Regulators didn’t sweep in to accuse Stanford Financial of fraud until early this year, but depositors and investors in Stanford were on to the alleged fraud as early as 2002, according to Securities and Exchange Commission documents obtained by FOX Business Network.

Stanford Financial, its affiliates and Chairman R. Allen Stanford face civil fraud charges, and a grand jury is mulling a criminal indictment. At issue is whether the company and executives perpetrated what the government has called a “massive ongoing fraud” by selling high-yield certificates of deposit that were invested in risky instruments and promised outsized returns.

Stanford himself has not yet been charged criminally, though his chief investment officer, Laura Pendergest-Holt, was charged with obstruction of justice.

While the original charges weren’t filed until February, the SEC was alerted to potential fraud involving the CDs as early as October 28, 2002, when an accountant in Mexico questioned the investments his mother had in Stanford. According to a letter obtained by FOX Business through a Freedom of Information Act request, the accountant was concerned that his mother had placed all her assets with Stanford, but had received little in the way of information about the performance of the CDs.

“The CD has a higher than 9% interest [rate], and I know other big banks like Citibank pay interest of 4%,” the accountant, whose name was redacted when the information was released by the SEC, wrote. “Is this possible and secure?”

The accountant also questioned how an American bank could have its accounts audited by a firm in Antigua rather than by a “good United States accounting company.”

The accountant ended with a plea that the SEC “make sure that many investors do not get cheated. These investors are simple people of Mexico and maybe many other places and have their faith in the United States financial system.”

A bigger red flag was waved by a whistleblower on Sept. 1, 2003. A person describing himself as an “insider who does not wish to remain silent, but also fears for his own personal safety and that of his family” wrote in a letter that “Stanford Financial is the subject of a lingering corporate fraud scandal perpetuated as a massive Ponzi scheme that will destroy the life savings of many, damage the reputation of all associated parties, ridicule securities and banking authorities, and shame the United States of America.”

The letter said that “by association with Wall Street giant Bear Stearns,” it is marketing the CDs as safe, but “investor proceeds are being directed into speculative investments like stocks, options, futures, currencies, real estate and unsecured loans.”

The insider claimed the fraud had gone on for 17 years and that no legitimate audit had questioned why CDs were invested in “primarily in high risk securities,” which were “not congruent with the nature of safe CD investments promised to clients.”

“The key point to focus on is the real market value of Stanford International Bank’s investment portfolio, which is believed to be significantly below the bank’s obligations to clients,” the insider wrote. “Overlooking these issues and not thoroughly investigating them is becoming an accomplice to any wrongdoing.”

Other allegations followed. A report was filed on April 19. 2005, involving an employee who was fired “in reprisal for reporting illegal financial activities,” while there was an “offering fraud” investigation opened on Aug. 18, 2005, alleging that the CDs were “simply a hedge fund.”

Other complaints followed but, in a sign of the times, the language used changed. In a fraud report filed on Jan. 22, 2009, shortly before the SEC charged Stanford, the tipster said Stanford Financial was the “next Bernie Madoff scandal,” though offered no specifics.

SEC spokesman John Nester declined to discuss the individual correspondence, but said in an email, "the same questions raised in the correspondence were raised by SEC staff in earlier and subsequent reviews of Stanford Group Company and its role in the sale of CDs issued by an Antiguan bank. In those inquiries, the SEC staff sought to determine the nature of the offshore CDs and their purported returns. 

"The SEC was unable to obtain detailed information about the offshore CDs in part because of complicating factors involving jurisdiction, including whether CDs issued by a foreign bank are securities covered by the federal securities laws, whether the CDs were covered by U.S. banking laws, and the application of Antiguan laws governing confidentiality," he continued.

"Based on information obtained through a 2004 examination of the firm's U.S. sales activities, which continued into 2005, the SEC initiated an enforcement investigation in the spring of 2005, and has been actively investigating this matter ever since, in cooperation with other federal agencies. Notwithstanding the significant regulatory obstacles presented in this case, the SEC ultimately was able to obtain critical evidence that allowed it to bring emergency enforcement action in the courts to halt the sales of the CDs and seek the return of funds to investors," Nester said.