Have Mexican Jews lost their wealth in Madoff-like scheme?

Alleged $8 million fraud could severely undermine Mexico City's Jewish community.

By ABE SELIG
February 23, 2009 23:57
3 minute read.
Have Mexican Jews lost their wealth in Madoff-like scheme?

robert stanford 248 88 ap. (photo credit: )

Texas-born bank tycoon Robert Allen Stanford, who faces unfolding fraud allegations surrounding his Antiguan investment banks, may end up filling a Bernard Madoff-like role for Latin American Jews and specifically the Mexico City community. While a smaller sum of money is involved - "only" $8 billion of investments are being questioned - a lot more is at stake. Thousands of Mexico City's Jews purportedly invested with Stanford's banks, lured in by promises of 14-percent returns and a seemingly secure place for their money outside the volatile Mexican economy. Pesos were tucked away in Caribbean accounts, and investors felt assured that their money would be available whenever the need arose. But now that the need has arisen - the current financial crisis is by many accounts growing worse, and people are strapped for cash - Mexico City's Jews, a community of nearly 40,000, cannot get to their money. Earlier this month, the Securities and Exchange Commission and the FBI began investigating Stanford's company, Stanford Financial Group, after allegations of fraud began to surface. Federal agents raided the offices of Stanford Financial on February 17, and the SEC charged Stanford with "massive ongoing fraud" based on the $8b. investment scheme. Stanford's two banks were seized by Antiguan government officials last week, and a thorough investigation with the cooperation of American regulators is now under way. All of the banks' assets have been frozen and Stanford's Mexico City branch shut its doors, leaving many there to wonder if they would ever see their money again. "All of my mom's retirement savings were in one of Stanford's banks," said "Rosa," an immigrant from Mexico City now living in Israel. She asked that her real name be withheld due to the sensitivity of the situation, and said that many of Mexico City's Jews would prefer to remain silent about their losses, rather than allow the Mexican government to find out about their offshore, off-the-book investments. "Everything in Mexico is fuzzy, it's a scary place," she said. "There's no rule of law, no real government, and the police themselves are thieves. Because it's so dangerous, you have to take care of yourself, and the only way to take care of yourself is with money. That's why so many people keep money somewhere else, outside of the country." But while Mexico City's Jews have attained security only by gaining wealth and remaining steadfastly insular, Rosa also explained that the very foundations of the community were now threatened with collapse. "If people don't get their money back, the Jewish community is going to change completely," Rosa continued. "The society in Mexico is extremely divided, there's no middle class, it's either rich or poor. The Jews are wealthy and they keep to themselves, they go to Jewish schools, and they have very little contact with other Mexicans. "If they lose their money, they won't be able to remain in Mexico without that lifestyle, and I think we'll see a huge wave of aliya." Rosa said she believed at least 10,000 families had invested with Stanford's bank, but that the number could be much higher. "It could be a lot more," she said. "But it's hard to tell, because people will keep it a secret." An operator at the Jewish Agency office in Mexico City told The Jerusalem Post she was not at liberty to discuss details of the situation. "We know about Stanford and what happened in Antigua," she said. "But we can't talk about who may have been hurt by this. It's a private issue." Others' however, said that they feared the ongoing financial situation, accompanied with new fallout from the Stanford scandal, which follows so close on the heels of the $50b. Madoff disaster, could change Diaspora Jewish communities forever. "These are the sort of situations where people are not only losing their investments, but the terms of Jewish life can change," said Bobby Brown, a former Diaspora affairs adviser to both Prime Ministers Binyamin Netanyahu and Ehud Barak, who has dealt extensively with Latin American Jewish communities. "When one person or entity becomes so central, and then they go down, it takes the whole community down with them." Now, Brown explained, it was important to keep an eye on the fallout from Stanford's fraudulent investments, to see how it plays out in the Mexican Jewish community's public sphere. "The key question is how much will this affect the schools and the synagogues," he said. "I'm sure Mexico has already been hammered by the financial crisis, so we'll have to wait and see how this adds to the situation. "The pattern has been, slowly, all of these small communities are closing down," Brown continued. "This is the problem with not having the kind of financial strength to survive without key individuals."


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