Stanford Jury Box ‘Skunk’ Prompts Fraud Trial Judge to Issue Instruction

R. Allen Stanford, after a month of trial over allegations he led a $7 billion fraud, lost his bid for a mistrial based on a prosecutor’s improper question that defense lawyer Ali Fazel called a “skunk” in the jury box.

U.S. District Judge David Hittner in Houston instructed jurors to disregard the question yesterday by Justice Department attorney Andrew Warren, which implied that audit records from Stanford’s Antigua bank were destroyed to hide wrongdoing.

“By putting that skunk into the jury box, they’ve created a huge problem for me,” Fazel told the judge after the jury was led from the courtroom.

Stanford, 61, has been on trial since Jan. 23 on charges he led an investment fraud scheme centered on the sale of certificates of deposit by his Antigua-based Stanford International Bank Ltd. Stanford maintains he is innocent.

Warren’s question came on the second day of his cross- examination of defense witness Morris Hollander, an accountant with the global auditing firm Marcum Group LLP, who has testified that the Stanford bank’s annual reports showed no evidence of fraudulent activity.

Computer records of the bank’s auditor, C.A.S. Hewlett, were destroyed after he died and Stanford was indicted, Warren said in open court.

Question Withdrawn

“Are you aware that the firm erased the hard drives?” Warren asked Hollander, drawing Fazel’s objection and motion for a mistrial, the sixth such defense request in the trial.

When the jury returned, the judge told them the prosecutor’s question wasn’t evidence and was withdrawn by order of the court.

Hollander later testified that in the absence of the underlying accounting work papers, the Stanford bank reports issued to its investors could as easily be said to be accurate as inaccurate.

“Isn’t relying on what the auditor says exists, sort of like asking your children if they did their homework?” Warren asked.

Hollander replied that while he trusted his children, “they never asked me to audit their homework.”

Asked then if he was placing the same amount of trust in Hewlett, the auditor responded, “That’s a professional trust, yes.”

While Fazel’s co-counsel, Robert Scardino, told jurors at the outset of the trial that Stanford would testify, the financier hasn’t taken the witness stand.

Judge’s Order

Hittner yesterday told the defense lawyers they must turn over to prosecutors any records they intend to rely upon in questioning Stanford, if he testifies, at least 48 hours before the start of his testimony.

Stanford sustained head injuries in a 2009 inmate-induced jailhouse beating. He later developed an addiction to prescription anti-anxiety medication necessitating almost nine months of treatment at a federal prison hospital in North Carolina.

Hittner, after dismissing the jury for the day, told attorneys for both sides yesterday that evidence of Stanford’s medical condition would be inadmissible at the outset of any testimony by the defendant. That ruling, he added, could be revisited depending on what Stanford is asked and says.

The judge also said he would hear arguments on Feb. 27 over whether statements Stanford made while in custody and deemed legally incompetent to stand trial could be used against him if he takes the witness stand.

The case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

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

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

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