The SIPC trustee had little to show for his 15 years experience. Early on Rounds offered $500,000 to settle with SIPC and its trustee with one stipulation: “that the proceeds would all go to the El Paso victims without any shrinkage of legal fees.” SIPC and its Trustee patently refused the offer. There was obviously no incentive to settle for the Trustee and his former law firm while still plucking away at SIPC ‘s billion dollar coffers. Regardless of right or wrong they were working within the law.
According to Rounds, “the SEC botched this entire matter from the get go. The claim by the SEC that they help and protect investors and victims is a joke. They created more victims in the CIS matter, including the 107 Stanford investors. The SIPC trustee’s contractual interference in Stanford Square caused a significant economic loss to the 107 investors. Graham sold 100 Hamilton, the building in Palo Alto which the Stanford investors owned for $30 million. Graham returned little of these sales proceeds to the 107 investors. The new owner later sold the property for $60 million. If SIPC trustee didn’t muscle in Rounds’ wife would have sold the property at a higher price based on the guidance of her property management, Tarleton Properties, which she relied for guidance for all onsite property matters. The SEC’s gross lack of supervision cost those 107 investors over $30 million.”
The thousands of Madoff victims is a perfect example of the SEC inability to protect investors. Those investors lost over $60 billion when the SEC knew of Madoff’s scam 10 years before they finally acted (2). The SEC’s incompetence is smeared all over this matter which became the largest bankruptcy in U.S. history. Lehman Brothers, SIPC failed to act and botched this too.. The SEC egregious failure in these matters and in their inability to supervise SIPC in the CIS matter was costly to thousands of investors. SEC staff is more interested in viewing porn sites then assisting victims. For more on SEC’s failings, see an article appearing in Forbes in 2012 titled: “Senior SEC Staff Downloads Porn Amid Financial Crisis.”
Rounds now admits” his major mistake was his association with Fainter (which his wife warned him about from the beginning), and retaining attorneys Berliner, Tondre and Head”. Sadly an attorney cannot be disbarred for being incompetent. Rounds put his professional life in the hands of these lawyers and they failed him. However, according to Rounds “his biggest mistake was initially calling the SEC regarding the evidence he was able to obtain regarding Ted McCormick theft(McCormick the former CIS RR whom Rounds fired over one year prior to detecting the fraud). Rounds states: He should have handled this entire matter himself with local and state authorities’ and without the SEC interference.” At the time, he was unaware of the incompetency of the SEC”.
Rounds accept all the blame for his bad judgment and associating with Fainter and retaining his former attorneys. The real criminal here is McCormick for his fraud and theft and the SEC who allowed the SIPC Trustee to hire his former law firm and who grossly failed to supervise the case by allowing the Trustee and his former law firm to rack up millions in unnecessary fees. It’s like the bank president who graciously and freely hands the keys to the safe to the bank robbers without being held at gunpoint. The atrocity is that it was all done within the law.
(2) No One Would Listen, by Harry Markopoulus, Published March, 2010.