Mexican Jews may be victims of Madoff-like scheme

Texas-born bank tycoon Robert Allen Stanford, who faces unfolding fraud allegations surrounding his Antiguan investment banks, might 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 — 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 need has arisen due to the recession

Robert Allen Stanford (center) helps announce a $20 million, five-match cricket series in London in June 2008. photo/ap/lefteris pitarakis

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 Stanford Financial offices in Houston and Memphis, Tenn., on Feb. 17, and the SEC charged Stanford with “massive ongoing fraud.” Two Stanford banks were seized by Antiguan government officials last week, and all of the banks’ assets have been frozen. 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, 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 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 — a community of nearly 40,000 — have attained security by gaining wealth and remaining insular, Rosa also explained that the  foundations of the community are now threatened.

“If people don’t get their money back, the Jewish community is going to change completely,” Rosa said. “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 aliyah.”

An operator at the Jewish Agency office in Mexico City was not at liberty to discuss details of the situation.

Others’ said they fear the fallout from the Stanford scandal, following on the heels of the $50 billion Madoff disaster, could change diaspora Jewish life 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 Benjamin Netanyahu and Ehud Barak, who has dealt extensively with Latin American Jewish communities.

“The key question is how much will this affect the schools and the synagogues,” Brown 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.”