The Chief Accounting Officer and Global Controller formerly executives at Stanford International Bank have been found guilty of nine counts of wire fraud. The charges stem from the ponzi scheme that cost investors $7 billion. The two are now facing prison for the next 20 years. The exact term will be decided by District Judge David Hittner. The sentencing is scheduled for February 14, 2013.

Prosecutors said the accounting staff at the bank had inside knowledge of what R. Allen Stanford was really doing with the bank. The bank was losing money and loaning much of it to Stanford to feed a lavish lifestyle and his other businesses.

Lawyers for Gilbert Lopez and Mark Kuhrt said they were unaware of the fraud at the company. They claim it was all the work of Stanford. The jury did not agree and found the two guilty on 9 of the 10 counts of wire fraud.

A Ponzi scheme is one where investors are paid returns from future investors. They get investors by promising better returns than other investments. The problem is eventually there are not enough new investors to cover the returns for the past investors and the scheme collapses.

The scheme is named after Charles Ponzi who used it in 1920. However, he did not invent it and descriptions of the scheme can be found in literature in the mid nineteenth century. Most ponzi schemes are discovered by authorities before they reach the tipping point and collapse.

The old advice from your mother applies to every investment. If it sounds too good to be true than it probably isn't. If you ever have questions then talk to your accountant to get a neutral perspective.