The Role of Whistleblower Leyla Wydler in Allen Stanford Ponzi Scheme Case

Introduction

The scandalmongers have recently been subjected to close monitoring, especially when they leak information that involves sensitive issues like security relating to a state.  In the U.S., the Security and Exchange Commission has been given the mandate by Congress to safeguard the interest of the citizens in a greatly important area of the U.S. national economy (Bolkovac & Lynn, 2011, p. 7). Talebearers may usually be recognized and appreciated, but most people of the United States have a greater chance of assuming or even rejecting them whenever they want to pinpoint a problem within their own places of work or at the society level.

Leyla Wydler’s situation wasn’t extraordinary too (Bolkovac & Lynn, 2011, p. 9). Not only did the Security and Exchange Commission disregard her alarming sentiments concerning Stanford, but also her fellow colleagues. No one took the initiative to defend neither her,  nor her customers, since most of them neglected and ignored the claims she championed about the Certificates of Deposits (CDs) by Stanford (Bolkovac & Lynn, 2011, p. 12).

In the reference to the Wall Street Journal, of all the 1273 grievances brought forward by workers,  who claimed to have been the subject to the organization’s rejection for revealing the information between 2002 and 2008, the government made the final decisions in favor of notifiers 17 times (Bolkovac & Lynn, 2011, p. 15). Another 841 grievances were not heard and hence dismissed, at times due to minute reasons. At different circumstances, they were nullified as a result of informant working at non-governmental subsidiaries of bodies traded in public, which the Labor Department affirmed that they were not represented by the law (Bolkovac & Lynn, 2011, p. 17). Leyla Wydler’s situation illustrates how courageous individuals can raise concerns which can aid in preventing adverse economic or other unpleasant consequences from occurring.

The Role of Whistleblower Leyla Wydler in Allen Stanford Ponzi Scheme Case

Leyla Wydler was a central person who offered crucial advice at Stanford Group Company, and made $150,000 in the year 2002 (Gerritsen, 2007, p. 12). She revealed the information about her boss, Allen Stanford, who had employed her. Her boss had perpetrated 7 billion dollars- this case is known as a Ponzi scheme. He had defrauded a lot of people who had spent a lot of money investing, and this later became one of the largest unacceptable practices in U.S. history. In addition, he made use of his ill-gotten gains for an exorbitant lifestyle as well as making influence in politics (Gerritsen, 2007, p. 14).

Furthermore, Stanford made huge payments of bonuses to marketing employees who sold fraudulent Certificates of Deposits (CDs) to customers. His criminal acts continued for several years without undergoing investigations, until June 14, 2012, when he was finally proven guilty and sentenced for 110 years after being proven guilty of 13 counts. During the process of trying to expose her boss’s criminal acts, Leyla Wydler was revoked her job by Stanford. Further, several agencies responsible for enforcing regulations ignored her warnings (Gerritsen, 2007, p. 15).

As a single woman with two kids and a victim of cancer, Leyla Wydler was not influential in her decision to stand up. Her intentions were not to become female idol, rather she opted to expose truth of the matter with the aim of saving her customers’ capital. Additionally, what she had experienced at Stanford organization had disrupted her personal values and therefore exerted pressure on her to take a corrective measure (Joy, 2010, p. 24). In all her legal fights with a wealthy person, taunts from previous colleagues, as well as an alarming bank account, she stood firm and prevailed.

Under normal circumstances, many people who expose unacceptable acts do not achieve victory. They lose their jobs and status in an antiquated system that tends to give favor to the influential and hence their efforts are never taken into consideration (Joy, 2010, p. 26). Leyla Wydler sent a letter to the Security and Exchange Commission about her previous employer, the Stanford Financial Group, which had suspended from working in the previous year due to her strong stand not to sell certificates of deposits .She fully suspected these certificates being advertised in a misleading way to various individuals who wanted to invest (Joy, 2010, p. 27).

The organization, as described by Wydler in her letter, was the central party of a flourishing corporate fraud scam,  termed as a huge Ponzi scheme that would cause destruction to the life savings of many people, create losses to the reputation of all related bodies, mock safety and banking authorities and bring shame to United States of America (Joy, 2010, p. 29). Furthermore, Wydler sent copies to the National Association of Securities Dealers (NASD), the present Financial Industry Regulatory Authority (FINRA); the trade agency tasked to enforce laws throughout the industry, as well as various newspapers such as the Wall Street Journal and the Washington post (Katz, 2015, p. 96).

In that period, none of them gave any feedback. At the end of 2004, Wydler made a call to the examination branch of the Security and Exchange Commission’s Forth Wort District Office to pass her grievances. A staff member became aware, but like before, nothing came out of it (Katz, 2015, p. 97). More than four years later, when the aftershocks of the worldwide financial meltdown proceeded to play out, it became evident that Stanford had orchestrated a 7-billion-dollar Ponzi fraud which cost the savings of many investors who had been defrauded.

Wydler might have given the preference the attention of Espionage Act to the unresponsiveness that hindered her efforts to unleash the scam (Katz, 2015, p. 99). The experiences of corporate snitchers like Wydler made little score to the truth pin- pointed by a scholar of law, Cass Sunstein.He also states that the concerns of the agitators who possess the strength to raise sensitive issues and bring them to light, useful information that can aid in avoiding adverse economic or other kinds of mistakes, makes impact only when anyone pays much attention to them (Kotz, 2009, p. 45). Moreover, securities adjudicator did not only refuse her leaker retaliation claim, but also instructed her to pay back 100,000 dollars signing bonus.

As per 2010 Dodd-Frank Act, Snitchers like Leyla Wydler are no longer bound by forced adjudication agreements (Kotz, 2009, p. 47). Wydler claimed that her employer, Allen Stanford, persuaded his broking workers to prioritize in concentrating on the belongings of the customers in his phony offshore certificates of deposits. Contrary to the opinion of any financial specialist, and Wydler identified at the time, this was totally against the best interest of his customers and increased the chances of unnecessary outcome (Kotz, 2009, p. 49). The majority of the investors were of old age and were just trying to get higher outcomes.

Aspects that had facilitated Allen Stanford Ponzi Scheme Case

There was no identified agency that audited the financial statements of Stanford’s firm. The majority of investors always forgot to inquire of the independent legitimate audits (Kotz, 2009, p. 51). The products were marketed very fast, but the proceeds were placed in highly risky investments yet the clients were not informed. Stanford’s major law enforcer, which at that time was the National Association of Securities Dealers (NASD), was at the same side earlier with Stanford in a wrongful termination of Wydler’s argument. Under the industry regulations, Wydler had to present her grievance to the industry‘s arbitration committee and was not granted a court hearing (Kotz, 2009, p. 54).

Moreover, the press noted how Congress members purposed to make it very hard for leakers to emerge victorious in their claims under the Dodd-Frank Regulation. For example, bills like that of Rep. Michael Grimm would need the informant to raise the issue with their employers before proceeding to the Security and Exchange Commission, and would compel the SEC to reveal the talebearer concerns to the organization or agency to be going contrary to the law (Kotz, 2009, p. 55).

In 2002, after the accounting scam of erupted at Enron and Worldcom, President George W. Bush gave assent to the Sarbanes-Oxley Act, which stated that it was criminal of the organizations or firms to repel against employees who reported suspicious business and unaccepted activities (Zuckoff, 2005, p. 32). His tenure quickly set about creating more members of staff in the federal body tasked to hear complaints from informants with judges,  determined to deprive workers who gave information of a suspicious scam of the protection they thought they had just been given guarantee. During the spell at job, Wydler, a financial consultant and deputy leader, continuously exerted pressure to the leaders of the firm to for an appraisal of the real value of Stanford International Bank’s assets but was not given information (Zuckoff, 2005, p. 33).

In 2003, she further went ahead and made a claim of wrongful termination. Under the Whistleblowers Act, she requested the internal monitoring agency of the financial industry; the Financial Industry Regulatory Authority (FINRA), to begin investigations of her counts of fraud. Furthermore, in 2004, she made another grievance to the Security and Exchange Commission without hiding her identity (Zuckoff, 2005, p. 35). During discussions in September and December in that year with Security and Exchange Commission officials at the regional office in Fort Worth, Texas, Wydler availed the Security and Exchange Commission with copies of her electronic mails and other important information.

They also noted that certificates of deposit were in real sense Securities, therefore giving the Security and Exchange Commission the power and mandate over Stanford’s welfare (Zuckoff, 2005, p. 42). Later, after the actual facts had been released, Wydler gave a testimony at a congressional hearing in Baton Rouge, Louisiana, before an audience of those who had been defrauded in the process of investment. Many people were present during the Banking Committee hearing, which took place in an area with  large concentration of Stanford’s customers (Zuckoff, 2005, p. 52).

There were complaints and dissatisfactions that the law enforcement agencies did not act swiftly to arrest the perpetrators running the fraud, which affected more than 28,000 people who had invested in the firm. Wydler, who was employed in 2000, in the process of hearing revealed that she was fired two years later after being employed due to her firm decision not to sell the fraudulent Certificates of Deposits to her customers (Zuckoff, 2005, p. 54). She added that the financial consultants, who marketed the Certificates of Deposits ,were given praise and awarded compensation for the work that they were doing, while those like her who were reluctant and acted like obstacles, were terminated from the job.

Moreover, in the same year, 2004, Wydler lost her adjudication and therefore took her grievances to the Security and Exchange Commission which began a formal scrutiny the following year. However, the SEC did not sue Stanford but it did that in subsequent years (Zuckoff, 2005, p. 55). The agency noted that it was too hindered by Antiguan law enforcers. It was until January 2009, four years later, when  she was contacted by the Security and Exchange Commission again and after just a month, Stanford imploded.

She informed the hearing of the Congress that most of her issues had been confirmed and stated clearly that if the government had taken seriously her cries and taken appropriate measures, thousands of investors could have avoided the disaster they were going through (Zuckoff, 2005, p. 62). Various individuals who had invested such as Craig Nelson, a 55 year-old citizen who resided in Magnolia Springs, Alabama, stated that organizations along with Stanford had forcefully taken away his American dream.

Another person, Troy Lillie, noted that he had put all his savings got from retirement into the investment in Stanford certificates of deposits after acquiring comments from his colleagues at a refinery where he had been employed for several years. Moreover, it was a  humiliation for him after losing his money in the fraud, as Lillie stated his great disappointment that the law enforcers had not succeeded in preventing it (Zuckoff, 2005, p. 62). Widler’s agitation had not been taken into consideration by the U.S. Security and Exchange Commission for six years. Later, the federal law enforcing corporation captured the offshore investment industry and opened charges for Texas billionaire Robert Allen Stanford with conducting a Ponzi scheme.

The rose of the news of the company in February 2009 came as a shock to the majority of people across the world who had invested, not to exclude those who had lost their life savings, and this created a wave of fear at financial institutions owned by the financier (Zuckoff, 2005, p. 63). In addition, the Stanford law enforcing agencies in 2009, which was responsible for manning the brokers at the Stanford Financial Group, admitted not acting on the information of fraud relayed by Wydler in 2003.

The regulators noted that the institution was running a Ponzi scheme, but the agency did not pay keen attention to the claims as a result of its guidelines which underwent amendments (Zuckoff, 2005, p. 65). The information was disclosed during a testimony by Daniel Sibears, an Executive Vice-President of the Financial Industry Regulatory Authority (FINRA). FINRA finally agreed that Wydler’s grievances of fraud were never transmitted to the panel tasked to conduct investigation by the FINRA adjudication committee.

Sibears’ testimony stated that even if the organization had taken Wydler’s agitations seriously, it had great chances of coming through obstacles from regulators in Antigua, the locality of Stanford’s offshore financial institution, where he pointed out that officials were unwilling to cooperate in trying to dig out the tips of the matter (Joy, 2010, p. 51). Wydler noted that her senior had given her no justification for her sacking, but noted that she had been put under pressure to market certificates of deposits to her clients rather than getting them into stocks, bonds, and several other investments.

Conclusion

The U.S. Congress laid down new guidelines as part of the Dodd-Frank Wall Street policy as well as the Consumer Protection Act, that at least improved the safeguarding and provisions of incentives to snitchers (Joy, 2010, p. 62). Part of the requirements of Dodd-Frank, for instance, gives employees the freedom to bypass corporate inner compliance programs and report breach of law directly to the Security and Exchange Commission. The Wall Street informants who come forward and provide secrets to the government that later leads to the successful prosecution of scam, also have the different provisions (Joy, 2010, p. 64). Despite taking long time, Leyla Wydler tried so much to bring the Ponzi scam into attention. She secured  many citizens from bankruptcy and adverse financial consequences.

Furthermore, she opted to lose her job and career as well and to stand firm for what was right (Gerritsen, 2007, p. 25). If individuals like Wydler should be given honor, then there is need to ensure that the financial corporation agitators who want to be like her in future do not have to spend a lot of their time awaiting their recognition. The conviction of Stanford will act as a boost to various civil agencies aiming to hold people accountable for defrauding people (Gerritsen, 2007, p. 45).

 

 

 

 

 

 

 

 

 

References

Bolkovac, K., & Lynn, C. (2011). The whistleblower. New York: Palgrave Macmillan.

Gerritsen, T. (2007). Whistleblower. Thorndike, Me.: Center Point Pub.

Joy, A. (2010). Whistleblower. Point Richmond, CA: Bay Tree Pub.

Katz, B. (2015). Whistleblower. University Press of New England.

Kotz, H. (2009). Investigation of failure of the SEC to uncover Bernard Madoff’s Ponzi scheme. [Washington, D.C.]: U.S. Securities and Exchange Commission, Office of Inspector General.

Zuckoff, M. (2005). Ponzi’s scheme. New York: Random House.