The SEC swooped down on R. Allen Stanford yesterday:

The Securities and Exchange Commission yesterday charged R. Allen Stanford, a prominent Texas businessman, and three companies under his control with carrying out a “massive, ongoing fraud” involving the sale of $8 billion in certificates of deposit.

The case is one of the largest alleged financial frauds in U.S. history and comes just two months after the SEC accused New York financier Bernard L. Madoff of orchestrating a Ponzi scheme of up to $50 billion.
[...]
“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” Rose Romero, director of the SEC’s Fort Worth office, said in a statement.

In addition to Allen Stanford, the SEC charged Stanford International Bank; two affiliates in Houston, Stanford Group and Stanford Capital Management; and two top executives, James M. Davis and Laura Pendergest-Holt.

The SEC acted after Stanford moved to liquidate some of its holdings, including $178 million from the bank’s accounts, over the past two weeks.

That’s The Washington Post‘s account, but most other mainstream media accounts sound very similar. The sub-text is that the SEC, twice shy after being once bitten by the Madoff scam, has scored a nice little triumph.

What’s missing is any clear mention of the fact that the SEC has allegedly been investigating Stanford for two years. A half-asleep, half-dead investigation that produced no results for months and months, even though the facts of the fraud are so simple, the evidence of fraud so transparent, that it should not have taken more than a few weeks of real investigation to figure out that something was rotten.

It is possible that the Madoff case stung the SEC to turn this into a real investigation, and what we saw yesterday was the fruit of that renewed resolve. But it is more likely that the SEC was forced into action by one Alex Dalmady, who went public with allegations of fraud a few weeks ago.

Of course, what’s missing from the Washington Post and other mainstream media accounts is any mention of Alex Dalmady and his role in bringing Stanford down. (A Google News search for Dalmady Stanford produces this paltry list of 36 hits, which includes many duplicates.) In fact, it was probably Dalmady’s allegations, and the publicity they received, that led to Stanford International Bank “(moving) to liquidate some of its holdings, including $178 million from the bank’s accounts, over the past two weeks.”

Dalmady is a Venezuelan Florida-based financial analyst who first looked into Stanford International Bank last October at the request of a friend who had “a good chunk of his assets in CDs” with them. He quickly realized things didn’t add up, and advised his friend to pull out all his money. After the Madoff fraud hit the headlines, Dalmady wrote an article laying out the case against Stanford International Bank. It was published in the January issue of a Venezuelan magazine, Veneconomy. A pdf version of the article can be downloaded here. He followed that up with a blog post on February 13 on a Venezuelan blog, in which he describes the sequence of events in great detail.

The Veneconomy article gained some traction in Venezuela (partly because many of Stanford’s investors are from Latin America). Felix Salmon, at Condé Nast’s portfolio.com, picked up Dalmady’s analysis on February 10, alerting U.S. media to the story. (Salmon has published several follow-up posts since then.)

Dalmady got calls from Business Week and Bloomberg, both of which were already working on stories about Stanford’s shenanigans. Already scooped by Dalmady, both Business Week and Bloomberg quickly published their stories. The Business Week story appeared on February 11; written by Matthew Goldstein, the story does not even mention Dalmady, which is outrageously dishonest. Bloomberg‘s story appeared on February 12; written by Alison Fitzgerald, it does mention Dalmady in passing, but carefully conceals the fact that Dalmady had gone public with detailed allegations of fraud well before Bloomberg‘s story appeared. That’s less dishonest than Goldstein, but only very slightly, in my opinion.

It’s shameful — and downright shoddy journalism — that Alex Dalmady has not received the credit he deserves in the U.S. media. Harry Markopolos was lionized for unsuccessfully raising an alert about Madoff. Dalmady, in contrast, has been effective in actually getting Stanford’s fraud shut down in short order. Granted that an $8 billion fraud is not as sexy as a $50 billion fraud. But surely success counts for something? If nothing else, Dalmady had the sense — and courage — to go public instead of just writing to the SEC. Both Markopolos and Dalmady had the sense to recognize fraud when they saw it. Dalmady was able to get the fraud shut down, whereas Markopolos could only jump up and down years later saying “I told them so, the stupid, sorry bastards!”

So who’s the real hero here?

*** Update, 6:28 a.m. ***

The British press offers a stark contrast to the U.S. press.

The Guardian has a story today headlined How the alarm was raised — by a Venezuelan economics magazine, which puts Dalmady front and center.

The Times acknowledges Dalmady’s role (although this comes right at the very end of their story, in the second-last paragraph).

Our friends at TPMMUckraker don’t come out looking very duly diligent either:

Zachary Roth of TPMMUckraker, for instance, first found the story in the NYT, and put up a blog entry on Friday morning. Later that day, he realised the story was a bit older than that, and put out an update giving BusinessWeek credit for “breaking” the story on Wednesday. But even as he continues to follow the story today, there’s no indication that, I, for one, (i.e. Felix Salmon) was reporting it on Tuesday morning — and there’s certainly no mention of Dalmady. Isn’t the whole point of the blogosphere that it’s meant to be able to glom onto stories without the intermediation of the MSM?

*** Update #2, 6:38 a.m. ***

Dalmady is becomingly modest:

Dalmady insists that had he not published his investigation, one of the major newspapers or industry magazines would have done so.

If he has an equally engaging personality and is photogenic to boot, he might even get his moment in the sun.