What money? Ponzi scheme cash not too dirty for Obama & Co.

Official White House Photo by Pete Souza
A number of prominent US politicians, including President Barack Obama, are refusing to comply with a federal court order that they return donations from a known Ponzi scheme. The funds amount to $1.8 million in losses for the bilked investors.

­The then-freshly inaugurated President Obama had received $4,600 for his campaign from Stanford Financial Services, Reuters reports. Obama’s campaign then donated the sum to charity in February 2009, just days after Stanford was taken over by the US government following charges of massive fraud. Republican and Democratic national fundraising committees, along with the campaign funds of various Senators, Representatives and the President himself, all received donations from the Houston financier Allan Stanford, who is currently facing charges of masterminding the second-largest Ponzi scheme in history – totaling $7 billion, second only to Bernard Madoff's estimated $50 billion fraud.

Obama is now catching criticism for refusing the court's demand that the recipients return the donated money to the defrauded investors. Kevin Sadler, a lead counsel for the investors entitled to repayment, compared the move by Obama’s campaign to taking money from “a guy who goes into a Seven Eleven and robs the store.”

Following Stanford’s arrest in 2009, his Stanford Financial Group was placed under the management of a receiver. The receiver was charged with compensating investors – some of whom lost over half a million dollars in savings. The problem was that a large portion of the money had been donated to the campaign funds of high-profile politicians.

Other notable politicians owing money to the receivership include Representative Pete Sessions (R-TX) and Senator John Cornyn (R-TX). The total amount of money owed by party committees on both sides of the aisle is over $1.5 million that, so far, these committees have refused to pay back.

But some Senators and Representatives complied with the demands and returned the money they had received from Stanford. These include Speaker John Boehner (R-OH), Senate Majority Leader Harry Reid (D-NV), Senator John McCain (R-AZ), Senator Chris Dodd (D-CT) and Senator Richard Shelby (R-AL). However, the $154,000 recovered from these politicians is a mere fraction of the $1.8 million owed to Stanford's investors.

A scarcity of legal precedents and the difficulty to prove that the money received by a campaign was known to be illicit remain major hurdles in recovering the money.