By Laurel Brubaker Calkins - Jan 31, 2012
A $330 million promissory note signed by R. Allen Stanford was introduced at his criminal trial as evidence that the financier secretly borrowed money from his bank to build a lavish “Stanford World in Antigua” and lure rich new clients.
“Rich people do not get impressed very easily,” Stanford said in an undated video clip shown to his jury today in Houston federal court. “They have to go back literally blown away, saying ‘I have a confidence and a trust that I will do business in that part of the world.’”
Stanford, videotaped while speaking to a gathering in Antigua, said his goal in building the private airplane hangar, restaurants, cricket grounds and banking facilities on 20 acres surrounding Stanford International Bank Ltd. was to convince the “richest people in the world” it was safe to invest there.
Stanford, 61, was indicted in June 2009 on charges he led a $7 billion investment fraud based on certificates of deposit issued by the Antiguan bank. He’s accused of 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the allegations. If convicted on the most serious charges, he could be imprisoned for 20 years.
Assistant U.S. Attorney Gregg Costa asked government witness Arnold Knoche, a former president of Stanford Development Corp., if he knew where the money came from for “Stanford World in Antigua.”
‘Personal Resources’
“He told me he had his personal resources, that he’d take care of it,” Knoche testified in the second week of trial. “I always wondered where the money was coming from because it was a huge amount.”
Knoche testified that Stanford never said he used depositors’ funds on real estate developments in the Caribbean or elsewhere. He also said he never suspected illegal activity during his 16 years with Stanford’s organization. Knoche said he resigned in 2003 because he was tired of the constant travel.
Costa showed Knoche a copy of a Stanford International Bank promissory note for $330 million signed by Stanford personally in December 2003. Knoche said he wasn’t aware Stanford had borrowed any money from his bank, and said he would have been concerned if he had known.
“The depositors at the bank were told there were not loans being made,” he said. Knoche said promotional materials for the bank’s CDs said the funds were placed in conservative, liquid investments and that the bank “has never made and will never make loans.”
Annual Reports
After reviewing Stanford International Bank’s annual reports for 2002 and 2003 on the witness stand, Knoche concluded that Stanford’s promissory note wasn’t disclosed to depositors.
Prosecutors contend Stanford skimmed more than $1 billion of depositor money for personal use, including funding the Caribbean real estate ventures, several regional airlines, a private fleet of airplanes and yachts, and a collection of unrelated private equity investments.
The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
By JUAN A. LOZANO Associated Press
HOUSTON February 1, 2012 (AP)
A former employee for Texas tycoon R. Allen Stanford testified Tuesday that the financier lavishly spent tens of millions of dollars to develop property and businesses on the Caribbean island nation of Antigua, one time replacing the hardwood floors at his bank because they weren't the right color.
Arnold Knoche, who worked 16 years in Stanford's real estate development company, testified Tuesday at the financier's fraud trial that his former boss spared no expense on such projects as a private airport hangar, cricket grounds, an athletic club, two airlines and a dock facility for his boat.
Prosecutors allege Stanford masterminded a fraud in which he bilked investors out of more than $7 billion in a massive Ponzi scheme centered on the sales of certificates of deposit from his bank in Antigua. Authorities allege he used depositors' money to fund his businesses, many of which failed, as well as his lavish billionaire lifestyle.
Stanford's attorneys contend the financier was a savvy businessman whose financial empire was legitimate. They have suggested James Davis, the ex-chief financial officer for the financier's company, is the real culprit behind the financial fraud. Davis has pleaded guilty in the case and is expected to be called by prosecutors this week.
Knoche said Stanford was partial to granite and marble finishes and that one time the financier replaced the hardwood floors in his bank in Antigua because he thought "they were too light a shade." Stanford had wanted all of his buildings in Antigua to have the same color hardwood floors, he said.
"He was very upset. He said, 'This shouldn't have happened,'" Knoche said.
Knoche, who eventually became president of Stanford's real estate development company, said he grew concerned about where the money came from for these construction projects, which were very expensive because they were built quickly and most of the materials for them had to be brought from outside the island.
Knoche said he stopped asking Stanford about the source of the money because he "refused to provide information."
"It seemed there had to be some limit to how much money he had," he said.
But when questioned by Robert Scardino, one of Stanford's attorneys, Knoche said any concerns he had about the source of Stanford's funding did not prompt him to quit. Knoche said he left Stanford's company in 2003 because he was traveling too much for work.
"What he built there improved the island considerably?" Scardino asked.
"Yes," Knoche responded.
In a video shown to jurors, Stanford could be seen talking to staffers about how he was willing to "spend millions and millions of dollars" to develop Antigua so he could create an environment that would "literally blow away" potential investors his company flew on corporate jets to the island nation.
"We are growing our business with high net worth people and high net worth people are not easily impressed," Stanford said in the video. Prosecutors did not say when the video was taken.
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