Stanford Finance Chief Davis Meets With FBI, SEC, Says Lawyer

By Laurel Brubaker Calkins, Erik Larson and Alison Fitzgerald

March 26 (Bloomberg) -- James M. Davis, accused of helping R. Allen Stanford swindle investors in an alleged $8 billion Ponzi scheme, met yesterday with investigators, his lawyer said.

Davis, 60, the chief financial officer for the Stanford Financial Group of companies, met with representatives of the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation at the SEC’s Fort Worth, Texas, offices, his lawyer, David Finn, said in a phone interview. Last month, Davis filed court papers asserting his right against self- incrimination and refusing to cooperate with the SEC.

Regulators last month sued Stanford, Davis, Stanford Chief Investment Officer Laura Pendergest-Holt and three related companies, alleging they orchestrated a “massive ongoing fraud” through the sale of high-yield certificates of deposit by Antigua-based Stanford International Bank Ltd.

“Jim is fully and actively cooperating, and trying to get investors who lost their money some help,” said Finn, a former federal prosecutor and Texas judge. “He’s absolutely devastated, because he knows a lot of good people got hurt.”

Finn wouldn’t comment on when or how Davis plans to answer the SEC’s allegations that he and Stanford controlled the alleged scheme, in which early investors were repaid with funds taken from later investors. Davis was “actually the whistleblower” who alerted regulators to the fraud after Stanford’s senior executives met in Miami in early February to prepare for SEC questioning, Finn said.

Whistleblower

“After that infamous Miami meeting, he was the one who blew the whistle and brought the house of cards down,” Finn said.

As part of his effort to locate and recover Stanford assets, Ralph Janvey, a court-appointed receiver, asked a judge to force the law firm Hunton & Williams LLP to turn over all records of its work for Stanford International Bank, according to papers filed March 24 in federal court in Dallas.

The Richmond, Virginia-based law firm rejected a Feb. 24 request to ship the receiver original files and billing records for Stanford’s foreign businesses, including the Antigua-based bank and operations in Ecuador, Panama and Grenada, according to Janvey.

“The Hunton & Williams law firm has declined to relinquish possession and control of records that are part of the receivership estate,” Janvey said in the filing. “Information regarding valuable assets belonging to the bank and other offshore Stanford entities may be found in the files.”

The law firm and one of its Miami-based lawyers, Carlos Loumiet, questioned Janvey’s jurisdiction over Houston-based Stanford’s foreign records. Janvey, appointed to recover assets to repay victims, said Hunton & Williams is providing only the requested documents for Stanford’s U.S. businesses.

Law Firm Response

In an e-mail yesterday, Hunton & Williams spokeswoman Kim Perret said the law firm is cooperating with Janvey and will seek a court ruling on the dispute.

“There are legal issues regarding jurisdiction and client privilege that must be resolved before we proceed further,” Perret said. “We have agreed with the receiver’s counsel to ask the court to rule on these issues, a process that will protect all parties involved.”

Stanford and Davis haven’t been criminally charged in connection with the alleged scheme. Pendergest-Holt was charged with obstructing the investigation and released on $300,000 bond. Her lawyer, Dan Cogdell, said she is innocent and was cooperating with investigators until her Feb. 25 arrest.

Legal-Fees Lawsuit

Pendergest-Holt has sued Lloyd’s of London for legal- defense funds under Stanford’s officers and directors insurance policy. A federal judge in Dallas froze the personal assets of Stanford, Davis and Pendergest-Holt when they were sued by the SEC. Finn said Davis is paying his legal fees with funds provided by Davis’s “family, friends and others in time of need who come to try to assist someone they really care for.”

“I can tell you the funds are absolutely, positively not derived from anything associated with this case,” Finn said of his legal fees. “So, any investor who is concerned that I’m being paid with dirty money, that’s not happening.”

Finn said he couldn’t explain why Davis invoked his Fifth Amendment right against self-incrimination under the U.S. Constitution on Feb. 21 and later abandoned it. Finn said he didn’t represent Davis until last week.

Stanford filed papers last month refusing to testify and asserting his right against self-incrimination. He hasn’t named a defense lawyer.

$250 million Recovered

Paul Pelletier, a principal trial attorney for the U.S. Justice Department, told a U.S. magistrate last month that investigators and Janvey have been able to locate about $250 million of the $8 billion in assets the Stanford entities publicly claimed. Allen Stanford is accused of skimming as much as $1.6 billion in personal loans from the companies, of which he was the sole shareholder.

Kevin Callahan, and SEC spokesman, Justice Department spokesman Ian McCaleb and FBI spokeswoman Shauna Dunlap declined to comment.

The case is SEC v. Stanford International Bank Ltd., 09-cv- 00298-N, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com ; Erik Larson in New York at elarson4@bloomberg.net ; Alison Fitzgerald in Houston at afitzgerald2@bloomberg.net .

Last Updated: March 26, 2009 00:01 EDT

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