As the joke goes, the days when the SEC was exclusively the plaintiff are truly over. The regulator has been notified that former clients of billionaire money manager Allen Stanford have sued for negligence and misconduct.
The good news for the SEC is that Stanford -- accused of running a $7 billion Ponzi scheme and currently in the same jail as Bernie Madoff awaiting trial -- has dropped his $7.2 billion countersuit alleging that the SEC used illegal strong-arm tactics to circumvent his legal rights.
But in theory, Stanford's case could be reopened if he loses his current legal fight, which would turn the SEC back into the defendant.
And the bad news is that at least eight of Stanford's former clients in Louisiana and Texas have filed their own suit against the SEC for "inexcusable negligence" in letting the situation go as far as it did.
The suit hopes to recover at least $19 million in lost capital and accuses the former head of the SEC's Fort Worth office by name of having failed to catch apparent problems at Stanford's firm early.
An internal SEC audit found that enforcers suspected Stanford of misconduct as early as 1997, but at least four inconclusive reviews of his records were never followed up on until 2005.