Lawyers in the R. Allen Stanford fraud trial on Friday began discussing
ground rules for his testimony, which likely will start early next week if
he chooses to take the stand.
Defense lawyers said they have one more expert witness to call on Monday,
after which Stanford might testify. They gave no hint in open court about
their decision, and a gag rule forbids them from any other public comments
about the case.
After the jury was dismissed for the weekend, prosecutors, defense lawyers
and U.S. District Judge David Hittner talked about what will be admissible
if Stanford elects to tell jurors his side of the story. Defense lawyers
told jurors early in the trial that their client would testify, but he
doesn't have to.
The prosecution has the burden of proving his guilt beyond a reasonable
doubt.
Friday morning, a prosecutor's question to a defense witness prompted a
heated court argument after Stanford's lawyers sought a mistrial.
Hittner denied the mistrial motion but instructed jurors that they should
base conclusions on testimony from the witness stand and not on lawyers'
questions.
'Skunk in the jury box'
Defense attorney Ali Fazel moved for the mistrial, arguing that prosecutor
Andrew Warren put a "skunk in the jury box" when he asked a defense expert
witness if he knew computer hard drives containing Stanford financial
information had been erased.
Warren was cross-examining forensic accountant Morris Hollander, who was
beginning his third day on the witness stand and had testified that the
auditing and financial statements of Stanford's companies complied with
international accounting standards.
He had acknowledged previously that he based his information on the
financial reports themselves, and didn't have access to working papers that
Stanford's auditor, CAS Hewlett, used to generate the annual reports.
"Are you aware that the firm erased the hard drives?" Warren asked.
Jury escorted out
Fazel immediately asked for the mistrial, and the jury was escorted out so
lawyers could argue the motion.
"They're making it sound like the reason the wiping occurred is because
there's something in those records or lack of in those records that make the
wiping necessary," Fazel said.
The government said Hewlett's daughter told investigators she wiped his
firm's hard drives clean after he died in 2009, but that nothing in Warren's
question implied wrongdoing.
The defense argued that the condition of the hard drives constituted hearsay
and not evidence.
The indictment against Stanford alleges that Hewlett received bribes in
exchange for producing favourable financial reports.
Testimony before the jury resumed after about 45 minutes, and Hollander
repeated his earlier testimony that financial statements show loans to
Stanford from his bank in the Caribbean nation of Antigua were for
investment in his companies.
Reorganization backed
He also said that the investments and other entries in the financial reports
suggest Stanford was reorganizing his financial network - consistent with a
defense argument that the Stanford businesses would have remained solvent
had the U.S. government not seized their assets in February 2009.
The government alleges that Stanford and others ran a $7 billion fraud using
money investors put into certificates of deposit at Stanford International
Bank - which like all Stanford's ventures was a subsidiary of Houston-based
Stanford Financial Group.
Stanford has denied wrongdoing. He is being held without bail because
Hittner ruled that his former wealth and international contacts make him a
flight risk.
Saturday 25 February 2012
Friday 24 February 2012
Accountant: Stanford's bank properly audited
Thursday, February 23, 2012
There was nothing "extravagant" about millions that were paid to the outside
auditor of jailed Texas tycoon R. Allen Stanford's Caribbean bank, an
accountant told jurors Thursday at the financier's fraud trial.
Prosecutors allege the bank was at the centre of a Ponzi scheme that took
billions from investors. But Morris Hollander, a forensic accountant hired
by Stanford's defense team, testified that his review of financial
statements and other documents seemed to show the bank was being properly
audited by the businessman's outside auditor, C.A.S. Hewlett, and the bank
was adhering to international accounting rules.
When questioned by a prosecutor, however, Hollander said he had not seen any
of the bank's actual accounting books and records. He said his conclusions
were based only on his review of prepared annual reports and other documents
that authorities allege were fabricated by Stanford.
Stanford is accused by prosecutors of orchestrating a 20-year scheme that
bilked more than $7 billion from investors through the sale of certificates
of deposit from his bank on the Caribbean island nation of Antigua. They
also allege Stanford, whose financial empire was headquartered in Houston,
lied to depositors by telling them their funds were being safely invested
but instead spent it on his businesses and his lavish lifestyle.
Prosecutors allege Stanford bribed Hewlett, who was based in Antigua, with
more than $4.6 million from a secret Swiss bank account over a 10-year
period, to help him hide the massive fraud. Defense attorneys say the money
was payment for auditing services.
"Are these amounts (the $4.6 million) extravagant ... if you were auditing
the bank?" Ali Fazel, one of Stanford's attorneys asked.
"In my view they are not extravagant," Hollander said.
Prosecutors have also alleged Stanford used up to $2 billion from deposits
as personal loans and investors were not made aware of the loans.
Hollander said based on international accounting standards, the loans did
not need to be reported to investors because they were actually investments
in Stanford's businesses, which included two airlines and a company that
maintained his fleet of private jets.
Prosecutor Andrew Warren said that from 2003 to 2008, Stanford's various
companies lost $711 million.
"Would people have bought the CDs if they had known the size of loans to Mr.
Stanford?" Warren asked.
Stanford's attorneys have said he was trying to consolidate his businesses
to pay back investors when authorities seized his companies. Hollander said
his review of prepared reports showed the proposed consolidation indicated
Stanford's various companies had a total value of $8.59 billion by the end
of 2008. Prosecutors allege nearly all of that money was already gone by
that point and the proposed consolidation was just a way to hide the fraud.
"Does consolidation allow you to create billions of dollars out of thin
air?" Warren asked.
"Not consolidation by itself," Hollander said.
Hollander spent much of his time going over the bank's reports and
explaining financial terms to jurors, sometimes in painstaking detail.
That prompted federal prosecutor Gregg Costa to say during a jury break that
the testimony was moving at a "glacial pace" and to suggest the defense team
was delaying the trial _ in its fifth week _ so it could have more time to
prepare for when Stanford takes the stand.
Fazel replied that "assumes Stanford will testify."
Defense attorneys said at the start of the trial the financier would
testify. After testimony ended Thursday, Fazel told U.S. District Judge
David Hittner a final decision hasn't been made.
Since Stanford began his defense last week, witnesses have said the
financier was not a hands-on boss and that his chief financial officer,
James M. Davis, handled the day-to-day operations of his businesses.
Stanford's attorneys have accused Davis, the prosecution's star witness, of
being behind the alleged fraud. Defense witnesses have also testified that
many of Stanford's business ventures were profitable and depositors were
informed there was risk with their investments.
Testimony was to resume Friday.
There was nothing "extravagant" about millions that were paid to the outside
auditor of jailed Texas tycoon R. Allen Stanford's Caribbean bank, an
accountant told jurors Thursday at the financier's fraud trial.
Prosecutors allege the bank was at the centre of a Ponzi scheme that took
billions from investors. But Morris Hollander, a forensic accountant hired
by Stanford's defense team, testified that his review of financial
statements and other documents seemed to show the bank was being properly
audited by the businessman's outside auditor, C.A.S. Hewlett, and the bank
was adhering to international accounting rules.
When questioned by a prosecutor, however, Hollander said he had not seen any
of the bank's actual accounting books and records. He said his conclusions
were based only on his review of prepared annual reports and other documents
that authorities allege were fabricated by Stanford.
Stanford is accused by prosecutors of orchestrating a 20-year scheme that
bilked more than $7 billion from investors through the sale of certificates
of deposit from his bank on the Caribbean island nation of Antigua. They
also allege Stanford, whose financial empire was headquartered in Houston,
lied to depositors by telling them their funds were being safely invested
but instead spent it on his businesses and his lavish lifestyle.
Prosecutors allege Stanford bribed Hewlett, who was based in Antigua, with
more than $4.6 million from a secret Swiss bank account over a 10-year
period, to help him hide the massive fraud. Defense attorneys say the money
was payment for auditing services.
"Are these amounts (the $4.6 million) extravagant ... if you were auditing
the bank?" Ali Fazel, one of Stanford's attorneys asked.
"In my view they are not extravagant," Hollander said.
Prosecutors have also alleged Stanford used up to $2 billion from deposits
as personal loans and investors were not made aware of the loans.
Hollander said based on international accounting standards, the loans did
not need to be reported to investors because they were actually investments
in Stanford's businesses, which included two airlines and a company that
maintained his fleet of private jets.
Prosecutor Andrew Warren said that from 2003 to 2008, Stanford's various
companies lost $711 million.
"Would people have bought the CDs if they had known the size of loans to Mr.
Stanford?" Warren asked.
Stanford's attorneys have said he was trying to consolidate his businesses
to pay back investors when authorities seized his companies. Hollander said
his review of prepared reports showed the proposed consolidation indicated
Stanford's various companies had a total value of $8.59 billion by the end
of 2008. Prosecutors allege nearly all of that money was already gone by
that point and the proposed consolidation was just a way to hide the fraud.
"Does consolidation allow you to create billions of dollars out of thin
air?" Warren asked.
"Not consolidation by itself," Hollander said.
Hollander spent much of his time going over the bank's reports and
explaining financial terms to jurors, sometimes in painstaking detail.
That prompted federal prosecutor Gregg Costa to say during a jury break that
the testimony was moving at a "glacial pace" and to suggest the defense team
was delaying the trial _ in its fifth week _ so it could have more time to
prepare for when Stanford takes the stand.
Fazel replied that "assumes Stanford will testify."
Defense attorneys said at the start of the trial the financier would
testify. After testimony ended Thursday, Fazel told U.S. District Judge
David Hittner a final decision hasn't been made.
Since Stanford began his defense last week, witnesses have said the
financier was not a hands-on boss and that his chief financial officer,
James M. Davis, handled the day-to-day operations of his businesses.
Stanford's attorneys have accused Davis, the prosecution's star witness, of
being behind the alleged fraud. Defense witnesses have also testified that
many of Stanford's business ventures were profitable and depositors were
informed there was risk with their investments.
Testimony was to resume Friday.
Stanford Accountant Witness Says No Sign of Fraud in Financier's Reports
By Andrew Harris and Laurel Brubaker Calkins - Feb 23, 2012
Morris Hollander, an accountant testifying at R. Allen Stanford's trial,
told a jury he saw no sign of fraud in annual reports issued by the
financier's Antigua bank.
"I see no evidence that indicates there was any fraudulent financial
reporting contained in those reports," Hollander said during his second day
of testimony for the defense in the trial at the U.S. courthouse in Houston.
Hollander, a partner in the international accounting firm Marcum Group LLP,
told the court while his testimony was based on those reports, he hasn't
seen underlying accountant work papers from which financial figures in those
reports were derived.
The financier, who has been on trial since Jan. 23, is fighting a cold that
has forced the early adjournment of the trial each of the past two days.
Stanford has been in court for the entirety of today's proceedings.
Challenged Testimony
Federal prosecutors, led by Andrew Warren, repeatedly challenged Marcum's
testimony today, prompting U.S. District Judge David Hittner to reiterate
that Hollander's recitation of figures from Stanford financial records are
admissible only for the fact they were said and not for their objective
truthfulness.
Still, based upon a consolidated statement of Stanford business holdings in
December 2008, the financier held more than $9 billion in assets, Hollander
testified.
Warren greeted Hollander on cross-examination late today with the question,
"Hypothetically, if I tell you I have a trillion dollars in my pocket, how
much money do I have in my pocket?"
Morris Hollander, an accountant testifying at R. Allen Stanford's trial,
told a jury he saw no sign of fraud in annual reports issued by the
financier's Antigua bank.
"I see no evidence that indicates there was any fraudulent financial
reporting contained in those reports," Hollander said during his second day
of testimony for the defense in the trial at the U.S. courthouse in Houston.
Hollander, a partner in the international accounting firm Marcum Group LLP,
told the court while his testimony was based on those reports, he hasn't
seen underlying accountant work papers from which financial figures in those
reports were derived.
The financier, who has been on trial since Jan. 23, is fighting a cold that
has forced the early adjournment of the trial each of the past two days.
Stanford has been in court for the entirety of today's proceedings.
Challenged Testimony
Federal prosecutors, led by Andrew Warren, repeatedly challenged Marcum's
testimony today, prompting U.S. District Judge David Hittner to reiterate
that Hollander's recitation of figures from Stanford financial records are
admissible only for the fact they were said and not for their objective
truthfulness.
Still, based upon a consolidated statement of Stanford business holdings in
December 2008, the financier held more than $9 billion in assets, Hollander
testified.
Warren greeted Hollander on cross-examination late today with the question,
"Hypothetically, if I tell you I have a trillion dollars in my pocket, how
much money do I have in my pocket?"
Only drama left besides verdict is whether Stanford will talk
The R. Allen Stanford fraud trial appears to be winding down, and the big
question is whether the Texas tycoon will take the stand today, Monday or at
all.
The defense team will continue this morning with their paid expert
accountant witness, Morris Hollander. Once his testimony is over, another
paid witness is expected to come on, and then possibly Stanford himself.
Stanford doesn't have to take the stand. And the defense team does not have
to tell U.S. District Judge David Hittner or the prosecution team that he is
testifying until the last possible moment.
The 61-year-old financial services king is accused of running a $7 billion
Ponzi scheme through sales of certificates of deposit from his Antigua bank
and if convicted on the 14 counts against him, could spend 20 years in
prison.
The government claims CD customers were told their money was going toward
safe and conservative investments and presented evidence that two-thirds of
it was used to fund his other companies and Stanford's high-end tastes.
But the defense says the bank was solvent, in the midst of a reorganization
and would be here today if the government had not shut it down in 2009.
question is whether the Texas tycoon will take the stand today, Monday or at
all.
The defense team will continue this morning with their paid expert
accountant witness, Morris Hollander. Once his testimony is over, another
paid witness is expected to come on, and then possibly Stanford himself.
Stanford doesn't have to take the stand. And the defense team does not have
to tell U.S. District Judge David Hittner or the prosecution team that he is
testifying until the last possible moment.
The 61-year-old financial services king is accused of running a $7 billion
Ponzi scheme through sales of certificates of deposit from his Antigua bank
and if convicted on the 14 counts against him, could spend 20 years in
prison.
The government claims CD customers were told their money was going toward
safe and conservative investments and presented evidence that two-thirds of
it was used to fund his other companies and Stanford's high-end tastes.
But the defense says the bank was solvent, in the midst of a reorganization
and would be here today if the government had not shut it down in 2009.
Thursday 23 February 2012
Wednesday 22 February 2012
Stanford bank CDs complied with rules, witness says
By Terri Langford
HOUSTON — Certificates of deposit issued by R. Allen Stanford's offshore bank complied with regulatory requirements as to their use and marketing, a defense witness testified Wednesday in Stanford's trial on charges the CDs were fraudulent.
Mike Callahan, who has worked as a securities broker and as a compliance officer ensuring that financial companies follow laws and rules, testified that Stanford brokers who sold the CDs earned 3 percent commission. That is within guidelines set by the Financial Industry Regulatory Authority, an industry self-regulating organization, he said.
Testifying as a defense expert witness, Callahan also said that unlike stocks — which represent a share of ownership in a company — CDs are bank deposits that promise a certain return over time, but don't stipulate how the bank is to use the money.
He noted that investors in the CDs issued by Stanford International Bank in Antigua received disclosure notices explaining that the CDs weren't insured by a government agency, as are most deposits in U.S. banks, and that they carried risks, including loss of all funds invested.
“They're telling the investors these securities are not covered by SIPC,” Callahan said, referring to the Securities Investors Protection Corp., an industry organization created by Congress that protects investors in certain instances if a broker-dealer fails.
On prosecution cross-examination, Callahan agreed that disclosure statements alone don't show that an institution isn't committing fraud.
Stanford and others are accused of using the CD funds for luxury items, investments in risky business ventures and unsecured personal loans.
According to earlier prosecution testimony, Stanford International investors were told that the bank was subject to oversight by Antiguan regulators and an independent auditor.
But the indictment alleges that a regulator and auditor received bribes in exchange for favorable reports, and Callahan agreed that if that were the case, it would be false to state that the bank was monitored independently.
Lawyers for Stanford, 61, a Mexia native, have told jurors he will testify in his own defense although he isn't required to. A gag order issued by U.S. District Judge David Hittner prohibits parties from commenting on the case beyond what they say in open court.
Wednesday's court session ended early, for the second consecutive day, because Stanford appears to be suffering from a cold.
In other testimony Wednesday, a defense expert witness said that Stanford Group Co., a brokerage that marketed the bank CDs through offices in Houston and elsewhere, was overseen by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.
“It was a highly regulated business,” said Morris Hollander, a certified public accountant and forensic accountant — an auditor who analyzes financial documents for use as court evidence.
The Antiguan bank, however, was not subject to any U.S. government or industry authorities, Hollander said.
Hollander said he examined 20 years of financial reports for the bank, a subsidiary of Houston-based Stanford Financial Group. In preparing its financial documents from the late 1980s to the early 1990s, Hollander said, the bank used Generally Accepted Accounting Principles, the U.S. standard. It later changed to International Financial Reporting Standards, which Hollander said was appropriate since the bank had many clients in Latin America.
HOUSTON — Certificates of deposit issued by R. Allen Stanford's offshore bank complied with regulatory requirements as to their use and marketing, a defense witness testified Wednesday in Stanford's trial on charges the CDs were fraudulent.
Mike Callahan, who has worked as a securities broker and as a compliance officer ensuring that financial companies follow laws and rules, testified that Stanford brokers who sold the CDs earned 3 percent commission. That is within guidelines set by the Financial Industry Regulatory Authority, an industry self-regulating organization, he said.
Testifying as a defense expert witness, Callahan also said that unlike stocks — which represent a share of ownership in a company — CDs are bank deposits that promise a certain return over time, but don't stipulate how the bank is to use the money.
He noted that investors in the CDs issued by Stanford International Bank in Antigua received disclosure notices explaining that the CDs weren't insured by a government agency, as are most deposits in U.S. banks, and that they carried risks, including loss of all funds invested.
“They're telling the investors these securities are not covered by SIPC,” Callahan said, referring to the Securities Investors Protection Corp., an industry organization created by Congress that protects investors in certain instances if a broker-dealer fails.
On prosecution cross-examination, Callahan agreed that disclosure statements alone don't show that an institution isn't committing fraud.
Stanford and others are accused of using the CD funds for luxury items, investments in risky business ventures and unsecured personal loans.
According to earlier prosecution testimony, Stanford International investors were told that the bank was subject to oversight by Antiguan regulators and an independent auditor.
But the indictment alleges that a regulator and auditor received bribes in exchange for favorable reports, and Callahan agreed that if that were the case, it would be false to state that the bank was monitored independently.
Lawyers for Stanford, 61, a Mexia native, have told jurors he will testify in his own defense although he isn't required to. A gag order issued by U.S. District Judge David Hittner prohibits parties from commenting on the case beyond what they say in open court.
Wednesday's court session ended early, for the second consecutive day, because Stanford appears to be suffering from a cold.
In other testimony Wednesday, a defense expert witness said that Stanford Group Co., a brokerage that marketed the bank CDs through offices in Houston and elsewhere, was overseen by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.
“It was a highly regulated business,” said Morris Hollander, a certified public accountant and forensic accountant — an auditor who analyzes financial documents for use as court evidence.
The Antiguan bank, however, was not subject to any U.S. government or industry authorities, Hollander said.
Hollander said he examined 20 years of financial reports for the bank, a subsidiary of Houston-based Stanford Financial Group. In preparing its financial documents from the late 1980s to the early 1990s, Hollander said, the bank used Generally Accepted Accounting Principles, the U.S. standard. It later changed to International Financial Reporting Standards, which Hollander said was appropriate since the bank had many clients in Latin America.
Stanford Fraud Trial Resumes Following Illness Interruption
By Laurel Brubaker Calkins - Feb 22, 2012
R. Allen Stanford’s criminal fraud trial resumed today after testimony was halted yesterday afternoon when the defendant became ill.
Stanford, 61, reoccupied his place at the defense table in federal court in Houston, coughing frequently and deeply. The financier’s coughing worsened by midday, when the jury broke for lunch. The trial is in its fifth week.
Stanford is fighting charges he swindled investors of more than $7 billion through what prosecutors claim was a Ponzi scheme built on allegedly bogus certificates of deposit at his Antigua-based Stanford International Bank Ltd. He has been incarcerated as a flight risk since being indicted in June 2009.
This week, jurors are hearing from expert witnesses testifying on Stanford’s behalf.
John Mezzanotte, who has conducted dozens of feasibility studies for Caribbean resorts, told jurors that the billionaires-only resort Stanford was developing on Antigua had been started years earlier by a Chinese multimillionaire. The other developer lost his funding in 2003, and later sold the property to Stanford.
Inflating the Value
Prosecutors accuse Stanford of inflating the value of that island property by more than 5,000 percent to make it appear he was recapitalizing his bank in late 2008. U.S. securities regulators found more than $5 billion missing from the bank’s investment accounts when Stanford’s operations were seized on suspicion of fraud in February 2009.
Mezzanotte described the property Stanford selected for the resort as unique for its beauty, pristine nature and protected harbor.
“There are only a couple of them in the Caribbean,” he testified.
Under questioning by prosecutors, Mezzanotte said Stanford’s island resort had no paved roads, utilities or buildings when he last saw it.
R. Allen Stanford’s criminal fraud trial resumed today after testimony was halted yesterday afternoon when the defendant became ill.
Stanford, 61, reoccupied his place at the defense table in federal court in Houston, coughing frequently and deeply. The financier’s coughing worsened by midday, when the jury broke for lunch. The trial is in its fifth week.
Stanford is fighting charges he swindled investors of more than $7 billion through what prosecutors claim was a Ponzi scheme built on allegedly bogus certificates of deposit at his Antigua-based Stanford International Bank Ltd. He has been incarcerated as a flight risk since being indicted in June 2009.
This week, jurors are hearing from expert witnesses testifying on Stanford’s behalf.
John Mezzanotte, who has conducted dozens of feasibility studies for Caribbean resorts, told jurors that the billionaires-only resort Stanford was developing on Antigua had been started years earlier by a Chinese multimillionaire. The other developer lost his funding in 2003, and later sold the property to Stanford.
Inflating the Value
Prosecutors accuse Stanford of inflating the value of that island property by more than 5,000 percent to make it appear he was recapitalizing his bank in late 2008. U.S. securities regulators found more than $5 billion missing from the bank’s investment accounts when Stanford’s operations were seized on suspicion of fraud in February 2009.
Mezzanotte described the property Stanford selected for the resort as unique for its beauty, pristine nature and protected harbor.
“There are only a couple of them in the Caribbean,” he testified.
Under questioning by prosecutors, Mezzanotte said Stanford’s island resort had no paved roads, utilities or buildings when he last saw it.
Stanford receiver sues two area law firms
BY TED GRIGGS
Advocate business writer
February 22, 2012
The receiver for the Stanford companies has sued Adams & Reese LLP and
Breazeale, Sachse & Wilson LLP for $1.8 billion, alleging that the New
Orleans and Baton Rouge law firms helped R. Allen Stanford misappropriate
the money.
The lawsuit claims the loss was caused by the wrongful conduct of the law
firms and other defendants, who it says are liable for all the damages
caused to the Stanford group of companies, as well as reasonable attorneys'
fees.
In addition to the law firms, the other defendants in the lawsuit are Adams
& Reese attorneys Robert Schmidt and James Austin; Claude Reynaud Jr., a
partner in Breazeale and former director of Stanford Trust Co.; and former
Stanford Trust directors Cordell Haymon and Thomas Frazier.
Stanford's clients included investors in the Baton Rouge, Lafayette and
Covington areas. The company had offices in Baton Rouge.
Among other things, the federal lawsuit filed in Dallas alleges that the law
firms helped Stanford commit fraud, enabling the promoter to misappropriate
at least $1.8 billion. The total included $300 million that the lawsuit said
Baton Rouge-based Stanford Trust Co. should have held in certificates of
deposit from Stanford International Bank Ltd.
Breazeale managing partner Scott S. Hensgens said Tuesday that the
allegations in the receiver's lawsuit appear to be virtually identical to
those in a lawsuit filed in February 2011 by the Official Stanford Investors
Committee.
The major difference is that the 2012 lawsuit, unlike the 2011 one, is not a
class action, Hensgens said.
"I don't understand the legal theory under which they think we're
responsible for anything, much less the entire amount of the damages,"
Hensgens said.
Hensgens said the most recent lawsuit is likely the result of a series of
adverse rulings in the earlier lawsuit by Federal District Judge David C.
Godbey that severely affected the plaintiffs' claims.
In that lawsuit, the investors committee sued Adams & Reese and Breazeale,
Sachse for $337 million.
At the time it was filed, Hensgens described the lawsuit as frivolous and
part of a shotgun approach that included suing St. Jude Children's Research
Hospital in Memphis, Tenn., and several related charities. The investors
committee wanted $7.3 million that Stanford companies contributed to the
charities.
In a statement issued Tuesday, Hensgens said Breazeale, Sachse occasionally
represented Stanford Trust Co. on a very limited basis on issues specific to
Louisiana law, such as state and local tax and regulatory issues.
"We believe that this lawsuit is a frivolous attempt to recoup unfortunate
losses incurred by the Stanford Financial Group's investors for alleged
actions that, if they occurred, were taken by individuals far removed from
BSW and Mr. Reynaud and without anyone at BSW's knowledge," Hensgens said.
Charles P. Adams Jr., general partner at Adams & Reese, could not be reached
for comment.
The latest lawsuit says the law firms enriched themselves at their other
clients' expense by encouraging clients to invest in the alleged Ponzi
scheme.
"Through these referrals, the two firms curried favour with their powerful
new client, Stanford Financial, while enjoying the lucrative legal work that
Stanford Financial sent them to reward them for adding to Stanford
Financial's bottom line," the lawsuit says.
Hensgens said Breazeale, Sachse never referred clients to Stanford, and he
doesn't believe Reynaud did either.
Neither Breazeale nor Reynaud had any knowledge of improper or illegal
activities on behalf of the Stanford Trust Co. or R. Allen Stanford,
Hensgens said.
Advocate business writer
February 22, 2012
The receiver for the Stanford companies has sued Adams & Reese LLP and
Breazeale, Sachse & Wilson LLP for $1.8 billion, alleging that the New
Orleans and Baton Rouge law firms helped R. Allen Stanford misappropriate
the money.
The lawsuit claims the loss was caused by the wrongful conduct of the law
firms and other defendants, who it says are liable for all the damages
caused to the Stanford group of companies, as well as reasonable attorneys'
fees.
In addition to the law firms, the other defendants in the lawsuit are Adams
& Reese attorneys Robert Schmidt and James Austin; Claude Reynaud Jr., a
partner in Breazeale and former director of Stanford Trust Co.; and former
Stanford Trust directors Cordell Haymon and Thomas Frazier.
Stanford's clients included investors in the Baton Rouge, Lafayette and
Covington areas. The company had offices in Baton Rouge.
Among other things, the federal lawsuit filed in Dallas alleges that the law
firms helped Stanford commit fraud, enabling the promoter to misappropriate
at least $1.8 billion. The total included $300 million that the lawsuit said
Baton Rouge-based Stanford Trust Co. should have held in certificates of
deposit from Stanford International Bank Ltd.
Breazeale managing partner Scott S. Hensgens said Tuesday that the
allegations in the receiver's lawsuit appear to be virtually identical to
those in a lawsuit filed in February 2011 by the Official Stanford Investors
Committee.
The major difference is that the 2012 lawsuit, unlike the 2011 one, is not a
class action, Hensgens said.
"I don't understand the legal theory under which they think we're
responsible for anything, much less the entire amount of the damages,"
Hensgens said.
Hensgens said the most recent lawsuit is likely the result of a series of
adverse rulings in the earlier lawsuit by Federal District Judge David C.
Godbey that severely affected the plaintiffs' claims.
In that lawsuit, the investors committee sued Adams & Reese and Breazeale,
Sachse for $337 million.
At the time it was filed, Hensgens described the lawsuit as frivolous and
part of a shotgun approach that included suing St. Jude Children's Research
Hospital in Memphis, Tenn., and several related charities. The investors
committee wanted $7.3 million that Stanford companies contributed to the
charities.
In a statement issued Tuesday, Hensgens said Breazeale, Sachse occasionally
represented Stanford Trust Co. on a very limited basis on issues specific to
Louisiana law, such as state and local tax and regulatory issues.
"We believe that this lawsuit is a frivolous attempt to recoup unfortunate
losses incurred by the Stanford Financial Group's investors for alleged
actions that, if they occurred, were taken by individuals far removed from
BSW and Mr. Reynaud and without anyone at BSW's knowledge," Hensgens said.
Charles P. Adams Jr., general partner at Adams & Reese, could not be reached
for comment.
The latest lawsuit says the law firms enriched themselves at their other
clients' expense by encouraging clients to invest in the alleged Ponzi
scheme.
"Through these referrals, the two firms curried favour with their powerful
new client, Stanford Financial, while enjoying the lucrative legal work that
Stanford Financial sent them to reward them for adding to Stanford
Financial's bottom line," the lawsuit says.
Hensgens said Breazeale, Sachse never referred clients to Stanford, and he
doesn't believe Reynaud did either.
Neither Breazeale nor Reynaud had any knowledge of improper or illegal
activities on behalf of the Stanford Trust Co. or R. Allen Stanford,
Hensgens said.
Monday 20 February 2012
Defense is desperate Lawyers hold back nothing in the financial Ponzi scheme case
By Lindsay Gary Published on: Monday, February 20, 2012
Stanford was charged committing a "bait and switch" international Ponzi scheme in which he allegedly conned investors out of $7 billion.
The trial, is a battleground between the government and Stanford's defense team, who seem to be trying everything possible to win this difficult case.
The defense team's tactics include trying to prove that former Chief Financial Officer of Stanford Financial Group and college roommate of Stanford, James Davis, is responsible for the alleged scheme. They also allege that had government groups, such as the U.S. Securities and Exchange Commission (SEC), not intervened, Stanford would have completed the task of paying investors back. However both are difficult to prove for various reasons.
First, although it is the CFO's responsibility to advise a company financially, Stanford was still the final decision-maker. On Friday, Feb. 3, 2012, the government presented several emails as evidence to the courtroom, including emails with subject line "Transfer of Funds TIOC" (Two Islands One Club). These were a series of emails regarding a risky business venture - building a resort in the Caribbean. Patricia Maldonado asked for the approval of $1,275,000 to go into this resort. This money came from a Societe Generale account in Switzerland that was funded by the Certificates of Deposits from investments.
Davis' alleged reply was for Maldonado to contact Stanford for approval; Stanford supposedly in turn approved this amount, and possibly many other illegal transactions such as this. Investors thought they were making secure investments but based on the evidence presented by the government, they actually weren't. In fact, the money went to millions of dollars worth of employee bonuses, bills and, not to mention, the TIOC, which was never completed.
There is no strong evidence that proves Stanford was actually in the process of paying investors back, especially when emails similar to the TIOC series were sent just weeks before Stanford was caught.
It is obvious the defense team is uneasy. Davis was Stanford's right-hand man and he has not only plead guilty but has testified against him with believable evidence.
Stanford and his defense team only revealed their poker faces. But their desperate actions, such as trying to put the blame on Davis, show their insecurity.
Not only are they trying to persuade the courtroom that a man who already plead guilty is at fault, but they even tried to call for a mistrial during recess on the grounds that Davis violated Stanford's Fifth Amendment rights.
Judge Hittner overruled that accusation against Davis and the trial continued.
After exhausting many of their options, they are still having a difficult time proving Stanford's innocence.
First the defense claimed Stanford was incompetent. Now they're blaming Stanford's employee for all the crime committed in Stanford's company. What will the defense resort to next?
With all of the evidence and witnesses the government has brought in, it will almost be impossible for the prosecution to lose this case.
Stanford was charged committing a "bait and switch" international Ponzi scheme in which he allegedly conned investors out of $7 billion.
The trial, is a battleground between the government and Stanford's defense team, who seem to be trying everything possible to win this difficult case.
The defense team's tactics include trying to prove that former Chief Financial Officer of Stanford Financial Group and college roommate of Stanford, James Davis, is responsible for the alleged scheme. They also allege that had government groups, such as the U.S. Securities and Exchange Commission (SEC), not intervened, Stanford would have completed the task of paying investors back. However both are difficult to prove for various reasons.
First, although it is the CFO's responsibility to advise a company financially, Stanford was still the final decision-maker. On Friday, Feb. 3, 2012, the government presented several emails as evidence to the courtroom, including emails with subject line "Transfer of Funds TIOC" (Two Islands One Club). These were a series of emails regarding a risky business venture - building a resort in the Caribbean. Patricia Maldonado asked for the approval of $1,275,000 to go into this resort. This money came from a Societe Generale account in Switzerland that was funded by the Certificates of Deposits from investments.
Davis' alleged reply was for Maldonado to contact Stanford for approval; Stanford supposedly in turn approved this amount, and possibly many other illegal transactions such as this. Investors thought they were making secure investments but based on the evidence presented by the government, they actually weren't. In fact, the money went to millions of dollars worth of employee bonuses, bills and, not to mention, the TIOC, which was never completed.
There is no strong evidence that proves Stanford was actually in the process of paying investors back, especially when emails similar to the TIOC series were sent just weeks before Stanford was caught.
It is obvious the defense team is uneasy. Davis was Stanford's right-hand man and he has not only plead guilty but has testified against him with believable evidence.
Stanford and his defense team only revealed their poker faces. But their desperate actions, such as trying to put the blame on Davis, show their insecurity.
Not only are they trying to persuade the courtroom that a man who already plead guilty is at fault, but they even tried to call for a mistrial during recess on the grounds that Davis violated Stanford's Fifth Amendment rights.
Judge Hittner overruled that accusation against Davis and the trial continued.
After exhausting many of their options, they are still having a difficult time proving Stanford's innocence.
First the defense claimed Stanford was incompetent. Now they're blaming Stanford's employee for all the crime committed in Stanford's company. What will the defense resort to next?
With all of the evidence and witnesses the government has brought in, it will almost be impossible for the prosecution to lose this case.
Friday 17 February 2012
Stanford CFO Forged Boss's Name, Refused Reforms, Witness Says
By Laurel Brubaker Calkins - Feb 17, 2012
R. Allen Stanford was furious to learn that his finance chief, James Davis,
forged his name to a 2007 employee memo abolishing a department Stanford
created to "reel in" expenses, a former executive testified.
"He called me at home at 11 or 12 one evening, and he was very mad," Linda
Wingfield, Stanford's former executive director of special projects, told
jurors today at Stanford's criminal fraud trial in federal court in Houston.
"He said he did not sign it."
Wingfield, who held a number of executive positions at Stanford's companies
over 10 years, testified that Davis refused to give the boss access to a
corporate computer system with Stanford Financial Group Co.'s financial
records. Testifying as a defense witness, she said Davis also ignored or
circumvented policies Stanford instituted to clamp down on expenditures.
"He fought us from day one, a department set up by the chairman to try to
control costs," Wingfield said of Davis. "Mr. Davis was always refusing."
Wingfield's testimony may bolster Stanford's defense claim that it was
Davis, not Stanford, who ran the financial services empire and engineered a
fraud that cost investors more than $7 billion. Davis pleaded guilty and
testified as a government witness earlier in the trial, which is concluding
its fourth week.
Airlines, Cricket
Prosecutors accuse Stanford of stealing more than $2 billion from
certificates of deposit at his Antigua-based Stanford International Bank.
Instead of holding investor funds in safe assets as he promised, Stanford
used their money to fund an extravagant lifestyle and risky ventures
including Caribbean airlines, real estate projects and cricket tournaments,
prosecutors say.
Stanford, 61, has been imprisoned as a flight risk since his indictment in
June 2009. If convicted of the most serious charges, he faces as many as 20
years in prison.
Wingfield, who also ran some of Stanford side ventures, testified today via
a video link from federal court in Orlando, Florida. She said she was too
ill to travel.
Robert Scardino, Stanford's lawyer, asked Wingfield who controlled "all the
financial issues, including the treasury, accounting, internal audits and
investments" at Stanford's companies.
'Nobody Else'
"Mr. Davis -- and the insurance, too," she said. "There was nobody else who
handled all the books."
Wingfield told jurors she believed Stanford's court- appointed receiver
duplicated efforts and wasted money during the "chaotic" period after the
businesses were seized by the U.S. Securities and Exchange Commission in
February 2009.
More than 40 Stanford investors crowded into the courtroom today to mark the
third anniversary of the SEC crackdown.
The group had planned to wear stickers to court until U.S. District Judge
David Hittner asked them not to do so, for fear of distracting the jury.
Houston investor Cassie Wilkinson, 63, said she lost $500,000 on Stanford
CDs and has attended roughly 80 percent of the trial. A video shown to
jurors yesterday, depicting a luxury Antigua resort Stanford was developing
with investor money, was the toughest evidence she's seen yet, she said.
"He took our money and built another country with it," Wilkinson said during
a break in testimony. "I was fighting back tears to see the lavish way he
lived his life, and now we're left to try to scrape through the rest of
ours."
Assistant U.S. Attorney Gregg Costa spoke with some of the investors during
court breaks. "This is who we're doing this for," he said outside of court.
R. Allen Stanford was furious to learn that his finance chief, James Davis,
forged his name to a 2007 employee memo abolishing a department Stanford
created to "reel in" expenses, a former executive testified.
"He called me at home at 11 or 12 one evening, and he was very mad," Linda
Wingfield, Stanford's former executive director of special projects, told
jurors today at Stanford's criminal fraud trial in federal court in Houston.
"He said he did not sign it."
Wingfield, who held a number of executive positions at Stanford's companies
over 10 years, testified that Davis refused to give the boss access to a
corporate computer system with Stanford Financial Group Co.'s financial
records. Testifying as a defense witness, she said Davis also ignored or
circumvented policies Stanford instituted to clamp down on expenditures.
"He fought us from day one, a department set up by the chairman to try to
control costs," Wingfield said of Davis. "Mr. Davis was always refusing."
Wingfield's testimony may bolster Stanford's defense claim that it was
Davis, not Stanford, who ran the financial services empire and engineered a
fraud that cost investors more than $7 billion. Davis pleaded guilty and
testified as a government witness earlier in the trial, which is concluding
its fourth week.
Airlines, Cricket
Prosecutors accuse Stanford of stealing more than $2 billion from
certificates of deposit at his Antigua-based Stanford International Bank.
Instead of holding investor funds in safe assets as he promised, Stanford
used their money to fund an extravagant lifestyle and risky ventures
including Caribbean airlines, real estate projects and cricket tournaments,
prosecutors say.
Stanford, 61, has been imprisoned as a flight risk since his indictment in
June 2009. If convicted of the most serious charges, he faces as many as 20
years in prison.
Wingfield, who also ran some of Stanford side ventures, testified today via
a video link from federal court in Orlando, Florida. She said she was too
ill to travel.
Robert Scardino, Stanford's lawyer, asked Wingfield who controlled "all the
financial issues, including the treasury, accounting, internal audits and
investments" at Stanford's companies.
'Nobody Else'
"Mr. Davis -- and the insurance, too," she said. "There was nobody else who
handled all the books."
Wingfield told jurors she believed Stanford's court- appointed receiver
duplicated efforts and wasted money during the "chaotic" period after the
businesses were seized by the U.S. Securities and Exchange Commission in
February 2009.
More than 40 Stanford investors crowded into the courtroom today to mark the
third anniversary of the SEC crackdown.
The group had planned to wear stickers to court until U.S. District Judge
David Hittner asked them not to do so, for fear of distracting the jury.
Houston investor Cassie Wilkinson, 63, said she lost $500,000 on Stanford
CDs and has attended roughly 80 percent of the trial. A video shown to
jurors yesterday, depicting a luxury Antigua resort Stanford was developing
with investor money, was the toughest evidence she's seen yet, she said.
"He took our money and built another country with it," Wilkinson said during
a break in testimony. "I was fighting back tears to see the lavish way he
lived his life, and now we're left to try to scrape through the rest of
ours."
Assistant U.S. Attorney Gregg Costa spoke with some of the investors during
court breaks. "This is who we're doing this for," he said outside of court.
Jury will decide, but Stanford investors have no doubt
R. Allen Stanford's fraud trial neared the end of its fourth week Friday morning as defense lawyers built a case for his innocence in a courtroom filled with investors who believe he swindled them collectively out of millions of dollars.
About 40 investors in financial products offered by Houston-based Stanford Financial Group attended the trial to commemorate the third anniversary of the federal lawsuit that shut down Stanford's global financial operations and seized assets that may have included funds intrusted to the companies by clients.
In Friday's trial proceedings before U.S. District Judge David Hittner, Linda Wingfield, a former vice president in Stanford's operations, testified via a video link from Orlando, Fla., because she is ill and could not travel to Houston.
Wingfield testified that she went to work for Stanford in 1998 and eventually became a project manager and one of his top assistants and troubleshooters, sometimes representing him at meetings.
"He was a detail person," Wingfield testified, but over time he handed off increasing day-to-day responsibility to his chief financial officer, James Davis.
The testimony supports the defense narrative that in the years before the Stanford operations collapsed, Davis was in charge of financial transactions that prosecutors allege defrauded investors of $7 billion.
Davis pleaded guilty to three felony counts and was the star prosecution witness against Stanford, testifying that the two manipulated financial reports to conceal the funneling of investors' money to their personal use and to Stanford's pet business ventures.
Wingfield suggested in her testimony, however, that Stanford was trying to make an array of businesses profitable, and often delegated the specific tasks.
She described the shock among employees when the receiver took control of the operations three years ago Friday, and expressed bitterness at the way it was done.
"I saw multiple inefficiencies," she said, including receiver staff's confiscation of unlabeled boxes without ascertaining their contents.
"We were devastated that this company was taken apart."
Meanwhile, investors described their own devastation in interviews during courtroom breaks and as they assembled outside the courthouse.
They came from across Texas and from Louisiana, and while it will be up to a jury to determine Stanford's guilt or innocence, the investors expressed little doubt.
"I came to see the guy who stole my money," said Jim Eccles, 76, of Austin, who invested in two 5-year certificates of deposit at Stanford's offshore bank in 2007 - one for $1 million and one for $50,000. They mature next September.
"That means I'll be able to get it all back," Eccles said, laughing gamely at the reality that investors will recover little if any of their money.
"It's painful enough to lose your resources," Eccles said. "Add to that the embarrassment of the fool who is soon parted from his money."
Paul Gallagher, 64, said he and his mother-in-law lost more than half a million dollars in Stanford investments, and has received no help from the Securities Investor Protection Corp., an insurance fund operated by the industry to protect investors from losses in failed brokerage firms. It does not protect against investment losses.
The SIPC is in a dispute with the U.S. Securities and Exchange Commission over whether it must cover some losses for Stanford investors.
Gallagher said he came to court Friday to see Stanford and the dynamics of the trial first hand, and to show solidarity with others who lost money.
He said that because of his Stanford losses, he probably won't ever be able to retire.
Paul Wolfe said he has been frustrated by the long wait for some kind of restitution - either from assets controlled by the receiver or from the SIPC.
"We aren't all big wealthy investors," Wolfe said. "We're just regular people."
About 40 investors in financial products offered by Houston-based Stanford Financial Group attended the trial to commemorate the third anniversary of the federal lawsuit that shut down Stanford's global financial operations and seized assets that may have included funds intrusted to the companies by clients.
In Friday's trial proceedings before U.S. District Judge David Hittner, Linda Wingfield, a former vice president in Stanford's operations, testified via a video link from Orlando, Fla., because she is ill and could not travel to Houston.
Wingfield testified that she went to work for Stanford in 1998 and eventually became a project manager and one of his top assistants and troubleshooters, sometimes representing him at meetings.
"He was a detail person," Wingfield testified, but over time he handed off increasing day-to-day responsibility to his chief financial officer, James Davis.
The testimony supports the defense narrative that in the years before the Stanford operations collapsed, Davis was in charge of financial transactions that prosecutors allege defrauded investors of $7 billion.
Davis pleaded guilty to three felony counts and was the star prosecution witness against Stanford, testifying that the two manipulated financial reports to conceal the funneling of investors' money to their personal use and to Stanford's pet business ventures.
Wingfield suggested in her testimony, however, that Stanford was trying to make an array of businesses profitable, and often delegated the specific tasks.
She described the shock among employees when the receiver took control of the operations three years ago Friday, and expressed bitterness at the way it was done.
"I saw multiple inefficiencies," she said, including receiver staff's confiscation of unlabeled boxes without ascertaining their contents.
"We were devastated that this company was taken apart."
Meanwhile, investors described their own devastation in interviews during courtroom breaks and as they assembled outside the courthouse.
They came from across Texas and from Louisiana, and while it will be up to a jury to determine Stanford's guilt or innocence, the investors expressed little doubt.
"I came to see the guy who stole my money," said Jim Eccles, 76, of Austin, who invested in two 5-year certificates of deposit at Stanford's offshore bank in 2007 - one for $1 million and one for $50,000. They mature next September.
"That means I'll be able to get it all back," Eccles said, laughing gamely at the reality that investors will recover little if any of their money.
"It's painful enough to lose your resources," Eccles said. "Add to that the embarrassment of the fool who is soon parted from his money."
Paul Gallagher, 64, said he and his mother-in-law lost more than half a million dollars in Stanford investments, and has received no help from the Securities Investor Protection Corp., an insurance fund operated by the industry to protect investors from losses in failed brokerage firms. It does not protect against investment losses.
The SIPC is in a dispute with the U.S. Securities and Exchange Commission over whether it must cover some losses for Stanford investors.
Gallagher said he came to court Friday to see Stanford and the dynamics of the trial first hand, and to show solidarity with others who lost money.
He said that because of his Stanford losses, he probably won't ever be able to retire.
Paul Wolfe said he has been frustrated by the long wait for some kind of restitution - either from assets controlled by the receiver or from the SIPC.
"We aren't all big wealthy investors," Wolfe said. "We're just regular people."
Stanford Operations Run by CFO Davis, Not Boss, Manager Says
By Laurel Brubaker Calkins
Feb. 17 (Bloomberg) --
R. Allen Stanford left daily operating decisions to his finance chief, who volunteered to "lay himself off" for a $650,000 lump-sum pay out as regulators were closing in on the company in February 2009, a former manager testified.
"We were in the midst of a crisis, and I told him it would look strange if we lay off our global CFO," Joan Stack, former global human resources manager at Stanford Financial Group, said she told finance chief James M.
Davis. "He was the person I felt made the day-to-day decisions."
Davis replied that he would "stay behind the scenes" and continue running the firm, Stack told jurors yesterday in federal court in Houston at Stanford's criminal fraud trial. In exchange for appearing to step aside, Davis asked for an upfront payment of 65 present of his 2009 salary, she said.
Davis made this proposal "at a very fast-moving time" when "cash flow problems" were causing Stanford's firm to cancel 2008 year-end bonuses and lay off half its employees, Stack testified. "We were trying to get to a point where costs would be reduced to the point the organization would survive," Stack said.
Stanford Memo
Stack told jurors that a Stanford memo to employees, sent several days before the U.S. Securities and Exchange Commission seized the company on suspicion of fraud, was done partly at her request. Prosecutors told jurors that the message, which tried to reassure staff the offshore bank remained strong, is the basis of one of Stanford's fraud counts.
"I told him, 'People need to hear from you,'" Stack said. "A lot of people were telling him that. He wasn't visible. He wasn't responding. We told him people are scared, and they need to hear from a leader."
At the time the memo was sent, Stack said, Stanford was often absent and difficult to reach.
"Mr. Stanford would be absent for a month, five or six weeks," she said.
"Then suddenly he'd come in and get hyper- focused on some project. Then he'd just disappear for a few more weeks."
Promoting Cricket
Stack said he appeared more focused on promoting cricket and building a high-end island resort than on running his financial services empire.
"He was very excited, almost like a kid at Christmas," when discussing the island resort project, she said.
Stack testified that Davis and Laura Pendergest Holt, Stanford's investment chief, routinely hired unqualified relatives and fellow church members to staff most positions in the Memphis, Tennessee, research division that oversaw the bank's multibillion-dollar investment portfolio.
"They were family members who had no experience in doing what we'd hired them to do," she said.
Earlier witnesses told jurors that Davis hired one of his farm hands to analyse commodities and his preacher to advise the company on Middle Eastern affairs. Holt also invested about $2 million of the bank's portfolio in a hedge fund run by her husband, a former personal trainer.
Broken Laptops
Prosecutors have said Stanford wasn't an absentee boss and kept in close touch electronically with executives while he travelled.
Sohil Merchant, Stanford's former information technology manager, told jurors under prosecutors' questioning that he replaced the financier's personal laptop computer 20 to 30 times from 2005 to 2008. Merchant said the financier broke his personal laptops so regularly that the technology department maintained a standing replacement order.
Assistant U.S. Attorney Gregg Costa asked Merchant if Stanford destroyed his laptop "through physical abuse, such as dropping it in the water, throwing it against a wall." Merchant said that was his understanding. He said he sometimes delivered the replacements on one of Stanford's private jets.
Jurors watched much of a 30-minute promotional video Stanford created to promote his planned ultra-luxury resort, which he called Islands Club.
Giselle James, the Stanford employee who marketed the project, testified the resort was intended for vacationers who could pay a $50 million initiation fee and $15 million in annual dues for access to 30 villas planned for a private island off Antigua's coast.
Islands Club
Jurors, watching the video without any sound, saw footage of Antigua's lush foliage and pristine beaches intermingled with interviews of New York-based architects who had worked on the project and Antiguan celebrities, including several cricket stars. Prosecutors requested that the sound be turned off to avoid improper influence on the jury.
James testified Stanford had constructed yacht-docking facilities, desalinization plants, a private airstrip and hangar, refuelling facilities and other infrastructure to support his luxury resort. James said a marine research facility was also part of the planned development.
"The prosecution said it was just a dream, but this was real bricks and mortar, wasn't it?" Robert Scardino, Stanford's lawyer, asked James.
"I walked there," James testified. "I saw it."
Feb. 17 (Bloomberg) --
R. Allen Stanford left daily operating decisions to his finance chief, who volunteered to "lay himself off" for a $650,000 lump-sum pay out as regulators were closing in on the company in February 2009, a former manager testified.
"We were in the midst of a crisis, and I told him it would look strange if we lay off our global CFO," Joan Stack, former global human resources manager at Stanford Financial Group, said she told finance chief James M.
Davis. "He was the person I felt made the day-to-day decisions."
Davis replied that he would "stay behind the scenes" and continue running the firm, Stack told jurors yesterday in federal court in Houston at Stanford's criminal fraud trial. In exchange for appearing to step aside, Davis asked for an upfront payment of 65 present of his 2009 salary, she said.
Davis made this proposal "at a very fast-moving time" when "cash flow problems" were causing Stanford's firm to cancel 2008 year-end bonuses and lay off half its employees, Stack testified. "We were trying to get to a point where costs would be reduced to the point the organization would survive," Stack said.
Stanford Memo
Stack told jurors that a Stanford memo to employees, sent several days before the U.S. Securities and Exchange Commission seized the company on suspicion of fraud, was done partly at her request. Prosecutors told jurors that the message, which tried to reassure staff the offshore bank remained strong, is the basis of one of Stanford's fraud counts.
"I told him, 'People need to hear from you,'" Stack said. "A lot of people were telling him that. He wasn't visible. He wasn't responding. We told him people are scared, and they need to hear from a leader."
At the time the memo was sent, Stack said, Stanford was often absent and difficult to reach.
"Mr. Stanford would be absent for a month, five or six weeks," she said.
"Then suddenly he'd come in and get hyper- focused on some project. Then he'd just disappear for a few more weeks."
Promoting Cricket
Stack said he appeared more focused on promoting cricket and building a high-end island resort than on running his financial services empire.
"He was very excited, almost like a kid at Christmas," when discussing the island resort project, she said.
Stack testified that Davis and Laura Pendergest Holt, Stanford's investment chief, routinely hired unqualified relatives and fellow church members to staff most positions in the Memphis, Tennessee, research division that oversaw the bank's multibillion-dollar investment portfolio.
"They were family members who had no experience in doing what we'd hired them to do," she said.
Earlier witnesses told jurors that Davis hired one of his farm hands to analyse commodities and his preacher to advise the company on Middle Eastern affairs. Holt also invested about $2 million of the bank's portfolio in a hedge fund run by her husband, a former personal trainer.
Broken Laptops
Prosecutors have said Stanford wasn't an absentee boss and kept in close touch electronically with executives while he travelled.
Sohil Merchant, Stanford's former information technology manager, told jurors under prosecutors' questioning that he replaced the financier's personal laptop computer 20 to 30 times from 2005 to 2008. Merchant said the financier broke his personal laptops so regularly that the technology department maintained a standing replacement order.
Assistant U.S. Attorney Gregg Costa asked Merchant if Stanford destroyed his laptop "through physical abuse, such as dropping it in the water, throwing it against a wall." Merchant said that was his understanding. He said he sometimes delivered the replacements on one of Stanford's private jets.
Jurors watched much of a 30-minute promotional video Stanford created to promote his planned ultra-luxury resort, which he called Islands Club.
Giselle James, the Stanford employee who marketed the project, testified the resort was intended for vacationers who could pay a $50 million initiation fee and $15 million in annual dues for access to 30 villas planned for a private island off Antigua's coast.
Islands Club
Jurors, watching the video without any sound, saw footage of Antigua's lush foliage and pristine beaches intermingled with interviews of New York-based architects who had worked on the project and Antiguan celebrities, including several cricket stars. Prosecutors requested that the sound be turned off to avoid improper influence on the jury.
James testified Stanford had constructed yacht-docking facilities, desalinization plants, a private airstrip and hangar, refuelling facilities and other infrastructure to support his luxury resort. James said a marine research facility was also part of the planned development.
"The prosecution said it was just a dream, but this was real bricks and mortar, wasn't it?" Robert Scardino, Stanford's lawyer, asked James.
"I walked there," James testified. "I saw it."
Stanford defense begins with no hint of whether he'll testify
By Terri Langford
Wednesday, February 15, 2012
HOUSTON - The government rested its case Wednesday afternoon in the trial of accused swindler R. Allen Stanford, and his lawyers began calling witnesses without indicating whether Stanford will testify in his own defense.
The first defense witness, lawyer and former U.S. Customs Agent Patrick O'Brien, said he served with Stanford during the late 1990s on a committee charged with reforming banking laws in the Caribbean nation of Antigua, where Stanford owned the largest bank.
Stanford pushed the effort and wanted to make Antigua the "crown jewel"
among Caribbean nations for providing financial services, O'Brien said.
The effort yielded new laws and a new regulatory body in Antigua, and Stanford was named to its board even though he owned an institution it was charged with overseeing.
Prosecution witness Althea Crick, who was executive director of the new agency, said earlier in Stanford's trial that his position on the board allowed him to impede efforts to regulate his bank.
In her testimony, she compared Stanford to a "rat being put in charge of the cheese."
But O'Brien painted a different picture, saying Crick obstructed reform efforts and resisted sharing agency documents with U.S. authorities.
Wednesday's other defense witness was Lloyd Harrell, a retired FBI agent and private investigator, who said he participated with Stanford in "Operation Clean Slate," the 1998-2000 U.S. effort pushing for offshore banking reforms, and also found Crick obstructive.
Early in the trial, defense lawyers said Stanford would testify, but he doesn't have to, and U.S. District Judge David Hittner reminded jurors that they might learn his intentions only when and if he takes the stand.
Trial experts have said it's risky for defendants to testify because it subjects them to intense cross-examination. In Stanford's case, the decision is even more complicated because his lawyers attempted to delay the trial on grounds he was mentally incompetent to assist in his defense.
His Antiguan bank, Stanford International, is at the centre of what prosecutors allege was a $7 billion investor fraud led by Stanford and others.
Defense lawyer Ali Fazel showed spread sheets labelled as "consolidated"
financial reports during cross-examination of FBI agent Robert Martin, who spent Tuesday describing the flow of money through Stanford-related accounts based on financial reports he said came from Stanford's employees.
"Did you use this document to formulate these numbers?" Fazel asked as he showed Martin a series of statements that Fazel suggested projected the companies' financial standing if they were consolidated.
"I have not looked at this document," Martin replied repeatedly, explaining that he examined reports only of transactions that actually occurred, not projections.
Recalling Martin's testimony that money from the bank went to Stanford-affiliated companies, Fazel asked Martin why he assumed the money wasn't used for business purposes.
Martin said the companies were 100 per cent owned by Stanford and therefore were his "possessions."
On further prosecution questioning, Assistant U.S. Attorney Andrew Warren asked about the defense suggestions that Stanford was consolidating his companies.
"Does consolidation allow you to create billions of dollars in thin air?"
Warren asked.
"No it does not," Martin replied.
Wednesday, February 15, 2012
HOUSTON - The government rested its case Wednesday afternoon in the trial of accused swindler R. Allen Stanford, and his lawyers began calling witnesses without indicating whether Stanford will testify in his own defense.
The first defense witness, lawyer and former U.S. Customs Agent Patrick O'Brien, said he served with Stanford during the late 1990s on a committee charged with reforming banking laws in the Caribbean nation of Antigua, where Stanford owned the largest bank.
Stanford pushed the effort and wanted to make Antigua the "crown jewel"
among Caribbean nations for providing financial services, O'Brien said.
The effort yielded new laws and a new regulatory body in Antigua, and Stanford was named to its board even though he owned an institution it was charged with overseeing.
Prosecution witness Althea Crick, who was executive director of the new agency, said earlier in Stanford's trial that his position on the board allowed him to impede efforts to regulate his bank.
In her testimony, she compared Stanford to a "rat being put in charge of the cheese."
But O'Brien painted a different picture, saying Crick obstructed reform efforts and resisted sharing agency documents with U.S. authorities.
Wednesday's other defense witness was Lloyd Harrell, a retired FBI agent and private investigator, who said he participated with Stanford in "Operation Clean Slate," the 1998-2000 U.S. effort pushing for offshore banking reforms, and also found Crick obstructive.
Early in the trial, defense lawyers said Stanford would testify, but he doesn't have to, and U.S. District Judge David Hittner reminded jurors that they might learn his intentions only when and if he takes the stand.
Trial experts have said it's risky for defendants to testify because it subjects them to intense cross-examination. In Stanford's case, the decision is even more complicated because his lawyers attempted to delay the trial on grounds he was mentally incompetent to assist in his defense.
His Antiguan bank, Stanford International, is at the centre of what prosecutors allege was a $7 billion investor fraud led by Stanford and others.
Defense lawyer Ali Fazel showed spread sheets labelled as "consolidated"
financial reports during cross-examination of FBI agent Robert Martin, who spent Tuesday describing the flow of money through Stanford-related accounts based on financial reports he said came from Stanford's employees.
"Did you use this document to formulate these numbers?" Fazel asked as he showed Martin a series of statements that Fazel suggested projected the companies' financial standing if they were consolidated.
"I have not looked at this document," Martin replied repeatedly, explaining that he examined reports only of transactions that actually occurred, not projections.
Recalling Martin's testimony that money from the bank went to Stanford-affiliated companies, Fazel asked Martin why he assumed the money wasn't used for business purposes.
Martin said the companies were 100 per cent owned by Stanford and therefore were his "possessions."
On further prosecution questioning, Assistant U.S. Attorney Andrew Warren asked about the defense suggestions that Stanford was consolidating his companies.
"Does consolidation allow you to create billions of dollars in thin air?"
Warren asked.
"No it does not," Martin replied.
Texas financier Stanford to begin defense in fraud trial after 3-week long prosecution case
by: JUAN A. LOZANO , Associated Press Updated: February 15, 2012
HOUSTON - Attorneys for jailed Texas tycoon R. Allen Stanford on Wednesday began their defense in his fraud trial after prosecutors rested their case following three weeks of testimony in support of their claims the financier was behind a massive Ponzi scheme that took billions from investors.
The start of Stanford's defense was briefly delayed as his attorneys asked U.S. District Judge David Hittner for time to discuss how they would proceed.
"We've been in discussions with our client on what is wise, what the next step would be," said Robert Scardino, one of Stanford's attorneys. Scardino had initially asked for the rest of Wednesday to discuss trial strategy with Stanford but Hittner only gave them an hour.
The request by Stanford's attorneys came after Hittner denied their motion to dismiss all charges against the financier because prosecutors had failed to prove their case. Such motions are typically argued after prosecutors finish presenting a case and are usually denied.
After consulting with Stanford, Scardino gave Hittner a list of 26 potential defense witnesses. Scardino said he was not sure if all of them would testify. Although Scardino had previously said Stanford would, his name was not on the list. However, Stanford's attorneys could decide later to put their client on the witness stand. A gag order prevents defense attorneys and prosecutors from discussing the case.
Before resting, federal prosecutors methodically presented evidence, including testimony from ex-workers of Stanford's companies as well as emails, financial statements and other documents, that they allege show the flamboyant businessman orchestrated a 20-year scheme that bilked more than
$7 billion from investors through the sale of certificates of deposit, or CDs, from his bank on the Caribbean island nation of Antigua. They allege Stanford lied to depositors by telling them their funds were being safely invested.
Defense attorneys have tried to show the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They said he was trying to reorganize his businesses to pay back investors when authorities seized his companies.
The first two witnesses for Stanford were a retired FBI agent and a retired U.S. Customs investigator who told jurors about the work they did on a committee in the late 1990s to strengthen banking and money laundering laws in Antigua.
Patrick O'Brien, the former U.S. Customs investigator and a retired attorney who had done legal work for Stanford, told jurors the financier was the "driving force" behind this effort to improve Antigua's banking laws.
When questioned by a prosecutor, Lloyd Harrell, the retired FBI agent who had done investigative work for Stanford's bank, testified he and others on the committee were paid by the Antiguan government through a loan it had received from another bank on Antigua also owned by Stanford.
The prosecution's star witness - James M. Davis, the former chief financial officer for Stanford's various companies - told jurors his ex-boss used CD deposits to bribe Antiguan bank regulators. Davis also said Stanford funnelled money to pay for various businesses, most of which failed, and to pay for a lavish lifestyle that included yachts and private jets.
Stanford' attorneys accused Davis of leading the fraud and questioned his character, including highlighting extra marital affairs he's had. They also accused him of lying so he could get a reduced sentence. Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors for a possible reduced sentence.
Testimony was to resume on Thursday.
HOUSTON - Attorneys for jailed Texas tycoon R. Allen Stanford on Wednesday began their defense in his fraud trial after prosecutors rested their case following three weeks of testimony in support of their claims the financier was behind a massive Ponzi scheme that took billions from investors.
The start of Stanford's defense was briefly delayed as his attorneys asked U.S. District Judge David Hittner for time to discuss how they would proceed.
"We've been in discussions with our client on what is wise, what the next step would be," said Robert Scardino, one of Stanford's attorneys. Scardino had initially asked for the rest of Wednesday to discuss trial strategy with Stanford but Hittner only gave them an hour.
The request by Stanford's attorneys came after Hittner denied their motion to dismiss all charges against the financier because prosecutors had failed to prove their case. Such motions are typically argued after prosecutors finish presenting a case and are usually denied.
After consulting with Stanford, Scardino gave Hittner a list of 26 potential defense witnesses. Scardino said he was not sure if all of them would testify. Although Scardino had previously said Stanford would, his name was not on the list. However, Stanford's attorneys could decide later to put their client on the witness stand. A gag order prevents defense attorneys and prosecutors from discussing the case.
Before resting, federal prosecutors methodically presented evidence, including testimony from ex-workers of Stanford's companies as well as emails, financial statements and other documents, that they allege show the flamboyant businessman orchestrated a 20-year scheme that bilked more than
$7 billion from investors through the sale of certificates of deposit, or CDs, from his bank on the Caribbean island nation of Antigua. They allege Stanford lied to depositors by telling them their funds were being safely invested.
Defense attorneys have tried to show the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They said he was trying to reorganize his businesses to pay back investors when authorities seized his companies.
The first two witnesses for Stanford were a retired FBI agent and a retired U.S. Customs investigator who told jurors about the work they did on a committee in the late 1990s to strengthen banking and money laundering laws in Antigua.
Patrick O'Brien, the former U.S. Customs investigator and a retired attorney who had done legal work for Stanford, told jurors the financier was the "driving force" behind this effort to improve Antigua's banking laws.
When questioned by a prosecutor, Lloyd Harrell, the retired FBI agent who had done investigative work for Stanford's bank, testified he and others on the committee were paid by the Antiguan government through a loan it had received from another bank on Antigua also owned by Stanford.
The prosecution's star witness - James M. Davis, the former chief financial officer for Stanford's various companies - told jurors his ex-boss used CD deposits to bribe Antiguan bank regulators. Davis also said Stanford funnelled money to pay for various businesses, most of which failed, and to pay for a lavish lifestyle that included yachts and private jets.
Stanford' attorneys accused Davis of leading the fraud and questioned his character, including highlighting extra marital affairs he's had. They also accused him of lying so he could get a reduced sentence. Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors for a possible reduced sentence.
Testimony was to resume on Thursday.
Thursday 16 February 2012
Government rests in Stanford trial
The government rested its case Wednesday afternoon in the trial of accused
swindler R. Allen Stanford, and a federal judge was to consider motions from both sides before the 18th day of the trial continues later in the
afternoon.
Prosecutors presented evidence that they contend shows Stanford and others
conducted a $7 billion investor scam through certificates of deposit in an
offshore bank .
Defense lawyers have indicated by their questioning of government witnesses
that they'll attempt to show that Stanford's businesses were legitimate, and collapsed because the government seized their assets in 2009.
Wednesday morning, Stanford's lawyers presented documents to boost their
expected defense that he was consolidating his operations and that they
could have remained solvent.
Defense lawyer Ali Fazel showed spread sheets labelled as "consolidated"
financial reports during cross-examination of FBI agent Robert Martin, who
spent the day Tuesday describing the flow of money through Stanford-related
accounts based on financial reports he said came from Stanford's employees.
"Did you use this document to formulate these numbers?" Fazel asked as he
showed Martin a series of statements.
"I have not looked at this document," Martin replied repeatedly.
Fazel also pressed Martin about how the government developed charts and
graphics presented during Martin's testimony Tuesday, when he described
Stanford's finances to jurors in U.S. District Judge David Hittner's court.
Martin - a bank loan examiner before he began his FBI career - said
investigators used documents provided by staff of Houston-based Stanford
Financial Group and its dozens of subsidiaries, including Stanford
International Bank in the Caribbean nation of Antigua.
A 14-count indictment alleges that Stanford defrauded clients who invested
in certificates of deposit issued by the bank, marketing them as
conservative investments when the funds really went to Stanford's luxurious
lifestyle and speculative business ventures.
Martin testified Tuesday that the bank loaned $2 billion to Stanford, often
through transfers to a Swiss bank account and then to Stanford for personal
use.
Recalling Martin's testimony that money also went from the account to
Stanford-affiliated companies, Fazel asked Martin if it was misleading to
assume the money wasn't used for business purposes.
Martin said the companies were 100 percent owned by Stanford and therefore
were his "possessions."
Fazel concluded his cross-examination of Martin at midday, and Assistant
U.S. Attorney Andrew Warren resumed prosecution questioning by asking about
the defense suggestions that Stanford was consolidating his companies.
Martin - the final witness in the prosecution's presentation of its case -
had testified Tuesday that Stanford International Bank reported reserves of
less than $1 billion at the end of 2008.
"Does consolidation allow you to create billions of dollars in thin air?"
Warren asked.
"No it does not," Martin replied.
swindler R. Allen Stanford, and a federal judge was to consider motions from both sides before the 18th day of the trial continues later in the
afternoon.
Prosecutors presented evidence that they contend shows Stanford and others
conducted a $7 billion investor scam through certificates of deposit in an
offshore bank .
Defense lawyers have indicated by their questioning of government witnesses
that they'll attempt to show that Stanford's businesses were legitimate, and collapsed because the government seized their assets in 2009.
Wednesday morning, Stanford's lawyers presented documents to boost their
expected defense that he was consolidating his operations and that they
could have remained solvent.
Defense lawyer Ali Fazel showed spread sheets labelled as "consolidated"
financial reports during cross-examination of FBI agent Robert Martin, who
spent the day Tuesday describing the flow of money through Stanford-related
accounts based on financial reports he said came from Stanford's employees.
"Did you use this document to formulate these numbers?" Fazel asked as he
showed Martin a series of statements.
"I have not looked at this document," Martin replied repeatedly.
Fazel also pressed Martin about how the government developed charts and
graphics presented during Martin's testimony Tuesday, when he described
Stanford's finances to jurors in U.S. District Judge David Hittner's court.
Martin - a bank loan examiner before he began his FBI career - said
investigators used documents provided by staff of Houston-based Stanford
Financial Group and its dozens of subsidiaries, including Stanford
International Bank in the Caribbean nation of Antigua.
A 14-count indictment alleges that Stanford defrauded clients who invested
in certificates of deposit issued by the bank, marketing them as
conservative investments when the funds really went to Stanford's luxurious
lifestyle and speculative business ventures.
Martin testified Tuesday that the bank loaned $2 billion to Stanford, often
through transfers to a Swiss bank account and then to Stanford for personal
use.
Recalling Martin's testimony that money also went from the account to
Stanford-affiliated companies, Fazel asked Martin if it was misleading to
assume the money wasn't used for business purposes.
Martin said the companies were 100 percent owned by Stanford and therefore
were his "possessions."
Fazel concluded his cross-examination of Martin at midday, and Assistant
U.S. Attorney Andrew Warren resumed prosecution questioning by asking about
the defense suggestions that Stanford was consolidating his companies.
Martin - the final witness in the prosecution's presentation of its case -
had testified Tuesday that Stanford International Bank reported reserves of
less than $1 billion at the end of 2008.
"Does consolidation allow you to create billions of dollars in thin air?"
Warren asked.
"No it does not," Martin replied.
Wednesday 15 February 2012
PM: King extradition a work in progress
ST JOHN'S, Antigua - Prime Minister Baldwin Spencer, who also holds the External Affairs portfolio, is awaiting a response from Leroy King to determine how he will proceed with an extradition request from the United States government.
The United States Securities and Exchange Commission charged King, former head of the Financial Services and Regulatory Commission (FSRC), with 21 counts relating to wire, mail and securities fraud and conspiracy to commit money laundering.
The charges relate to an alleged $7 billion Ponzi scheme said to have been masterminded by R Allen Stanford.
High Court judge Mario Michel, last week, upheld a 2009 committal order for King to be extradited.
The ruling placed the matter in Spencer's hands, under his external affairs mandate.
Spencer said he has followed the steps in the Extradition Act by writing to King.
OBSERVER understands this was done last Friday. The law gives King 15 days to respond.
"There are some preliminary steps that have to be taken in that regard. The individual has to be written to, informing him that the courts have ruled in a particular way and that he should be given some time to respond to that.
"He may have reasons that he wishes to advance as to why he probably should not be extradited. According to the law that process has to take place.
"I have done the initial thing - that is to write to him indicating certain things and to request of him to respond. It's at that point I will have the opportunity to make the final determination," Spencer said.
The prime minister declined to comment on the Stanford trial, which began on January 24 and which has already heard testimony from witnesses, at home and abroad, about how the Texan exerted influence on those who should have been the gatekeepers.
Spencer was cautious, saying that he, like the rest of the world, is waiting to "see how things unfold."
"I am not in a position to make any judgment or assessment of the situation," he said.
Stanford, once the largest private sector employee in Antigua, was charged with 21 federal criminal counts. He pleaded not guilty to a revised 14-count indictment and said that if his company was involved in any illegal activity, it was the fault of his former chief financial officer, James Davis.
Davis, the prosecution's star witness, has pleaded guilty to three counts:
conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation.
The United States Securities and Exchange Commission charged King, former head of the Financial Services and Regulatory Commission (FSRC), with 21 counts relating to wire, mail and securities fraud and conspiracy to commit money laundering.
The charges relate to an alleged $7 billion Ponzi scheme said to have been masterminded by R Allen Stanford.
High Court judge Mario Michel, last week, upheld a 2009 committal order for King to be extradited.
The ruling placed the matter in Spencer's hands, under his external affairs mandate.
Spencer said he has followed the steps in the Extradition Act by writing to King.
OBSERVER understands this was done last Friday. The law gives King 15 days to respond.
"There are some preliminary steps that have to be taken in that regard. The individual has to be written to, informing him that the courts have ruled in a particular way and that he should be given some time to respond to that.
"He may have reasons that he wishes to advance as to why he probably should not be extradited. According to the law that process has to take place.
"I have done the initial thing - that is to write to him indicating certain things and to request of him to respond. It's at that point I will have the opportunity to make the final determination," Spencer said.
The prime minister declined to comment on the Stanford trial, which began on January 24 and which has already heard testimony from witnesses, at home and abroad, about how the Texan exerted influence on those who should have been the gatekeepers.
Spencer was cautious, saying that he, like the rest of the world, is waiting to "see how things unfold."
"I am not in a position to make any judgment or assessment of the situation," he said.
Stanford, once the largest private sector employee in Antigua, was charged with 21 federal criminal counts. He pleaded not guilty to a revised 14-count indictment and said that if his company was involved in any illegal activity, it was the fault of his former chief financial officer, James Davis.
Davis, the prosecution's star witness, has pleaded guilty to three counts:
conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation.
Stanford Blew Millions on Bellagio, Women and Yachts, Agent Says
By Laurel Brubaker Calkins
Feb. 15 (Bloomberg) -- R. Allen Stanford blew $1.1 million at the Bellagio hotel and casino in Las Vegas and gave another million in cash to family members, including his wife and girlfriend, an FBI agent told jurors at the financier's criminal fraud trial.
The Texas financier also spent $20 million on yachts, $37 million promoting cricket tournaments, $333 million on a pair of start-up Caribbean airlines, and another $379 million to underwrite his Stanford Group Co. broker-dealer, FBI Special Agent Robert Martin testified yesterday about his review of the company's financial records.
"Did that represent all his spending?" Assistant U.S. Attorney Andrew Warren asked Martin.
"No, not at all," Martin replied.
Prosecutors showed jurors evidence illustrating how they believe Stanford spent more than $2 billion he's accused of skimming from certificates of deposit at Stanford International Bank Ltd. in Antigua. While customers were promised their money was invested in safe, liquid assets, prosecutors claim Stanford borrowed heavily from the CDs to finance an extravagant lifestyle and dozens of risky ventures.
Flight Risk
Stanford, 61, has been jailed as a flight risk since his indictment in June 2009. The former billionaire, who denies wrongdoing, faces as long as 20 years in prison if convicted of the most serious charges against him.
Among Stanford's personal wire transfers to the Bellagio in Las Vegas, Martin testified he found one for $200,000 in January 2009, four weeks before regulators seized Stanford's operation on suspicion it was a $7 billion Ponzi scheme.
Martin said he also reviewed business records indicating the financier loaned $418 million to Stanford Development Co., his real estate development firm, and $350 million to his venture capital unit. An array of other speculative ventures, some of which simply disappeared, Martin said, burned through an additional $486 million Stanford borrowed from CD depositors.
Stanford's defense lawyers have told jurors their client was in the process of consolidating roughly 130 private companies onto his Antiguan bank's balance sheet when U.S. regulators shut him down. If regulators hadn't blocked that consolidation, his lawyers claim, the move would have recapitalized the bank and repaid all of Stanford's investors.
'Practically None'
"Practically none of Mr. Stanford's companies were profitable," Martin testified. While some of Stanford's side ventures made money from "time to time," the agent said, only Bank of Antigua, a tiny commercial bank Stanford ran for islanders, consistently earned a yearly profit.
The side ventures Stanford loaned more than $2 billion to collectively lost at least $711 million by the end of 2008, Martin told jurors. The financier's borrowings contributed to a $7.05 billion "hole" Martin said existed between the $8.59 billion in reported assets and $1.54 billion in actual assets on Stanford International Bank's books at year-end 2008.
Under questioning by Ali Fazel, one of Stanford's attorneys, Martin said he has calculated "practically zero" value for most of the financier's side enterprises because the entities weren't owned by the bank and most were unprofitable.
"Are you saying these companies are worthless because they have no profits?"
Fazel asked. "These companies have no value in and of themselves?"
'Can Have Value'
"They can have value, but that doesn't mean they do have value," Martin replied.
Fazel suggested the government hasn't found all of Stanford's assets, and that's why the bank's balance sheet appears short.
"Wouldn't it be important to know the totality of assets SIBL has before you tell the jury that 92 percent of the assets are missing or don't exist?"
Fazel asked. "Are there assets out there you don't know about?"
"I don't think there are," Martin replied. "I think we've got an accounting of what the bank's assets were at the end of 2008."
Lanny Breuer, head of the Justice Department's criminal division, monitored testimony yesterday at Stanford's trial, which is in its fourth week.
Sitting alone in the rear of the courtroom, Breuer said he has been "following the case" through regular reports. He declined to comment on the trial, citing a gag order by the judge barring lawyers from publicly discussing it.
Feb. 15 (Bloomberg) -- R. Allen Stanford blew $1.1 million at the Bellagio hotel and casino in Las Vegas and gave another million in cash to family members, including his wife and girlfriend, an FBI agent told jurors at the financier's criminal fraud trial.
The Texas financier also spent $20 million on yachts, $37 million promoting cricket tournaments, $333 million on a pair of start-up Caribbean airlines, and another $379 million to underwrite his Stanford Group Co. broker-dealer, FBI Special Agent Robert Martin testified yesterday about his review of the company's financial records.
"Did that represent all his spending?" Assistant U.S. Attorney Andrew Warren asked Martin.
"No, not at all," Martin replied.
Prosecutors showed jurors evidence illustrating how they believe Stanford spent more than $2 billion he's accused of skimming from certificates of deposit at Stanford International Bank Ltd. in Antigua. While customers were promised their money was invested in safe, liquid assets, prosecutors claim Stanford borrowed heavily from the CDs to finance an extravagant lifestyle and dozens of risky ventures.
Flight Risk
Stanford, 61, has been jailed as a flight risk since his indictment in June 2009. The former billionaire, who denies wrongdoing, faces as long as 20 years in prison if convicted of the most serious charges against him.
Among Stanford's personal wire transfers to the Bellagio in Las Vegas, Martin testified he found one for $200,000 in January 2009, four weeks before regulators seized Stanford's operation on suspicion it was a $7 billion Ponzi scheme.
Martin said he also reviewed business records indicating the financier loaned $418 million to Stanford Development Co., his real estate development firm, and $350 million to his venture capital unit. An array of other speculative ventures, some of which simply disappeared, Martin said, burned through an additional $486 million Stanford borrowed from CD depositors.
Stanford's defense lawyers have told jurors their client was in the process of consolidating roughly 130 private companies onto his Antiguan bank's balance sheet when U.S. regulators shut him down. If regulators hadn't blocked that consolidation, his lawyers claim, the move would have recapitalized the bank and repaid all of Stanford's investors.
'Practically None'
"Practically none of Mr. Stanford's companies were profitable," Martin testified. While some of Stanford's side ventures made money from "time to time," the agent said, only Bank of Antigua, a tiny commercial bank Stanford ran for islanders, consistently earned a yearly profit.
The side ventures Stanford loaned more than $2 billion to collectively lost at least $711 million by the end of 2008, Martin told jurors. The financier's borrowings contributed to a $7.05 billion "hole" Martin said existed between the $8.59 billion in reported assets and $1.54 billion in actual assets on Stanford International Bank's books at year-end 2008.
Under questioning by Ali Fazel, one of Stanford's attorneys, Martin said he has calculated "practically zero" value for most of the financier's side enterprises because the entities weren't owned by the bank and most were unprofitable.
"Are you saying these companies are worthless because they have no profits?"
Fazel asked. "These companies have no value in and of themselves?"
'Can Have Value'
"They can have value, but that doesn't mean they do have value," Martin replied.
Fazel suggested the government hasn't found all of Stanford's assets, and that's why the bank's balance sheet appears short.
"Wouldn't it be important to know the totality of assets SIBL has before you tell the jury that 92 percent of the assets are missing or don't exist?"
Fazel asked. "Are there assets out there you don't know about?"
"I don't think there are," Martin replied. "I think we've got an accounting of what the bank's assets were at the end of 2008."
Lanny Breuer, head of the Justice Department's criminal division, monitored testimony yesterday at Stanford's trial, which is in its fourth week.
Sitting alone in the rear of the courtroom, Breuer said he has been "following the case" through regular reports. He declined to comment on the trial, citing a gag order by the judge barring lawyers from publicly discussing it.
Tuesday 14 February 2012
Obama, politicians decline to return Stanford money
By Murray Waas
Mon Feb 13, 2012 6:40pm EST
(Reuters) - National fundraising committees for the Democratic and
Republican parties, President Barack Obama, and other major politicians have declined to return campaign donations totaling $1.8 million from Houston financier R. Allen Stanford, now on trial for allegedly masterminding a $7 billion Ponzi scheme.
The court-appointed receiver charged with returning money to Stanford
investors obtained a federal court order last June against five Democratic
and Republican campaigns. But they haven't returned the money. The
Democratic Senatorial Campaign Committee received $950,500; the National
Republican Congressional Committee (NRCC), $238,500; the Democratic
Congressional Campaign Committee, $200,000; the Republican National
Committee $128,500, and the National Republican Senatorial Committee (NRSC)
$83,345.
The contributions to the campaign committees and candidates were given by
Stanford himself, Stanford executives, and a political action committee
associated with the financier.
The receiver, Ralph Janvey, is also trying to claw back money Stanford
donated to individual politicians. The list of his recipients reads like a
who's who of Washington, including President Obama - who received $4,600
from Stanford in his 2008 election campaign - Rep. Pete Sessions (R-Texas),
the chairman of the NRCC, and Sen. John Cornyn (R-Texas), the chairman of
the National Republican Senatorial Campaign Committee. Janvey is seeking
these funds informally, and has not filed lawsuits.
Money has already been returned by House Speaker John Boehner, Senate
Majority Leader Harry Reid and Sen. John McCain, among others. But the
roughly $154,000 recovered from elected officials is a fraction of the $1.8
million still outstanding.
The $4,600 Janvey is seeking from the Obama campaign reflects only direct
contributions from Allen Stanford himself. The total may be as high $31,000
when Stanford's contributions to Obama's other campaign committees are
included, along with money from senior Stanford executives, and the Stanford Financial Group's now defunct PAC, according to campaign finance records and an analysis by the Center for Responsive Politics.
"ROBS THE STORE"
The Obama campaign donated the $4,600 contribution to charity on February
18, 2009, just days after Stanford's alleged fraud came to light. The Obama
campaign officially has no comment on the matter, but a source familiar with the campaign's thinking told Reuters that it does not intend to return the money to the receiver or Stanford investors.
Kevin Sadler, lead counsel for the Stanford receivership, condemned the
failure by the Obama campaign to turn over the contributions to the
receiver. He said "the money was never theirs to begin with," so they have
no more right to the money than an ordinary person who was given it from "a
guy who goes into a Seven Eleven and robs the store."
Stanford is on trial for allegedly bilking $7 billion from investors, the
second-largest Ponzi scheme in the nation's history. He has denied any
wrongdoing or taking money from investors.
In his opening statement, assistant U.S. attorney Greg Costa, alleged: "Some people trusted Mr. Stanford with their entire life savings... He stole from them so he could live the lavish lifestyle of a billionaire."
Stanford's attorney Robert Scardino, in his opening, acknowledged that
billions of dollars from Stanford's bank had gone missing, but said that
Stanford knew nothing about it, and the money had been taken by a Stanford
deputy.
The receiver first wrote to the Obama campaign five days after it gave the
money to charity in 2009, asking that it instead be returned to investors.
"If you have already donated such amounts to charity, we request you
consider donating an equal amount to the Receivership," Janvey wrote back on February 23, 2009. "By returning such amounts to the Receivership Estate, you will help reduce the losses suffered by victims of the alleged fraud."
The national campaign committees are working though the court system. They
have appealed a federal judge's order to return the money to a higher court, which has not yet decided whether to consider the matter.
There is scant legal precedent when it comes to clawing back such campaign
contributions. That's because it is often difficult to prove in court that a campaign committee took money that was clearly illicit and therefore must
return it to the victims of an alleged fraud, according to Meredith McGehee, the policy director for the non-profit Campaign Legal Center.
"If there is a clear trail, they can be forced to give the money back," she
said, noting that in cases like Stanford -- where yachts, homes and other
assets have been successfully claimed by the receiver - donations could be
fair game as well. That contrasts with a case like the 2002 telecom
accounting scandal at WorldCom, where there was fraud but also legitimate
business that can cloud the source of campaign donations.
Aside from the courts, McGehee said, another check on the system is that
candidates have to face "the court of public opinion if they are given and
then keep stolen money."
This is not the first Obama campaign contribution to have recently come into question. Last Monday, Obama's reelection campaign returned more than
$200,000 in campaign contributions it had received from the American
brothers of a Mexican casino magnate who has been in trouble with the law.
Juan Jose Rojas Cardona jumped bail in the U.S. in 1994 after being charged
with drug trafficking and fraud, according to the New York Times. The
campaign said it did not know the background of the Cardona brothers when it accepted the contribution.
Stanford spent considerable sums on lobbying and on donating to members of
Congress. According to former U.S. State Department and federal law
enforcement officials, the goal was to prevent passage of legislation and
enactment of regulations that would have strengthened money laundering laws
relating to offshore banking, which would have hampered his ability to
conduct his own allegedly illicit offshore business haven on the Caribbean
island of Antigua, where the Stanford International Bank was headquartered.
As a U.S. Senator from Illinois, Obama was one of three senators who in
February 2007, along with Sen. Carl Levin (D-Mich.) and then Sen. Norm
Coleman (R-Minn.), sponsored their own version of offshore banking
legislation.
A senior official of the NRSC, which raised funds for Republican house
members and candidates, said that the committee had attempted to settle the
receiver's demands but its offer was rejected.
According to this person, who declined to be identified, the NRSC offered to return the entire $83,345 Stanford donated and about seventy percent of the receiver's legal fees. However, the receiver was adamant that the
reimbursement should include 100 percent of his legal fees.
After that demand, the NRSC appealed the lower court's decision. Repeated
calls and emails to the other committees were not returned.
The receiver hasn't sued individual politicians for reimbursement, but has
been trying to persuade them to refund donations voluntarily, with mixed
success.
Sessions received $10,000 in campaign contributions from Stanford, the
largest amount among members of Congress who have yet to refund
contributions to the Stanford receiver. Sessions received an additional
$31,000 from other Stanford executives and the Stanford Financial Group's
Political Action Committee, according to the Center for Responsive Politics.
Torrie Miller, a spokesperson for Sessions, said in an email that Sessions
would not give $10,000 to the Stanford receiver, because Sessions had
already "donated to charity" the dollar amount of all contributions from
individuals charged in the case.
Stanford gave widely to members of Congress from Texas, his home state and
the location of many of his brokerage offices. According to the receiver's
report, Cornyn, who is chairman of the NRSC, received $6,000 from Stanford - money that Cornyn has not yet returned to the receiver.
TRIP TO ANTIGUA
In late 2004, Stanford paid for a three-day "financial services industry
fact-finding" trip for Cornyn and his wife to Antigua and Barbuda, according to congressional financial disclosure statements.
A spokesman for Cornyn, Mark Gosnell, said in a statement: "Sen. Cornyn
donated $4,000 received from Allen Stanford to Big Brothers Big Sisters of
America," a 100 year-old national children's charity.
A number of the individual campaign committees of current and former members of Congress received about $154,000 in contributions from Stanford that have yet to be returned, based on the receiver's last accounting in January, information provided to Reuters by the receiver and from interviews with members of congress and their staffs.
Among those who have turned over money to the receiver are Boehner, who
received $5,000 from Stanford; Reid, who received $8,000; and McCain's
presidential campaign committee, which was given $2,300.
Of those who have paid the receiver, former Democratic Senator Chris Dodd's
presidential campaign and senatorial campaign received and returned the
highest amount of funds-- $27,500. Sen. Richard Shelby (R-Alabama), gave
back the second largest amount, $14,000. Calls to Boehner, Reid, Dodd,
McCain and Shelby were not returned.
Federal District Court Judge David Godbey, who ruled in favor of the
receiver in June, said the campaign committees "will endure no greater
hardship than that suffered by other innocent victims of the Stanford
Defendants' Ponzi scheme who must do the same." He added that while they may be innocent beneficiaries of Stanford's largesse, "they are not entitled to special treatment."
Many of Stanford's alleged American victims were middle class-retirees, like Stan Kaufman, a retired Philadelphia school teacher, and his wife, Linda, who lost their entire half million dollar retirement fund. Stan Kaufman recalled in an interview that he was lured to invest by a salesman who assured him that Stanford's bank was heavily regulated and all of his
deposits assured.
"They stole everything," said Kaufman. "We worked hard our whole lives. Even while teaching a full day, I always worked a second job. We now have to watch every penny. We have taken thriftiness to a new level."
It is unclear that there is much money left over for the allegedly bilked
investors. Last Monday, prosecutors introduced evidence that Stanford in
late 2008 assured his most successful brokers that they had nothing to worry about because the Stanford International Bank "was sitting on $5.1 billion."
A top aide, however, emailed him around the same time to say that they only
had about $173 million on hand.
Davis, Stanford's former deputy and the bank's former chief financial
officer, has testified that by December 2008, the bank's reserves were a
mere $88 million.
Mon Feb 13, 2012 6:40pm EST
(Reuters) - National fundraising committees for the Democratic and
Republican parties, President Barack Obama, and other major politicians have declined to return campaign donations totaling $1.8 million from Houston financier R. Allen Stanford, now on trial for allegedly masterminding a $7 billion Ponzi scheme.
The court-appointed receiver charged with returning money to Stanford
investors obtained a federal court order last June against five Democratic
and Republican campaigns. But they haven't returned the money. The
Democratic Senatorial Campaign Committee received $950,500; the National
Republican Congressional Committee (NRCC), $238,500; the Democratic
Congressional Campaign Committee, $200,000; the Republican National
Committee $128,500, and the National Republican Senatorial Committee (NRSC)
$83,345.
The contributions to the campaign committees and candidates were given by
Stanford himself, Stanford executives, and a political action committee
associated with the financier.
The receiver, Ralph Janvey, is also trying to claw back money Stanford
donated to individual politicians. The list of his recipients reads like a
who's who of Washington, including President Obama - who received $4,600
from Stanford in his 2008 election campaign - Rep. Pete Sessions (R-Texas),
the chairman of the NRCC, and Sen. John Cornyn (R-Texas), the chairman of
the National Republican Senatorial Campaign Committee. Janvey is seeking
these funds informally, and has not filed lawsuits.
Money has already been returned by House Speaker John Boehner, Senate
Majority Leader Harry Reid and Sen. John McCain, among others. But the
roughly $154,000 recovered from elected officials is a fraction of the $1.8
million still outstanding.
The $4,600 Janvey is seeking from the Obama campaign reflects only direct
contributions from Allen Stanford himself. The total may be as high $31,000
when Stanford's contributions to Obama's other campaign committees are
included, along with money from senior Stanford executives, and the Stanford Financial Group's now defunct PAC, according to campaign finance records and an analysis by the Center for Responsive Politics.
"ROBS THE STORE"
The Obama campaign donated the $4,600 contribution to charity on February
18, 2009, just days after Stanford's alleged fraud came to light. The Obama
campaign officially has no comment on the matter, but a source familiar with the campaign's thinking told Reuters that it does not intend to return the money to the receiver or Stanford investors.
Kevin Sadler, lead counsel for the Stanford receivership, condemned the
failure by the Obama campaign to turn over the contributions to the
receiver. He said "the money was never theirs to begin with," so they have
no more right to the money than an ordinary person who was given it from "a
guy who goes into a Seven Eleven and robs the store."
Stanford is on trial for allegedly bilking $7 billion from investors, the
second-largest Ponzi scheme in the nation's history. He has denied any
wrongdoing or taking money from investors.
In his opening statement, assistant U.S. attorney Greg Costa, alleged: "Some people trusted Mr. Stanford with their entire life savings... He stole from them so he could live the lavish lifestyle of a billionaire."
Stanford's attorney Robert Scardino, in his opening, acknowledged that
billions of dollars from Stanford's bank had gone missing, but said that
Stanford knew nothing about it, and the money had been taken by a Stanford
deputy.
The receiver first wrote to the Obama campaign five days after it gave the
money to charity in 2009, asking that it instead be returned to investors.
"If you have already donated such amounts to charity, we request you
consider donating an equal amount to the Receivership," Janvey wrote back on February 23, 2009. "By returning such amounts to the Receivership Estate, you will help reduce the losses suffered by victims of the alleged fraud."
The national campaign committees are working though the court system. They
have appealed a federal judge's order to return the money to a higher court, which has not yet decided whether to consider the matter.
There is scant legal precedent when it comes to clawing back such campaign
contributions. That's because it is often difficult to prove in court that a campaign committee took money that was clearly illicit and therefore must
return it to the victims of an alleged fraud, according to Meredith McGehee, the policy director for the non-profit Campaign Legal Center.
"If there is a clear trail, they can be forced to give the money back," she
said, noting that in cases like Stanford -- where yachts, homes and other
assets have been successfully claimed by the receiver - donations could be
fair game as well. That contrasts with a case like the 2002 telecom
accounting scandal at WorldCom, where there was fraud but also legitimate
business that can cloud the source of campaign donations.
Aside from the courts, McGehee said, another check on the system is that
candidates have to face "the court of public opinion if they are given and
then keep stolen money."
This is not the first Obama campaign contribution to have recently come into question. Last Monday, Obama's reelection campaign returned more than
$200,000 in campaign contributions it had received from the American
brothers of a Mexican casino magnate who has been in trouble with the law.
Juan Jose Rojas Cardona jumped bail in the U.S. in 1994 after being charged
with drug trafficking and fraud, according to the New York Times. The
campaign said it did not know the background of the Cardona brothers when it accepted the contribution.
Stanford spent considerable sums on lobbying and on donating to members of
Congress. According to former U.S. State Department and federal law
enforcement officials, the goal was to prevent passage of legislation and
enactment of regulations that would have strengthened money laundering laws
relating to offshore banking, which would have hampered his ability to
conduct his own allegedly illicit offshore business haven on the Caribbean
island of Antigua, where the Stanford International Bank was headquartered.
As a U.S. Senator from Illinois, Obama was one of three senators who in
February 2007, along with Sen. Carl Levin (D-Mich.) and then Sen. Norm
Coleman (R-Minn.), sponsored their own version of offshore banking
legislation.
A senior official of the NRSC, which raised funds for Republican house
members and candidates, said that the committee had attempted to settle the
receiver's demands but its offer was rejected.
According to this person, who declined to be identified, the NRSC offered to return the entire $83,345 Stanford donated and about seventy percent of the receiver's legal fees. However, the receiver was adamant that the
reimbursement should include 100 percent of his legal fees.
After that demand, the NRSC appealed the lower court's decision. Repeated
calls and emails to the other committees were not returned.
The receiver hasn't sued individual politicians for reimbursement, but has
been trying to persuade them to refund donations voluntarily, with mixed
success.
Sessions received $10,000 in campaign contributions from Stanford, the
largest amount among members of Congress who have yet to refund
contributions to the Stanford receiver. Sessions received an additional
$31,000 from other Stanford executives and the Stanford Financial Group's
Political Action Committee, according to the Center for Responsive Politics.
Torrie Miller, a spokesperson for Sessions, said in an email that Sessions
would not give $10,000 to the Stanford receiver, because Sessions had
already "donated to charity" the dollar amount of all contributions from
individuals charged in the case.
Stanford gave widely to members of Congress from Texas, his home state and
the location of many of his brokerage offices. According to the receiver's
report, Cornyn, who is chairman of the NRSC, received $6,000 from Stanford - money that Cornyn has not yet returned to the receiver.
TRIP TO ANTIGUA
In late 2004, Stanford paid for a three-day "financial services industry
fact-finding" trip for Cornyn and his wife to Antigua and Barbuda, according to congressional financial disclosure statements.
A spokesman for Cornyn, Mark Gosnell, said in a statement: "Sen. Cornyn
donated $4,000 received from Allen Stanford to Big Brothers Big Sisters of
America," a 100 year-old national children's charity.
A number of the individual campaign committees of current and former members of Congress received about $154,000 in contributions from Stanford that have yet to be returned, based on the receiver's last accounting in January, information provided to Reuters by the receiver and from interviews with members of congress and their staffs.
Among those who have turned over money to the receiver are Boehner, who
received $5,000 from Stanford; Reid, who received $8,000; and McCain's
presidential campaign committee, which was given $2,300.
Of those who have paid the receiver, former Democratic Senator Chris Dodd's
presidential campaign and senatorial campaign received and returned the
highest amount of funds-- $27,500. Sen. Richard Shelby (R-Alabama), gave
back the second largest amount, $14,000. Calls to Boehner, Reid, Dodd,
McCain and Shelby were not returned.
Federal District Court Judge David Godbey, who ruled in favor of the
receiver in June, said the campaign committees "will endure no greater
hardship than that suffered by other innocent victims of the Stanford
Defendants' Ponzi scheme who must do the same." He added that while they may be innocent beneficiaries of Stanford's largesse, "they are not entitled to special treatment."
Many of Stanford's alleged American victims were middle class-retirees, like Stan Kaufman, a retired Philadelphia school teacher, and his wife, Linda, who lost their entire half million dollar retirement fund. Stan Kaufman recalled in an interview that he was lured to invest by a salesman who assured him that Stanford's bank was heavily regulated and all of his
deposits assured.
"They stole everything," said Kaufman. "We worked hard our whole lives. Even while teaching a full day, I always worked a second job. We now have to watch every penny. We have taken thriftiness to a new level."
It is unclear that there is much money left over for the allegedly bilked
investors. Last Monday, prosecutors introduced evidence that Stanford in
late 2008 assured his most successful brokers that they had nothing to worry about because the Stanford International Bank "was sitting on $5.1 billion."
A top aide, however, emailed him around the same time to say that they only
had about $173 million on hand.
Davis, Stanford's former deputy and the bank's former chief financial
officer, has testified that by December 2008, the bank's reserves were a
mere $88 million.
Stanford's Lawyers Subpoena Attorney of Key Witness
Friday, 10 Feb 2012 By: Scott Cohn
Senior Correspondent, CNBC
In an unusual move, attorneys for accused Ponzi mastermind Allen Stanford
have issued a subpoena to compel the attorney for the prosecution's star
witness to testify, CNBC has learned.
David Finn, the attorney for former Chief Financial Officer James Davis,
tells CNBC that United States Marshalls served the subpoena at his office
Friday.
Davis, who was also Stanford's college roommate, wrapped up roughly four
days of testimony earlier this week, in which he implicated his former boss
in the alleged $7 billion scheme.
Davis pleaded guilty in 2009 to three felony counts. Defense attorneys
allege his testimony was fabricated in hopes of receiving a lighter
sentence.
Stanford, 61, is on trial in Houston on 14 counts. Prosecutors could rest
their case as soon as today - day 15 of the trial.
That means Finn could be on the witness stand as early as Monday, although
defense attorneys have been careful not to tip their hand about their
strategy.
Calling the attorney for the main witness against their client is not only
an unusual move, it could be risky for the Stanford defense team. While they
apparently hope to attack the plea agreement Finn arranged for Davis, Finn
also could be privy to information that damages Stanford in the eyes of the
jury.
The defense has also indicated it plans to call Stanford himself to testify
- a strategy that, if they follow through with it, could involve even bigger risks.
Senior Correspondent, CNBC
In an unusual move, attorneys for accused Ponzi mastermind Allen Stanford
have issued a subpoena to compel the attorney for the prosecution's star
witness to testify, CNBC has learned.
David Finn, the attorney for former Chief Financial Officer James Davis,
tells CNBC that United States Marshalls served the subpoena at his office
Friday.
Davis, who was also Stanford's college roommate, wrapped up roughly four
days of testimony earlier this week, in which he implicated his former boss
in the alleged $7 billion scheme.
Davis pleaded guilty in 2009 to three felony counts. Defense attorneys
allege his testimony was fabricated in hopes of receiving a lighter
sentence.
Stanford, 61, is on trial in Houston on 14 counts. Prosecutors could rest
their case as soon as today - day 15 of the trial.
That means Finn could be on the witness stand as early as Monday, although
defense attorneys have been careful not to tip their hand about their
strategy.
Calling the attorney for the main witness against their client is not only
an unusual move, it could be risky for the Stanford defense team. While they
apparently hope to attack the plea agreement Finn arranged for Davis, Finn
also could be privy to information that damages Stanford in the eyes of the
jury.
The defense has also indicated it plans to call Stanford himself to testify
- a strategy that, if they follow through with it, could involve even bigger risks.
Saturday 11 February 2012
Stanford's Lawyers Subpoena Attorney of Key Witness
Friday, 10 Feb 2012 By: Scott Cohn Senior Correspondent, CNBC
In an unusual move, attorneys for accused Ponzi mastermind Allen Stanford have issued a subpoena to compel the attorney for the prosecution's star witness to testify, CNBC has learned.
David Finn, the attorney for former Chief Financial Officer James Davis, tells CNBC that United States Marshalls served the subpoena at his office Friday.
Davis, who was also Stanford's college roommate, wrapped up roughly four days of testimony earlier this week, in which he implicated his former boss in the alleged $7 billion scheme.
Davis pleaded guilty in 2009 to three felony counts. Defense attorneys allege his testimony was fabricated in hopes of receiving a lighter sentence.
Stanford, 61, is on trial in Houston on 14 counts. Prosecutors could rest their case as soon as today - day 15 of the trial.
That means Finn could be on the witness stand as early as Monday, although defense attorneys have been careful not to tip their hand about their strategy.
Calling the attorney for the main witness against their client is not only an unusual move, it could be risky for the Stanford defense team. While they apparently hope to attack the plea agreement Finn arranged for Davis, Finn also could be privy to information that damages Stanford in the eyes of the jury.
The defense has also indicated it plans to call Stanford himself to testify
- a strategy that, if they follow through with it, could involve even bigger risks
---------------------------------------------------------------------------
---------------------------------------------------------
Stanford claims 'defied imagination'
Fri, February 10, 2012
HOUSTON, Texas, CMC - An Antiguan regulator who scrutinized disgraced Texas tycoon R. Allen Stanford's bank in the months preceding its collapse said on Thursday he was in disbelief about the profits it claimed.
"It defied my imagination that the bank could make a billion dollar profit,"
Paul Ashe of Antigua's Financial Services Regulatory Commission told jurors in Stanford's criminal trial in US federal district court here, alluding to profits Stanford's Antigua-based Stanford International Bank (SIB) claimed in light of the 2008 international financial crisis.
Ashe also said there was panic among tens of thousands of depositors after the US financial services regulator, the Securities and Exchange Commission (SEC), froze Stanford's assets, in February 2009, over the alleged "massive
US$7 billion Ponzi scheme involving high-yield certificates of deposit at the SIB.
"It was total chaos," he testified. "The customers were screaming for their money."
Ashe said he and a team of regulators were surprised by the lack of documentation to support Stanford's reported finances at the SIB.
He also said the team was deeply concerned about loans that Stanford received from the SIB, which, he claimed, were not supported by cash reserves necessary under Antigua laws.
"We wanted to see how Stanford International Bank was actually making its money," Ashe said.
US prosecutors have charged that Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle, and bribe regulators and auditors.
They also charged that Stanford lied to depositors by telling them their money was being safely invested.
Stanford has repeatedly denied any wrongdoing. He has been charged with 14 counts, including mail and wire fraud, in the criminal case. He faces up to 20 years in prison if convicted.
Stanford's former finance chief, James Davis, has pleaded guilty to three felony counts and testified, for five days on the stand, as a government witness against his ex-boss.
Davis claimed that Stanford was the architect and mastermind behind the alleged "massive" Ponzi scheme.
He also told the court that Stanford was the chief beneficiary of the alleged scheme.
In a separate indictment, to be tried later, former head of the Antigua Financial Services Regulatory Commission, Leroy King, is also charged in the alleged Ponzi scheme, along with three Stanford financial officials.
Prosecutors allege that King alerted SIB officials when the SEC began making inquiries in 2005, and that Stanford's general counsel drafted King's response stating that the bank was in compliance with regulations.
Witnesses have testified that, besides cash payments, King received tickets to the 2004 and 2006 Super Bowls of the American National Football League.
Ashe, who served with King for part of King's tenure, said he was unaware of those payments, adding that Antigua laws prohibit regulators from accepting gifts worth more than $50.
In an unusual move, attorneys for accused Ponzi mastermind Allen Stanford have issued a subpoena to compel the attorney for the prosecution's star witness to testify, CNBC has learned.
David Finn, the attorney for former Chief Financial Officer James Davis, tells CNBC that United States Marshalls served the subpoena at his office Friday.
Davis, who was also Stanford's college roommate, wrapped up roughly four days of testimony earlier this week, in which he implicated his former boss in the alleged $7 billion scheme.
Davis pleaded guilty in 2009 to three felony counts. Defense attorneys allege his testimony was fabricated in hopes of receiving a lighter sentence.
Stanford, 61, is on trial in Houston on 14 counts. Prosecutors could rest their case as soon as today - day 15 of the trial.
That means Finn could be on the witness stand as early as Monday, although defense attorneys have been careful not to tip their hand about their strategy.
Calling the attorney for the main witness against their client is not only an unusual move, it could be risky for the Stanford defense team. While they apparently hope to attack the plea agreement Finn arranged for Davis, Finn also could be privy to information that damages Stanford in the eyes of the jury.
The defense has also indicated it plans to call Stanford himself to testify
- a strategy that, if they follow through with it, could involve even bigger risks
---------------------------------------------------------------------------
---------------------------------------------------------
Stanford claims 'defied imagination'
Fri, February 10, 2012
HOUSTON, Texas, CMC - An Antiguan regulator who scrutinized disgraced Texas tycoon R. Allen Stanford's bank in the months preceding its collapse said on Thursday he was in disbelief about the profits it claimed.
"It defied my imagination that the bank could make a billion dollar profit,"
Paul Ashe of Antigua's Financial Services Regulatory Commission told jurors in Stanford's criminal trial in US federal district court here, alluding to profits Stanford's Antigua-based Stanford International Bank (SIB) claimed in light of the 2008 international financial crisis.
Ashe also said there was panic among tens of thousands of depositors after the US financial services regulator, the Securities and Exchange Commission (SEC), froze Stanford's assets, in February 2009, over the alleged "massive
US$7 billion Ponzi scheme involving high-yield certificates of deposit at the SIB.
"It was total chaos," he testified. "The customers were screaming for their money."
Ashe said he and a team of regulators were surprised by the lack of documentation to support Stanford's reported finances at the SIB.
He also said the team was deeply concerned about loans that Stanford received from the SIB, which, he claimed, were not supported by cash reserves necessary under Antigua laws.
"We wanted to see how Stanford International Bank was actually making its money," Ashe said.
US prosecutors have charged that Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle, and bribe regulators and auditors.
They also charged that Stanford lied to depositors by telling them their money was being safely invested.
Stanford has repeatedly denied any wrongdoing. He has been charged with 14 counts, including mail and wire fraud, in the criminal case. He faces up to 20 years in prison if convicted.
Stanford's former finance chief, James Davis, has pleaded guilty to three felony counts and testified, for five days on the stand, as a government witness against his ex-boss.
Davis claimed that Stanford was the architect and mastermind behind the alleged "massive" Ponzi scheme.
He also told the court that Stanford was the chief beneficiary of the alleged scheme.
In a separate indictment, to be tried later, former head of the Antigua Financial Services Regulatory Commission, Leroy King, is also charged in the alleged Ponzi scheme, along with three Stanford financial officials.
Prosecutors allege that King alerted SIB officials when the SEC began making inquiries in 2005, and that Stanford's general counsel drafted King's response stating that the bank was in compliance with regulations.
Witnesses have testified that, besides cash payments, King received tickets to the 2004 and 2006 Super Bowls of the American National Football League.
Ashe, who served with King for part of King's tenure, said he was unaware of those payments, adding that Antigua laws prohibit regulators from accepting gifts worth more than $50.
Friday 10 February 2012
Regulator recalls Stanford's job offer
By Terri Langford
Thursday, February 9, 2012
The day after Paul Ashe took a post as a bank regulator in Antigua, R. Allen
Stanford called him with an offer for a job that would make him "a very
happy man" for the rest of his life, Ashe testified Thursday in Stanford's
fraud trial.
Ashe, supervisor of international banks for Antigua's Financial Services
Regulatory Commission, indicated he quickly ended the conversation with
Stanford in February 2008, did not know what job Stanford was proposing and
didn't follow up.
Later that year, Ashe participated in an examination of Stanford
International Bank in the Caribbean island nation and eventually came to
doubt the accuracy of its financial reports.
He also described panic among depositors in February 2009, when a U.S.
lawsuit against the bank's parent company, Houston-based Stanford Financial
Group, froze the assets of all Stanford properties.
"It was total chaos. The customers were screaming for their money," Ashe
told the jury in U.S. District Judge David Hittner's court.
Stanford, 61, a Mexia native, is accused of running a $7 billion investment
scam, largely through certificates of deposit issued by Stanford
International Bank.
Among the allegations are that investors were told the bank passed muster
from regulators and an independent auditor, and that an auditor and
regulator received bribes in exchange for those favourable reports.
Ashe said that he served during part of the tenure of the regulator accused
of taking bribes, Leroy King, former head of the Financial Services
Regulatory Commission.
Super Bowl tickets
Ashe testified he was unaware of under-the-table cash payments or gifts of
Super Bowl tickets King is accused of taking and said that Antiguan law
prohibits regulators from accepting gifts worth more than $50.
King is charged in a separate indictment, along with three Stanford
Financial officials, all to be tried later.
Ashe also described his own efforts to examine the bank in his official
capacity.
He said that after weeks of "hardball" from the bank resisting meetings with
regulators, a team of half a dozen met with bank officials in September
2008.
"We wanted to see how Stanford International Bank was actually making its
money," Ashe said. He said he was surprised by the paucity of documents
detailing oversight by the bank's board.
He also said he was concerned by loans from the bank to Stanford, which he
wasn't sure were supported by the cash reserves required under Antiguan law.
According to testimony by previous witnesses, the bank loaned Stanford
millions of dollars for his personal use and business ventures, even though
investors in the CDs were told their deposits were invested conservatively
and not used for such lending.
Fleet and estate
Jurors also got a description Thursday of Stanford's luxurious life, as a
personal assistant described his fleet of vessels and estate in St. Croix,
U.S. Virgin Islands.
"He always liked having the best," said Kelly Taylor, who, along with her
then-husband, worked for Stanford for several years. At one point their
tasks included overseeing the $13 million renovation of the Sea Eagle, a
106-foot yacht Stanford purchased for $4 million and extended to 112 feet.
The two-year renovation in the Netherlands began in 2003, Taylor said. She
and her husband spent time there, and Stanford visited at least once to
inspect the progress.
Stanford's other vessels included a 180-foot rescue tug that Stanford bought
to support the Sea Eagle, a 55-foot "weekend boat," and a 30-foot fishing
boat, Taylor said.
Difficult boss
She described Stanford as a difficult boss, and said she and other employees
jokingly referred to their jobs as "stand by to stand by" because they
always were on call to respond to his often-changing demands.
She also detailed quirks including his insistence that dry cleaning be sent
from St. Croix to Florida or Texas, and that water be shipped in. She said
she once was tasked with finding koi of a certain size and colour to stock a pond for a cricket tournament in Antigua.
Thursday, February 9, 2012
The day after Paul Ashe took a post as a bank regulator in Antigua, R. Allen
Stanford called him with an offer for a job that would make him "a very
happy man" for the rest of his life, Ashe testified Thursday in Stanford's
fraud trial.
Ashe, supervisor of international banks for Antigua's Financial Services
Regulatory Commission, indicated he quickly ended the conversation with
Stanford in February 2008, did not know what job Stanford was proposing and
didn't follow up.
Later that year, Ashe participated in an examination of Stanford
International Bank in the Caribbean island nation and eventually came to
doubt the accuracy of its financial reports.
He also described panic among depositors in February 2009, when a U.S.
lawsuit against the bank's parent company, Houston-based Stanford Financial
Group, froze the assets of all Stanford properties.
"It was total chaos. The customers were screaming for their money," Ashe
told the jury in U.S. District Judge David Hittner's court.
Stanford, 61, a Mexia native, is accused of running a $7 billion investment
scam, largely through certificates of deposit issued by Stanford
International Bank.
Among the allegations are that investors were told the bank passed muster
from regulators and an independent auditor, and that an auditor and
regulator received bribes in exchange for those favourable reports.
Ashe said that he served during part of the tenure of the regulator accused
of taking bribes, Leroy King, former head of the Financial Services
Regulatory Commission.
Super Bowl tickets
Ashe testified he was unaware of under-the-table cash payments or gifts of
Super Bowl tickets King is accused of taking and said that Antiguan law
prohibits regulators from accepting gifts worth more than $50.
King is charged in a separate indictment, along with three Stanford
Financial officials, all to be tried later.
Ashe also described his own efforts to examine the bank in his official
capacity.
He said that after weeks of "hardball" from the bank resisting meetings with
regulators, a team of half a dozen met with bank officials in September
2008.
"We wanted to see how Stanford International Bank was actually making its
money," Ashe said. He said he was surprised by the paucity of documents
detailing oversight by the bank's board.
He also said he was concerned by loans from the bank to Stanford, which he
wasn't sure were supported by the cash reserves required under Antiguan law.
According to testimony by previous witnesses, the bank loaned Stanford
millions of dollars for his personal use and business ventures, even though
investors in the CDs were told their deposits were invested conservatively
and not used for such lending.
Fleet and estate
Jurors also got a description Thursday of Stanford's luxurious life, as a
personal assistant described his fleet of vessels and estate in St. Croix,
U.S. Virgin Islands.
"He always liked having the best," said Kelly Taylor, who, along with her
then-husband, worked for Stanford for several years. At one point their
tasks included overseeing the $13 million renovation of the Sea Eagle, a
106-foot yacht Stanford purchased for $4 million and extended to 112 feet.
The two-year renovation in the Netherlands began in 2003, Taylor said. She
and her husband spent time there, and Stanford visited at least once to
inspect the progress.
Stanford's other vessels included a 180-foot rescue tug that Stanford bought
to support the Sea Eagle, a 55-foot "weekend boat," and a 30-foot fishing
boat, Taylor said.
Difficult boss
She described Stanford as a difficult boss, and said she and other employees
jokingly referred to their jobs as "stand by to stand by" because they
always were on call to respond to his often-changing demands.
She also detailed quirks including his insistence that dry cleaning be sent
from St. Croix to Florida or Texas, and that water be shipped in. She said
she once was tasked with finding koi of a certain size and colour to stock a pond for a cricket tournament in Antigua.
Judge to have say in SIPC's role in Stanford claims
By Nick Brown
Thu Feb 9, 2012 10:45pm EST
(Reuters) - A U.S. federal judge said he has the authority to decide whether the U.S. Securities & Exchange Commission can compel a brokerage industry protection fund to let thousands of victims of Allen Stanford's alleged Ponzi scheme file claims for compensation.
The SEC's effort to force the Securities Investor Protection Corp to initiate a claims procedure for Stanford's victims is subject to judicial review, Judge Robert Wilkins of federal court in Washington, D.C., ruled on Thursday.
SIPC, created under a 40-year-old investor protection law and funded by member firms, has handled liquidation proceedings for Bernard Madoff's Ponzi scheme and the MF Global failure. But it has said the law that governs it does not apply in the case of Stanford, the alleged mastermind of a $7.2 billion Ponzi scheme, because customer assets were kept in an offshore bank that is not a SIPC member.
The SEC in December filed a court application to force SIPC to act, saying the court was required to sign off on the application, but not authorized to review its merits.
Judge Wilkins rejected that position as "untenable," but sided with the SEC that the matter should be decided in a quick "summary proceeding" in lieu of full-blown litigation.
The judge told both the SEC and SIPC to brief him on the underlying issue of SIPC's obligations to Stanford's alleged victims.
Both sides took a glass-half-full view toward the ruling.
"We are...pleased that the court rejected the idea of full-blown litigation that could drag on for years and greatly delay relief to the Stanford investors," Matthew Martens, the SEC's chief litigation counsel, said in a statement.
Stephen Harbeck, SIPC's president and CEO, said he was pleased the SEC's application will receive judicial review.
"We are still reviewing the ruling, but SIPC looks forward to the opportunity to present its next submission in the case," Harbeck told Reuters.
Stanford, 61, was arrested in 2009 over charges that he ran a $7.2 billion Ponzi scheme linked to certificates of deposit issued by his Antigua-based bank.
SIPC argues that it is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms.
While Stanford's Texas-based brokerage was a SIPC member, its offshore bank was not. And in any case, SIPC says it was not chartered by Congress to combat fraud or guarantee an investment's value.
"The ruling seems largely procedural. The court has essentially struck down the SEC's attempt to say it gets to call all the shots," said Seton Hall University School of Law professor Stephen Lubben. "The next question is whether the court will defer to SIPC or force it to act."
The case is Securities & Exchange Commission v. Securities Investor Protection Corp, U.S. District Court, District of Columbia, No. 11-678.
Thu Feb 9, 2012 10:45pm EST
(Reuters) - A U.S. federal judge said he has the authority to decide whether the U.S. Securities & Exchange Commission can compel a brokerage industry protection fund to let thousands of victims of Allen Stanford's alleged Ponzi scheme file claims for compensation.
The SEC's effort to force the Securities Investor Protection Corp to initiate a claims procedure for Stanford's victims is subject to judicial review, Judge Robert Wilkins of federal court in Washington, D.C., ruled on Thursday.
SIPC, created under a 40-year-old investor protection law and funded by member firms, has handled liquidation proceedings for Bernard Madoff's Ponzi scheme and the MF Global failure. But it has said the law that governs it does not apply in the case of Stanford, the alleged mastermind of a $7.2 billion Ponzi scheme, because customer assets were kept in an offshore bank that is not a SIPC member.
The SEC in December filed a court application to force SIPC to act, saying the court was required to sign off on the application, but not authorized to review its merits.
Judge Wilkins rejected that position as "untenable," but sided with the SEC that the matter should be decided in a quick "summary proceeding" in lieu of full-blown litigation.
The judge told both the SEC and SIPC to brief him on the underlying issue of SIPC's obligations to Stanford's alleged victims.
Both sides took a glass-half-full view toward the ruling.
"We are...pleased that the court rejected the idea of full-blown litigation that could drag on for years and greatly delay relief to the Stanford investors," Matthew Martens, the SEC's chief litigation counsel, said in a statement.
Stephen Harbeck, SIPC's president and CEO, said he was pleased the SEC's application will receive judicial review.
"We are still reviewing the ruling, but SIPC looks forward to the opportunity to present its next submission in the case," Harbeck told Reuters.
Stanford, 61, was arrested in 2009 over charges that he ran a $7.2 billion Ponzi scheme linked to certificates of deposit issued by his Antigua-based bank.
SIPC argues that it is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms.
While Stanford's Texas-based brokerage was a SIPC member, its offshore bank was not. And in any case, SIPC says it was not chartered by Congress to combat fraud or guarantee an investment's value.
"The ruling seems largely procedural. The court has essentially struck down the SEC's attempt to say it gets to call all the shots," said Seton Hall University School of Law professor Stephen Lubben. "The next question is whether the court will defer to SIPC or force it to act."
The case is Securities & Exchange Commission v. Securities Investor Protection Corp, U.S. District Court, District of Columbia, No. 11-678.
Thursday 9 February 2012
More from day 13 in court
Stanford Had 100-Foot Ocean Yacht, CFO Settled for 12-Foot Boat
February 09, 2012 By Laurel Brubaker Calkins
Feb. 9 (Bloomberg) -- R. Allen Stanford was portrayed by his ex-finance chief, James M. Davis, as the mastermind and prime beneficiary of what prosecutors said was a $7 billion Ponzi scheme built on bogus certificates of deposit at Stanford's Antiguan bank.
"Who ran the companies, you or Mr. Stanford?" Assistant U.S. Attorney William Stellmach asked Davis, who has been testifying under a plea agreement at Stanford's fraud trial in federal court in Houston. "Who profited overwhelmingly from the conduct you described with the CD money?"
"Mr. Stanford," Davis replied to both questions.
Davis identified a photo of an ocean-going sport yacht as one of several Stanford owned before regulators seized his assets on suspicion of fraud in early 2009. Davis told jurors yesterday he owned a small boat on the pond at his Mississippi farm.
"Mr. Stanford's boat was 100 feet long; your boat was 12 feet long,"
Stellmach asked Davis. "Is that a fair reflection of how this was all divvied up," referring to proceeds each man realized from the alleged Ponzi scheme.
"Yes, that's a fair reflection," Davis told the jury. "Follow the money," he added, pointing across the courtroom at his former boss.
Stanford, 61, has denied all wrongdoing and is fighting charges he misled investors about the safety and oversight of deposits at his bank.
Prosecutors claim Stanford skimmed more than $2 billion to fund a lavish lifestyle and dozens of private companies that ranged from Caribbean airlines and real estate developments to cricket tournaments.
Presented Evidence
Stanford's attorneys presented evidence during the five days Davis spent on the stand trying to paint the ex-CFO as a thief who stole millions of dollars from Stanford's operations and ran the companies with little input from his boss.
"He had his finger on the pulse," Davis testified yesterday, repeating previous assertions that Stanford directed him to falsify financial records, lie to Antiguan regulators and bribe bank auditors to conceal Stanford's borrowings and keep investors' cash flowing into Stanford International Bank.
"They were bamboozled by a smoke and mirrors show," Davis said of investors who lost more than $7 billion through Stanford's bank. "We reported to investors one way when in actuality their money was being handled the opposite way."
Bribes to Regulator
Kalford Young, an Internal Revenue Service criminal investigator, also testified yesterday about banking records and internal e-mails he said supported Davis's claim that Stanford bribed Leroy King, then Antigua's top banking regulator, to conceal the fraud. According to the documents, Young said, Stanford gave King thousands of dollars in cash and club-level tickets to National Football League Super Bowl championship games.
Under questioning by Ali Fazel, another of Stanford's lawyers, Young said he didn't know why the financier would document such bribes with a paper trail Fazel described as "big enough for anyone and their mother to find."
"Are you saying Mr. Stanford is bribing someone and copying his lawyer on it?" Fazel asked about e-mails in which Stanford discussed King's tickets.
"He's bribing Mr. King, putting it on his credit card, and having the bill sent to his accountant?"
Stanford leaned forward at the defense table, grinning and chortling quietly as his lawyer questioned the IRS agent.
Under resumed questioning by prosecutors, Young testified that most white-collar criminal cases are built on paper trails. He said investigators obtained Stanford's records after he lost control of the bank.
February 09, 2012 By Laurel Brubaker Calkins
Feb. 9 (Bloomberg) -- R. Allen Stanford was portrayed by his ex-finance chief, James M. Davis, as the mastermind and prime beneficiary of what prosecutors said was a $7 billion Ponzi scheme built on bogus certificates of deposit at Stanford's Antiguan bank.
"Who ran the companies, you or Mr. Stanford?" Assistant U.S. Attorney William Stellmach asked Davis, who has been testifying under a plea agreement at Stanford's fraud trial in federal court in Houston. "Who profited overwhelmingly from the conduct you described with the CD money?"
"Mr. Stanford," Davis replied to both questions.
Davis identified a photo of an ocean-going sport yacht as one of several Stanford owned before regulators seized his assets on suspicion of fraud in early 2009. Davis told jurors yesterday he owned a small boat on the pond at his Mississippi farm.
"Mr. Stanford's boat was 100 feet long; your boat was 12 feet long,"
Stellmach asked Davis. "Is that a fair reflection of how this was all divvied up," referring to proceeds each man realized from the alleged Ponzi scheme.
"Yes, that's a fair reflection," Davis told the jury. "Follow the money," he added, pointing across the courtroom at his former boss.
Stanford, 61, has denied all wrongdoing and is fighting charges he misled investors about the safety and oversight of deposits at his bank.
Prosecutors claim Stanford skimmed more than $2 billion to fund a lavish lifestyle and dozens of private companies that ranged from Caribbean airlines and real estate developments to cricket tournaments.
Presented Evidence
Stanford's attorneys presented evidence during the five days Davis spent on the stand trying to paint the ex-CFO as a thief who stole millions of dollars from Stanford's operations and ran the companies with little input from his boss.
"He had his finger on the pulse," Davis testified yesterday, repeating previous assertions that Stanford directed him to falsify financial records, lie to Antiguan regulators and bribe bank auditors to conceal Stanford's borrowings and keep investors' cash flowing into Stanford International Bank.
"They were bamboozled by a smoke and mirrors show," Davis said of investors who lost more than $7 billion through Stanford's bank. "We reported to investors one way when in actuality their money was being handled the opposite way."
Bribes to Regulator
Kalford Young, an Internal Revenue Service criminal investigator, also testified yesterday about banking records and internal e-mails he said supported Davis's claim that Stanford bribed Leroy King, then Antigua's top banking regulator, to conceal the fraud. According to the documents, Young said, Stanford gave King thousands of dollars in cash and club-level tickets to National Football League Super Bowl championship games.
Under questioning by Ali Fazel, another of Stanford's lawyers, Young said he didn't know why the financier would document such bribes with a paper trail Fazel described as "big enough for anyone and their mother to find."
"Are you saying Mr. Stanford is bribing someone and copying his lawyer on it?" Fazel asked about e-mails in which Stanford discussed King's tickets.
"He's bribing Mr. King, putting it on his credit card, and having the bill sent to his accountant?"
Stanford leaned forward at the defense table, grinning and chortling quietly as his lawyer questioned the IRS agent.
Under resumed questioning by prosecutors, Young testified that most white-collar criminal cases are built on paper trails. He said investigators obtained Stanford's records after he lost control of the bank.
Cassidy's bill tailored to Stanford victims (BUT MAINLY AMERICAN VICTIMS)
By JORDAN BLUM
Capitol news bureau
February 09, 2012
U.S. Rep. Bill Cassidy plans to file legislation Thursday to allow investors of R. Allen Stanford to individually opt out of a federal lawsuit for one-time buyouts of up to $500,000.
The Securities and Exchange Commission filed suit in December against the Securities Investment Protection Corp. trying to force it to pay up to $500,000 each in lost money to investors with Stanford.
The Houston businessman is alleged to have run a Ponzi scheme while feeding his own wealthy lifestyle.
SIPC offered to pay investors up to $250,000, about half of what the law mandated by Congress allows, but the SEC previously rejected the offer.
The "Improving Security for Investors and Providing Closure Act," or Improving SIPC Act of 2012, legislation by Cassidy, R-Baton Rouge, and U.S.
Rep. Ted Deutch, D-Fla., would allow SIPC to name a fixed payout amount - potentially $250,000 - and let individual victims decide for themselves whether to remain in the lawsuit.
Investors who lost in the realm of $250,000 or so in net equity could, hypothetically, recover nearly all of what they lost, while someone who lost millions of dollars could choose to remain in the lawsuit and reject the $250,000.
"R. Allen Stanford defrauded thousands of hard working men and women of their entire life savings," Cassidy said in a prepared statement. "Those who lost smaller amounts will be eligible for reimbursement from SIPC while those who decide to continue their court battle will be able to do so. Many victims of the Stanford Ponzi Scheme were working men and women, this legislation will enable them to put this tragedy behind them."
Stanford is proclaiming his innocence in a Houston jail where he is being held on federal charges that he cheated customers for $7.2 billion. About 1,800 were from Louisiana - mostly in Baton Rouge, Lafayette and Covington.
Stanford's trial is currently under way.
Louisiana investors lost an estimated $1 billion, mostly in hundreds of thousands of dollars each in retirement savings.
Some of the affected investors have expressed concerns about meeting their financial obligations during a potentially prolonged federal lawsuit.
Baton Rouge lawyer Phil Preis is representing about 150 of the Louisiana investors, many of whom are ExxonMobil retirees who lost $500,000. Preis said the legislation could represent a huge deal for many of the victims and allow them to avoid an expensive liquidation process.
"If they (SIPC representatives) make a meaningful settlement offer - $250,000 to $300,000 - I think most of them will take advantage of it,"
Preis said of his clients.
While those who take an offer would give up any future claims against SIPC, Preis noted, they would still be able to make claims against other people and entities involved.
Other cosponsors of the legislation include U.S. Reps. Rodney Alexander, Charles Boustany and Jeff Landry, all of whom are Louisiana Republicans.
Capitol news bureau
February 09, 2012
U.S. Rep. Bill Cassidy plans to file legislation Thursday to allow investors of R. Allen Stanford to individually opt out of a federal lawsuit for one-time buyouts of up to $500,000.
The Securities and Exchange Commission filed suit in December against the Securities Investment Protection Corp. trying to force it to pay up to $500,000 each in lost money to investors with Stanford.
The Houston businessman is alleged to have run a Ponzi scheme while feeding his own wealthy lifestyle.
SIPC offered to pay investors up to $250,000, about half of what the law mandated by Congress allows, but the SEC previously rejected the offer.
The "Improving Security for Investors and Providing Closure Act," or Improving SIPC Act of 2012, legislation by Cassidy, R-Baton Rouge, and U.S.
Rep. Ted Deutch, D-Fla., would allow SIPC to name a fixed payout amount - potentially $250,000 - and let individual victims decide for themselves whether to remain in the lawsuit.
Investors who lost in the realm of $250,000 or so in net equity could, hypothetically, recover nearly all of what they lost, while someone who lost millions of dollars could choose to remain in the lawsuit and reject the $250,000.
"R. Allen Stanford defrauded thousands of hard working men and women of their entire life savings," Cassidy said in a prepared statement. "Those who lost smaller amounts will be eligible for reimbursement from SIPC while those who decide to continue their court battle will be able to do so. Many victims of the Stanford Ponzi Scheme were working men and women, this legislation will enable them to put this tragedy behind them."
Stanford is proclaiming his innocence in a Houston jail where he is being held on federal charges that he cheated customers for $7.2 billion. About 1,800 were from Louisiana - mostly in Baton Rouge, Lafayette and Covington.
Stanford's trial is currently under way.
Louisiana investors lost an estimated $1 billion, mostly in hundreds of thousands of dollars each in retirement savings.
Some of the affected investors have expressed concerns about meeting their financial obligations during a potentially prolonged federal lawsuit.
Baton Rouge lawyer Phil Preis is representing about 150 of the Louisiana investors, many of whom are ExxonMobil retirees who lost $500,000. Preis said the legislation could represent a huge deal for many of the victims and allow them to avoid an expensive liquidation process.
"If they (SIPC representatives) make a meaningful settlement offer - $250,000 to $300,000 - I think most of them will take advantage of it,"
Preis said of his clients.
While those who take an offer would give up any future claims against SIPC, Preis noted, they would still be able to make claims against other people and entities involved.
Other cosponsors of the legislation include U.S. Reps. Rodney Alexander, Charles Boustany and Jeff Landry, all of whom are Louisiana Republicans.
Some Allen Stanford Assets Were Profitable, Ex-CFO Testifies
February 08, 2012, 9:07
By Laurel Brubaker Calkins
Stanford Claimed $5.1 Billion, Had $173 Million, Ex-CFO Says
Stanford Invented Offshore Bank's U.K. Insurer, Prosecutor Says
Allen Stanford Was 'Chief Faker,' Ex-Finance Chief Testifies
Stanford Used 'Slush Fund' at SocGen for Bribes, Ex-CFO Say
Feb. 8 (Bloomberg) -- R. Allen Stanford's businesses collapsed in part because the stock market plunged and a court- appointed receiver destroyed much of the companies' value after they were seized by the government, James M. Davis, Stanford Financial Group Co.'s former finance chief, told jurors.
Davis, testifying yesterday for the government under a plea deal at Stanford's federal court trial in Houston, was shown a letter he wrote shortly after regulators seized Stanford's companies in February 2009.
"There was from the start never a thought to put the clients in harm's way in this process, never a hint of criminal intent," Robert Scardino, a lawyer for Stanford, read from the letter, which Davis said he wrote to an attorney he was trying to hire to defend him at the time.
"The underlying global business growth model remained strong," Davis wrote in the letter, adding that some of Stanford's businesses were moving toward profitability.
"Isn't that 180 degrees opposite from what you've been telling this jury?"
Scardino asked Davis. "You said these companies had no value."
Davis responded, "A number of the companies Stanford owned were growing; they were worth something." The 2009 letter "could be true under certain circumstances," he said.
The former finance chief told jurors he changed his mind a month after writing that letter, when he met with his current attorney, who persuaded him to seek a plea deal. "But at the time I was still lying," he said of the letter. "I was still in the middle of it."
Stanford's Defense
Davis's testimony may bolster Stanford's defense that he never intended to defraud investors of $7 billion through what the U.S. says was a Ponzi scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank.
Stanford's lawyers claim accountants were in the process of consolidating companies the financier funded with $2 billion in secret bank loans onto the Antiguan bank's portfolio when regulators stepped in and stopped the process.
"It would've been a last-ditch effort to hide the fraud that had been going on and plug the hole" between the bank's reported and actual assets, which was revealed when investors accelerated CD withdrawals from the bank, Davis testified.
"Was it to hide the fraud or save the bank?" Scardino asked.
"It was one and the same," the ex-CFO replied. "The show would be over without something happening pretty quick."
'Given Away'
Scardino said Stanford Group Co., the financier's broker- dealer, was "given away" by a court-appointed receiver who recovered no value for it.
"It was carried on your books for half a billion dollars," Scardino said.
"Oppenheimer offered more than that for it."
Davis testified that in December 2008, he received a flowchart of a Stanford International Bank consolidation project, which would have placed most of Stanford's private companies in a new umbrella company, Stanford International Bank Ltd. Holdings. Jurors were also shown a solvency analysis Davis received stating the consolidated companies' fair market value exceeded $8 billion at the end of 2008.
Davis said he received both e-mails from Gil Lopez, Stanford's former chief accounting officer, who worked on the business consolidation. Lopez was charged along with Stanford in June 2009 and is set to be tried in September.
Courtroom Visitors
Lopez, who says he's innocent, has been in the courtroom since Davis took the stand last week. Mark Kuhrt, Stanford's former global controller, who is indicted with the other Stanford executives, has also been a courtroom visitor.
Davis read the jury an e-mail he sent Stanford in November 2005, begging Stanford to spend more time with him discussing "the many details of running these huge companies."
Stanford's attorneys have told the jury that their client was a hands-off visionary who left the details of running his companies to others, primarily Davis.
"So you were running the company?" Scardino asked Davis.
"No sir," Davis replied. "His attention was desperately needed."
Davis testified that he hopes his cooperation will lead to leniency when he is sentenced. Under the terms of his plea, Davis, 63, faces as long as 30 years in prison.
Davis said while he doesn't wish to spend the rest of his life in prison, he'd rather be there than free and "bound as I was for the last 20 years with Allen Stanford."
By Laurel Brubaker Calkins
Stanford Claimed $5.1 Billion, Had $173 Million, Ex-CFO Says
Stanford Invented Offshore Bank's U.K. Insurer, Prosecutor Says
Allen Stanford Was 'Chief Faker,' Ex-Finance Chief Testifies
Stanford Used 'Slush Fund' at SocGen for Bribes, Ex-CFO Say
Feb. 8 (Bloomberg) -- R. Allen Stanford's businesses collapsed in part because the stock market plunged and a court- appointed receiver destroyed much of the companies' value after they were seized by the government, James M. Davis, Stanford Financial Group Co.'s former finance chief, told jurors.
Davis, testifying yesterday for the government under a plea deal at Stanford's federal court trial in Houston, was shown a letter he wrote shortly after regulators seized Stanford's companies in February 2009.
"There was from the start never a thought to put the clients in harm's way in this process, never a hint of criminal intent," Robert Scardino, a lawyer for Stanford, read from the letter, which Davis said he wrote to an attorney he was trying to hire to defend him at the time.
"The underlying global business growth model remained strong," Davis wrote in the letter, adding that some of Stanford's businesses were moving toward profitability.
"Isn't that 180 degrees opposite from what you've been telling this jury?"
Scardino asked Davis. "You said these companies had no value."
Davis responded, "A number of the companies Stanford owned were growing; they were worth something." The 2009 letter "could be true under certain circumstances," he said.
The former finance chief told jurors he changed his mind a month after writing that letter, when he met with his current attorney, who persuaded him to seek a plea deal. "But at the time I was still lying," he said of the letter. "I was still in the middle of it."
Stanford's Defense
Davis's testimony may bolster Stanford's defense that he never intended to defraud investors of $7 billion through what the U.S. says was a Ponzi scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank.
Stanford's lawyers claim accountants were in the process of consolidating companies the financier funded with $2 billion in secret bank loans onto the Antiguan bank's portfolio when regulators stepped in and stopped the process.
"It would've been a last-ditch effort to hide the fraud that had been going on and plug the hole" between the bank's reported and actual assets, which was revealed when investors accelerated CD withdrawals from the bank, Davis testified.
"Was it to hide the fraud or save the bank?" Scardino asked.
"It was one and the same," the ex-CFO replied. "The show would be over without something happening pretty quick."
'Given Away'
Scardino said Stanford Group Co., the financier's broker- dealer, was "given away" by a court-appointed receiver who recovered no value for it.
"It was carried on your books for half a billion dollars," Scardino said.
"Oppenheimer offered more than that for it."
Davis testified that in December 2008, he received a flowchart of a Stanford International Bank consolidation project, which would have placed most of Stanford's private companies in a new umbrella company, Stanford International Bank Ltd. Holdings. Jurors were also shown a solvency analysis Davis received stating the consolidated companies' fair market value exceeded $8 billion at the end of 2008.
Davis said he received both e-mails from Gil Lopez, Stanford's former chief accounting officer, who worked on the business consolidation. Lopez was charged along with Stanford in June 2009 and is set to be tried in September.
Courtroom Visitors
Lopez, who says he's innocent, has been in the courtroom since Davis took the stand last week. Mark Kuhrt, Stanford's former global controller, who is indicted with the other Stanford executives, has also been a courtroom visitor.
Davis read the jury an e-mail he sent Stanford in November 2005, begging Stanford to spend more time with him discussing "the many details of running these huge companies."
Stanford's attorneys have told the jury that their client was a hands-off visionary who left the details of running his companies to others, primarily Davis.
"So you were running the company?" Scardino asked Davis.
"No sir," Davis replied. "His attention was desperately needed."
Davis testified that he hopes his cooperation will lead to leniency when he is sentenced. Under the terms of his plea, Davis, 63, faces as long as 30 years in prison.
Davis said while he doesn't wish to spend the rest of his life in prison, he'd rather be there than free and "bound as I was for the last 20 years with Allen Stanford."
Wednesday 8 February 2012
Further Misinformation being Distributed by Jaime (COVISAL)
It has been brought to my attention that Jaime (Covisal) is sending out letters to Latin American victims. As usual the missive is full of misinformation and incorrect statements. Jaime claims he has sent a letter to Grant Thornton with his concerns, but instead of waiting for a response from Grant Thornton to clarify the situation he has gone ahead and given out the wrong information again.
I would suggest to all Latin American victims who receive this letter that you throw it in the trash and disregard the information it contains. If you have any questions, then either make contact with Grant Thornton or post your questions here on the forum and they will be passed onto GT.
Following Jaime's advice could result in you missing the opportunity to register your claim. Please do not be afraid of making a mistake, Grant Thornton know that many of us do not have all of our records, they have taken on extra staff to check each claim and THEY WILL COME BACK TO YOU if you have made any mistakes. Mistakes will NOT result in your claim being rejected I have spoken to GT about this and I have their assurance that they will help and assist you in any way they can to arrive at the correct amount of your claim. Please ignore what Jaime is telling you, he is wrong - again!!
I would suggest to all Latin American victims who receive this letter that you throw it in the trash and disregard the information it contains. If you have any questions, then either make contact with Grant Thornton or post your questions here on the forum and they will be passed onto GT.
Following Jaime's advice could result in you missing the opportunity to register your claim. Please do not be afraid of making a mistake, Grant Thornton know that many of us do not have all of our records, they have taken on extra staff to check each claim and THEY WILL COME BACK TO YOU if you have made any mistakes. Mistakes will NOT result in your claim being rejected I have spoken to GT about this and I have their assurance that they will help and assist you in any way they can to arrive at the correct amount of your claim. Please ignore what Jaime is telling you, he is wrong - again!!
Some Stanford Assets Were Profitable Before U.S. Seizure, Ex-CFO Testifies
By Laurel Brubaker Calkins - Feb 7, 2012
James M. Davis, Stanford Financial Group Co.'s former finance chief, told jurors that R. Allen Stanford's businesses collapsed in part because the stock market imploded and a court-appointed receiver destroyed much of the companies' value after they were seized by the government.
Davis, testifying for the government under a plea deal at Stanford's federal court trial in Houston, was shown a letter he wrote shortly after regulators seized Stanford's companies in February 2009.
"There was from the start never a thought to put the clients in harm's way in this process, never a hint of criminal intent," Robert Scardino, a lawyer for Stanford, read from the letter, which Davis said he wrote to an attorney he was trying to hire to defend him at the time.
"The underlying global business growth model remained strong," Davis wrote in the letter, adding that some of Stanford's businesses were moving toward profitability.
"Isn't that 180 degrees opposite from what you've been telling this jury?"
Scardino asked Davis. "You said these companies had no value."
Davis responded, "A number of the companies Stanford owned were growing; they were worth something." The 2009 letter "could be true under certain circumstances," he said.
The former finance chief told jurors he changed his mind a month after writing that letter, when he met with his current attorney, who persuaded him to seek a plea deal. "But at the time I was still lying," he said of the letter. "I was still in the middle of it."
Stanford's Defense
Davis's testimony may bolster Stanford's defense that he never intended to defraud investors of $7 billion through what the government says was a Ponzi scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank.
Stanford's lawyers claim accountants were in the process of consolidating companies the financier funded with $2 billion in secret bank loans onto the Antiguan bank's portfolio when regulators stepped in and stopped the process.
Stanford's attorneys told jurors several times that the financier was a hands-off visionary who left the details of running his companies to others, primarily Davis.
"So you were running the company?" Scardino asked Davis.
Attention Needed
"No sir," Davis replied. "His attention was desperately needed," Davis said of Stanford.
Davis testified he hopes his cooperation will lead to leniency when he is sentenced. Under the terms of his plea deal, Davis, 63, faces as long as 30 years in prison.
Davis said while he doesn't wish to spend the rest of his life in prison, he'd rather be there than free and "bound as I was for the last 20 years with Allen Stanford."
James M. Davis, Stanford Financial Group Co.'s former finance chief, told jurors that R. Allen Stanford's businesses collapsed in part because the stock market imploded and a court-appointed receiver destroyed much of the companies' value after they were seized by the government.
Davis, testifying for the government under a plea deal at Stanford's federal court trial in Houston, was shown a letter he wrote shortly after regulators seized Stanford's companies in February 2009.
"There was from the start never a thought to put the clients in harm's way in this process, never a hint of criminal intent," Robert Scardino, a lawyer for Stanford, read from the letter, which Davis said he wrote to an attorney he was trying to hire to defend him at the time.
"The underlying global business growth model remained strong," Davis wrote in the letter, adding that some of Stanford's businesses were moving toward profitability.
"Isn't that 180 degrees opposite from what you've been telling this jury?"
Scardino asked Davis. "You said these companies had no value."
Davis responded, "A number of the companies Stanford owned were growing; they were worth something." The 2009 letter "could be true under certain circumstances," he said.
The former finance chief told jurors he changed his mind a month after writing that letter, when he met with his current attorney, who persuaded him to seek a plea deal. "But at the time I was still lying," he said of the letter. "I was still in the middle of it."
Stanford's Defense
Davis's testimony may bolster Stanford's defense that he never intended to defraud investors of $7 billion through what the government says was a Ponzi scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank.
Stanford's lawyers claim accountants were in the process of consolidating companies the financier funded with $2 billion in secret bank loans onto the Antiguan bank's portfolio when regulators stepped in and stopped the process.
Stanford's attorneys told jurors several times that the financier was a hands-off visionary who left the details of running his companies to others, primarily Davis.
"So you were running the company?" Scardino asked Davis.
Attention Needed
"No sir," Davis replied. "His attention was desperately needed," Davis said of Stanford.
Davis testified he hopes his cooperation will lead to leniency when he is sentenced. Under the terms of his plea deal, Davis, 63, faces as long as 30 years in prison.
Davis said while he doesn't wish to spend the rest of his life in prison, he'd rather be there than free and "bound as I was for the last 20 years with Allen Stanford."
Stanford's Attorneys Say Ex-CFO Was Behind Fraud
By JUAN A. LOZANO Associated Press
HOUSTON February 7, 2012
Attorneys for jailed Texas tycoon R. Allen Stanford suggested to jurors Tuesday that letters, emails and other documents show it was not the financier but his top money man who was actually behind an alleged Ponzi scheme that took billions from investors.
During relentless and sometimes contentious questioning of James M. Davis, the former chief financial officer for Stanford's companies, the financier's attorneys claimed it was Davis alone who altered financial statements and requested that bribes be sent to an auditor as part of efforts to hide the alleged fraud at Stanford's Caribbean bank.
They also accused Davis of lying in his testimony, in which he accused Stanford of orchestrating the fraud, in order to get a reduced sentence.
Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors in exchange for a possible reduced sentence.
"You better say something here so (the prosecutors) will go to bat for you,"
said Robert Scardino, one of Stanford's attorneys.
"I'm here to tell the truth," said Davis, who is the prosecution's star witness and has testified for four days.
Prosecutors allege the 20-year scheme centred on the sales of certificates of deposit, or CDs, from the bank on the island nation of Antigua and bilked investors out of more than $7 billion. Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate and that he could have paid back investors if authorities hadn't seized his companies.
Authorities allege Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle, and bribe regulators and auditors.
They also say he lied to depositors by telling them their money was being safely invested.
Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.
During cross-examination, Scardino accused Davis of being the sole person who created documents that inflated the value of the bank's holdings to $6.3 billion when in reality it was about to collapse. Davis said the figures were falsified under Stanford's direction.
Scardino also showed jurors letters prosecutors allege were requests made by Stanford for payment of bribes from a secret Swiss bank account to the outside auditor of the financier's Antiguan bank. The letters were signed only by Davis, who worked for Stanford for 21 years.
"Mr. Stanford's signature doesn't appear on that?" Scardino asked.
"No sir," replied Davis.
On a large drawing pad placed on an easel next to the witness stand, Scardino wrote some of the words Davis has used during his testimony to describe himself: liar, hypocrite, adulterer, fraudster and coward. The list stood next to Davis for much of his testimony Tuesday.
Scardino also accused Davis of stealing $6 million that had been transferred in December 2008 from a secret Swiss bank account held by Stanford.
Davis said he didn't steal the money and when questioned again by prosecutors clarified the $6 million had been transferred to another Swiss account held by Stanford's other bank on Antigua. Davis said the money remained there until it was seized by authorities in February 2009.
Scardino presented to jurors a memo Davis wrote in February 2009 ahead of a meeting with potential defense attorneys in which he praised the bank's operation's, called Stanford a "gifted individual" and wrote there was "never a hint of criminal intent."
Davis said when he wrote the memo, for a meeting both he and Stanford were to attend, he still hadn't come clean about the fraud.
"I was still lying at this time," he said.
Scardino also accused Davis of being a tax cheat and underreporting his income in 2006 by as much as $1.2 million. Davis said he's paid more than $120,000 in back taxes.
While being questioned by Scardino, Davis would often answer questions requiring only a yes or no answer with longer responses where he added that both he and Stanford took part in the fraud. This upset Scardino and eventually prompted U.S. District Judge David Hitter to have the jury step out for about five minutes while he spoke with Davis.
"Mr. Davis you are going to have to answer just the questions either attorney asks you. ... No more volunteering," Hitter said.
Davis was to resume testifying on Wednesday as prosecutors continue to question him again.
HOUSTON February 7, 2012
Attorneys for jailed Texas tycoon R. Allen Stanford suggested to jurors Tuesday that letters, emails and other documents show it was not the financier but his top money man who was actually behind an alleged Ponzi scheme that took billions from investors.
During relentless and sometimes contentious questioning of James M. Davis, the former chief financial officer for Stanford's companies, the financier's attorneys claimed it was Davis alone who altered financial statements and requested that bribes be sent to an auditor as part of efforts to hide the alleged fraud at Stanford's Caribbean bank.
They also accused Davis of lying in his testimony, in which he accused Stanford of orchestrating the fraud, in order to get a reduced sentence.
Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors in exchange for a possible reduced sentence.
"You better say something here so (the prosecutors) will go to bat for you,"
said Robert Scardino, one of Stanford's attorneys.
"I'm here to tell the truth," said Davis, who is the prosecution's star witness and has testified for four days.
Prosecutors allege the 20-year scheme centred on the sales of certificates of deposit, or CDs, from the bank on the island nation of Antigua and bilked investors out of more than $7 billion. Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate and that he could have paid back investors if authorities hadn't seized his companies.
Authorities allege Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle, and bribe regulators and auditors.
They also say he lied to depositors by telling them their money was being safely invested.
Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.
During cross-examination, Scardino accused Davis of being the sole person who created documents that inflated the value of the bank's holdings to $6.3 billion when in reality it was about to collapse. Davis said the figures were falsified under Stanford's direction.
Scardino also showed jurors letters prosecutors allege were requests made by Stanford for payment of bribes from a secret Swiss bank account to the outside auditor of the financier's Antiguan bank. The letters were signed only by Davis, who worked for Stanford for 21 years.
"Mr. Stanford's signature doesn't appear on that?" Scardino asked.
"No sir," replied Davis.
On a large drawing pad placed on an easel next to the witness stand, Scardino wrote some of the words Davis has used during his testimony to describe himself: liar, hypocrite, adulterer, fraudster and coward. The list stood next to Davis for much of his testimony Tuesday.
Scardino also accused Davis of stealing $6 million that had been transferred in December 2008 from a secret Swiss bank account held by Stanford.
Davis said he didn't steal the money and when questioned again by prosecutors clarified the $6 million had been transferred to another Swiss account held by Stanford's other bank on Antigua. Davis said the money remained there until it was seized by authorities in February 2009.
Scardino presented to jurors a memo Davis wrote in February 2009 ahead of a meeting with potential defense attorneys in which he praised the bank's operation's, called Stanford a "gifted individual" and wrote there was "never a hint of criminal intent."
Davis said when he wrote the memo, for a meeting both he and Stanford were to attend, he still hadn't come clean about the fraud.
"I was still lying at this time," he said.
Scardino also accused Davis of being a tax cheat and underreporting his income in 2006 by as much as $1.2 million. Davis said he's paid more than $120,000 in back taxes.
While being questioned by Scardino, Davis would often answer questions requiring only a yes or no answer with longer responses where he added that both he and Stanford took part in the fraud. This upset Scardino and eventually prompted U.S. District Judge David Hitter to have the jury step out for about five minutes while he spoke with Davis.
"Mr. Davis you are going to have to answer just the questions either attorney asks you. ... No more volunteering," Hitter said.
Davis was to resume testifying on Wednesday as prosecutors continue to question him again.