Stanford Defense Rests Without Calling Financier to Testify

R. Allen Stanford opted not to take the witness stand at his criminal fraud trial in Houston before his lawyers rested their defense.

Prosecutors said they had no rebuttal witnesses, so U.S. District Judge David Hittner in Houston yesterday told the jury to return to the courtroom tomorrow. Lawyers will have two hours each for closing arguments and instructions to the jury will take an hour, the judge said.

“The case is over,” Hittner told the jury. Opening statements were delivered Jan. 24.

Prosecutors have accused Stanford of running a $7 billion investment fraud and misleading investors about the nature and oversight of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd.

Stanford, 61, has maintained his organization had sufficient holdings to repay investors and was in the midst of consolidating its disparate entities when he and the bank were sued by the U.S. Securities and Exchange Commission in February 2009 and their assets seized.

Defense lawyers have also said Stanford’s former finance chief, James M. Davis, was responsible for day-to-day operations.

Davis in 2009 pleaded guilty to three felony charges and testified for the prosecution at the trial, saying he knew Stanford was committing fraud and didn’t stop it.

Fraud Examiner

The last defense witness was a certified fraud examiner, Leonard H. Lyons, who told the court that neither he nor prosecutors had a complete set of Stanford business records necessary for making a complete assessment of the companies’ financial condition when the SEC sued.

Lyons, who said he is a former Resolution Trust Co. investigations chief, testified that the federal government evidence shared with the defense didn’t include records from Stanford’s non-U.S. businesses.

He told defense lawyer Robert Scardino he would have needed that information as an expert to draw a conclusion about the financial well-being of Stanford’s enterprise. Lyons said the U.S. government records lacked documentation from Stanford businesses in Antigua, Mexico, Peru and Venezuela.

He also disputed the accuracy of government charts displayed to jurors that appeared to show the Stanford organization sustaining mounting losses from 2003 through 2008, contending they failed to reflect the value of intangible assets.

‘Poof’

“Companies have value, they just don’t go away -- poof,” Lyons said.

The witness, who works for the accounting and auditing firm Marcum Group, also said he hadn’t had sufficient time to review all 15,000 boxes of corporate records obtained by the receivership appointed in the SEC enforcement action.

On cross-examination, he quarreled with prosecutor William Stellmach, who challenged Lyons’s claim that Stanford had publicly disclosed more than $2 billion in loans he had taken from his Antiguan bank.

Lyons said he believed the money was reinvested by Stanford in other businesses he owned. He also said the lack of complete corporate records meant neither he nor the government could fully trace Stanford funds.

The witness also said he was unaware a prior trial witness had testified that he lost almost $2 million invested with Stanford that he had unsuccessfully tried to withdraw before the businesses were seized by the U.S.

Billing Rate

Lyons told the prosecutor that he billed $375 an hour and said he had logged 1,200 to 1,400 hours on the Stanford case.

He told a defense lawyer that it was his opinion the government’s case is based on conclusions and speculations.

Outside the courtroom, Stanford’s mother, Sammie, said she had advised her son to use his own judgment in deciding whether to take the witness stand.

“I’ve been going through this for three years,” she said. “It’s never easy.”

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

To contact the reporter on this story: Andrew Harris in Houston at aharris16@bloomberg.net

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

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