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.
Showing posts with label loans. Show all posts
Showing posts with label loans. Show all posts
Friday, 24 February 2012
Wednesday, 15 February 2012
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.