Over $3 billion in transactions not properly disclosed, he says
R. Allen Stanford's Caribbean island bank loaned more than $3 billion to Stanford and his companies without properly disclosing the loans, a witness for Lloyd's of London testified Wednesday in a hearing on whether Lloyd's should pay the jailed Stanford's legal fees.
Mark Berenblut, a forensic accountant with NERA Economic Consulting in Toronto, said international reporting standards require that banks report transactions with related entities. He said the Stanford International Bank in Antigua loaned $1.7 billion to Stanford personally and $1.8 billion to companies he controlled.
Berenblut also testified that he reviewed e-mails and financial transactions that showed the bank reverse engineered financial statements — adjusting the numbers to achieve desired results.
The bank is central to the government's criminal case against Allen Stanford and his co-defendants. Indictments allege that they lured investors into a $7 billion Ponzi scheme by offering above-average interest rates on certificates of deposit issued by the bank.
Stanford and two other former executives of Houston-based Stanford Financial Group want U.S. District Judge Nancy Atlas to order that Lloyd's continue paying their legal fees under an insurance policy that covered Stanford Financial's officers and directors. The hearing is expected to last through the week, and Atlas told the parties not to expect an immediate decision on the legal fees.
Lloyd's had been paying the fees but contends the policy doesn't cover defense against money laundering charges, which are among the accusations in indictments against Stanford, founder of Stanford Financial Group; its former accounting chief, Gil Lopez; its former global controller, Mark Kuhrt; and its former chief investment officer, Laura Holt.
Holt has settled with Lloyd's, Atlas said Tuesday.
All four say they are innocent of the charges against them. Stanford has been jailed for more than a year as a flight risk. The others are free on bail.
Stanford Financial Group's ex-finance chief, James M. Davis, was charged separately, pleaded guilty and is cooperating with prosecutors.
He figured in testimony Wednesday by Alan West-heimer of Houston, a forensic accountant hired by Lopez and Kuhrt. The two have invoked their Fifth Amendment rights against self-incrimination, but Westheimer testified about interviews he did with them.
He figured in testimony Wednesday by Alan West-heimer of Houston, a forensic accountant hired by Lopez and Kuhrt. The two have invoked their Fifth Amendment rights against self-incrimination, but Westheimer testified about interviews he did with them.
According to Westheimer's account, Stanford bought land on several Caribbean islands for $63.5 million in 2008. Giselle James, a former Stanford employee called as a witness by his lawyer, Robert S. Bennett, testified that Stanford planned a project called Islands Club containing 30 exclusive estates.
According to Westheimer's testimony, Davis told Kuhrt and Lopez to value the land at $3.74 billion on company books, saying he based that figure on recent comparable sales.
In their interview with Westheimer, "Lopez and Kuhrt were very clear about the red flag this raised," West-heimer testified.
They told Davis they would need a real estate appraisal and advice from outside legal counsel before they recorded the higher valuation in the company's financial records, and Davis told them he would take care of the matter, West-heimer said.
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