A $7 BILLION ponzi scheme. The SEC knew about it in 1997. But, no action was taken against the scheme until 2009. TPM Muckracker has the story:

In news buried by the Goldman fraud charges, the Inspector General for the SEC issued a blistering 159-page report Friday concluding that the agency's Fort Worth office knew that Texas businessman Allen Stanford was operating a Ponzi scheme in 1997 -- but didn't make a serious effort to pursue the matter for eight years, until 2005.

Stanford, a flamboyant Texas billionaire, is currently in jail facing charges of operating a $7 billion Ponzi scheme.

The inspector general's report paints the enforcement section of the Fort Worth office as the main culprit. The IG concludes:

"[T]he SEC's Fort Worth office was aware since 1997 that Robert Allen Stanford was likely operating a Ponzi scheme, having come to that conclusion a mere two years after Stanford Group Company ('SGC'), Stanford's investment adviser, registered with the SEC in 1995. We found that over the next 8 years, the SEC's Fort Worth Examination group conducted four examinations of Stanford's operations, finding in each examination that the CDs could not have been 'legitimate,' and that it was 'highly unlikely' that the returns Stanford claimed to generate could have been achieved with the purported conservative investment approach.

Fort Worth examiners dutifully conducted examinations of Stanford in 1997, 1998, 2002 and 2004, concluding in each case that Stanford's CDs were likely a Ponzi scheme or a similar fraudulent scheme. The only significant difference in the Examination group's findings over the years was that the potential fraud grew exponentially, from $250 million to $1.5 billion."

This is a massive failure on the part of the SEC. For too long, a revolving door between the SEC and Wall Street has created an agency that is incapable of enforcing the law. SEC leaders sat idly buy as more and more innocent people fell victim to Allen Stanford. That must not happen again. The SEC and our financial regulatory environment need reform.