A lawyer for the Bidens told the WSJ that, "There is no connection between the Bidens and Allen Stanford or Stanford period, full stop. There never was any meeting between any member of the Biden family, no phone calls, zero correspondence." The idea of zero correspondence may be a bit hard to believe if there is a jointly branded hedge fund. Don't you think there must have been something in writing to set up the deal?
The WSJ wrote that Stanford-related companies marketed the fund to investors and also invested about $2.7 million in the fund. The fund has offered to turn that money over to the receiver appointed last week by a U.S. District Court judge in Texas, who is taking control of the assets of Stanford and his companies.
Jeffrey Schneider, a marketer for Paradigm, says he brought in the Stanford business. He told the WSJ that Stanford introduced clients to the fund and Paradigm managed it. Paradigm's attorney Marc LoPresti said that Stanford entities put up the $2.7 million as seed money and then helped to market the new hedge fund, which was launched June 2007. As of November 2008, there were 104 investors and had assets of $49.8 million. The fund lost 9.5% in 2008 and is up 0.1% this year.
The purchase of Paradigm by the Bidens in 2006 had resulted in a lawsuit, which was settled between the Bidens and a former business partner Anthony Lotito in December. Lotito claimed there was money due him from the Bidens. He also claimed that James Biden asked for his help to get Hunter Biden out of the lobbying business while his father ran for President. A Biden lawyer denied Lotito's claim that the Paradigm purchase was prompted by Joe Biden's desire to get his son out of the lobbying business.
Whatever turns out to be the truth, it's obvious from this story and from the campaign contributions story of last week that Stanford has strong ties to people making key decisions in Washington today. Whether or not these ties helped Stanford to avoid SEC scrutiny needs to be investigated.
Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies."
