriel Bauducco.
Nanes' Houston attorney, Charles Parker, said his client always believed in the financial products he was selling.
"He never suspected anything was wrong," Parker said, adding that Nanes and his wife "lost several million, his
parents even more." Believing that Stanford products were legitimate, Nanes naturally decided to market them to
the Jewish community because "that's who he knew. That was the wealthiest community," Parker said.
It made sense for Nanes to recruit other Jews from the communities as sales officers because they also had
extensive local connections there, Parker said.
"And word spread, and people were happy," Parker continued. "They got their return and passed it on to others.
Everybody was pretty happy until everything went to hell in a hand basket."
The same strategy of targeting wealthy Jews and hiring Jewish sales officers also apparently unfurled in Venezuela,
instilling a comfort level in potential clients like Rabbi Brener.
Brener said he felt almost no wariness about reaching out to one of Stanford's "account executives," a local Jewish
man whose family he'd known for decades, to invest his foundation's $50,000 reserve account. "I didn't pay too much
attention to the credentials," Brener said. "They were Venezuelan Jews. They worked for a bank. He didn't have to
convince me; I called him. This was made easier, so to speak, by the fact that he was Jewish."
Reached by phone, the former Stanford salesman, Morris Serrero, told GlobalPost Passport he sold extensively to
fellow Jews in Caracas and also to Jews in Panama and as far away as Switzerland. But he insisted he had no clue
it was all a scam and said that he too lost most of his personal money and his parents' money when the Ponzi scheme
was exposed. Serrero refused to talk further.
The good corporate neighbor
In Mexico, Kadima's Frieman refuses to believe that Nanes and at least some of his sales recruits didn't know their
investments were being diverted and couldn't be redeemed.
Not long after Nanes brought Stanford to Mexico City's Jews, he instituted an aggressive marketing campaign that
targeted the community. The company became a major, consistent corporate sponsor of cultural and sporting events,
doling out generous amounts of money to local charities and organizations.
Stanford also advertised heavily in community publications, including a well-read sports center newsletter about
teams the bank sponsored, said Renee Shabot, director of Tribuna, an organization that acts as a liaison between
the Jewish community and the non-Jewish world.
"People got used to seeing the name, seeing their faces and so they trusted them," Shabot said.
Stanford was especially generous to Kadima. In fact, the company sponsored Kadima's annual fundraiser for so many
years that board members felt they couldn't say no when Nanes put the squeeze on for the charity's endowment,
Frieman said.
"If you're sponsoring me and helping me out, I understand it would be good to move my money to your bank," she
said. "And also, some of the people on our board had their money there already. This is why we were so confident.
But it was a scam. We were fooled like everybody else."
Today, Frieman counts herself among the minions of Mexican Jews who feel a strong enmity toward Nanes. She doesn't
buy his story about not knowing the whole operation was a confidence swindle.
"I know a lot of people looking for him," she said. "People would probably spit in his face if they saw him. He
harmed many, many honest hardworking people."
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