Stanford Used Threats, Charm to Influence Antiguan Regulator, Witness Says

An Antiguan judge who is also the island’s top banking regulator told the jury at R. Allen Stanford’s investment fraud trial that he repeatedly tried to influence the agency that oversaw his banking operations there.

Marian Althea Crick said she complained to Antiguan officials shortly after Stanford relocated his bank to the island until the financier was removed as a director of the agency that predated the Financial Services Regulatory Commission, where she is now chairman. She said it was “a clear conflict” to have the owner of a regulated entity participating in the agency that oversees the business.

“It reminded me of a saying we have at home,” Crick, a government witness, testified yesterday in federal court in Houston in the second week of the trial. “It was a classic case of the rat being put in charge of the cheese.”

Stanford, 61, who was indicted in June 2009, is charged with 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the charges.

Crick testified that Antigua’s prime minister told her Stanford wanted her fired after she had a series of public and private disagreements with the financier in the 1990s. She said Stanford even briefly took control of her agency while she was out of the country in 1998, until she got Antigua’s Attorney General to reverse the decision on legal grounds.

Month-Long Trip

In 1999, Stanford paid for office space and placed several of his employees on the official committee tasked with conducting a formal review of Antigua’s international banks, Crick said. In 2001, she said, Stanford urged government officials to send her and an auditor examining Stanford International Bank Ltd. on a month-long trip so that a different auditor could complete the bank’s audit.

Stanford tried charm when threats failed, Crick said. Once, Stanford unsuccessfully tried to upgrade her economy flight to first class for a British banking conference. After another disagreement, when she informed Stanford forcefully that she “was not a yes person” and wouldn’t rubber-stamp his requests, she said, “He held my hand, and looked me straight in the eye and said, ‘You remind me so much of myself.’”

When Crick resigned from the regulatory commission in 2002, she was replaced by Leroy King, whom Stanford is accused of bribing with millions of dollars and tickets to the National Football League’s Super Bowl championship games. When King was accused of complicity in hiding Stanford’s alleged fraud in 2009, the agency removed him and put Crick back in charge.

Crick was scheduled to resume her testimony today.

Negative to Positive

Yesterday, the jury also heard from a former research analyst at Stanford Financial Group Co. who said that Laura Pendergest Holt, former chief investment officer of Stanford International Bank Ltd., asked him to change negative investment returns to positive ones that could be shown to Allen Stanford.

Mark Collinsworth testified that Holt made the request in March 2008 after showing him an e-mail she said she received from Stanford. The financier was requesting performance results for part of the bank’s investment portfolio.

“She showed me the e-mail on her iPhone and said, ‘I’m going to forward this to you but I want you to make the numbers positive,’” Collinsworth, a prosecution witness, said during cross-examination. “I thought, surely she wouldn’t ask me to change negative numbers to positive numbers,” he told Ali Fazel, one of Stanford’s attorneys.

Holt, Davis

Collinsworth’s testimony may bolster defense contentions that Stanford grew increasingly reliant upon information provided to him by Holt and Chief Financial Officer James M. Davis, as the organization grew in size and complexity.

Holt was indicted on criminal charges and has pleaded not guilty. Davis pleaded guilty to fraud in 2009 and is cooperating with the U.S.

A lawyer for Holt, Dan Cogdell of Houston, was present for Collinsworth’s testimony yesterday. Citing a gag order imposed by U.S. District Judge David Hittner, who is presiding over the trial, Cogdell declined to comment on what Collinsworth said.

Collinsworth said he refused to make the changes and didn’t know if Stanford was presented the correct investment results at a meeting the next day.

“I was not going to lie to the owner of the company,” he said, adding that he sat silently at the meeting with Stanford and was relieved not to be called upon.

Collinsworth said Holt reassured the bank’s research analysts in a conference call designed to “neutralize” concerns about the safety of the Antigua-based bank’s portfolio after New York investment manager Bernard Madoff was arrested for running a massive Ponzi scheme in December 2008.

‘Very Good Salesman’

Holt told the analysts she had seen the bank’s entire portfolio “and I had nothing to worry about,” Collinsworth said. “Laura was a very good salesman. She could make you feel warm and fuzzy and stuff,” he said.

Collinsworth said he later came to believe that Holt’s claim the portfolio was performing well made little sense because she had said it was invested largely in real estate, private equity and hedge funds. The real estate market at the time was down 50 percent to 60 percent, and private equity valuations were dropping as well, he testified.

“My brain began to kick in a day or so later,” Collinsworth testified. “How can you make money on real estate going down? You can’t short real estate. There was a total disconnect.”

Hired Friends

Stanford never personally asked him to falsify numbers or commit any crimes, Collinsworth said. He said he also believed Stanford wasn’t aware that Holt and Davis had hired friends to fill key bank positions for which they were unqualified.

Davis hired one of his former farm hands as a commodities analyst and his preacher as an analyst for Middle Eastern affairs, Collinsworth said.

Holt invested some of the bank’s funds with a hedge fund run by her husband, a former personal trainer, Collinsworth said. Holt had pressure applied to get another senior bank executive to resign after she ended an affair with him, Collinsworth said.

“Would it be important for the owner of the company to know about these things so he could come in and clean house?” Fazel asked.

“Oh yeah,” Collinsworth replied.

“Is it very clear in your mind that Mr. Stanford relied on Mr. Davis and Ms. Holt to run the numbers side of the business when it came to SIB?” Fazel said.

“Yes,” Collinsworth replied.

Under questioning by Assistant U.S. Attorney Andrew Warren, Collinsworth said he had no idea how often Stanford spoke, met or exchanged e-mail with either Davis or Holt.

Tracking Data

He identified several e-mails the prosecutor showed to the jury as including attachments where Davis sent portfolio tracking data to Stanford from late 2007 to late 2008.

The Stanford bank’s investment holdings didn’t resemble traditional, well-designed portfolios, the witness said.

“When it is finished, it should be like a work of art,” said Collinsworth. Instead, the portfolio suffered from what he called “Noah’s Ark syndrome, where you buy two of everything, with no rhyme or reason, and you end up with a zoo instead of a well-designed portfolio.”

The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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