R. Allen Stanford was portrayed by his ex-finance chief, James M. Davis, as the mastermind and prime beneficiary of what prosecutors said was a $7 billion Ponzi scheme built on bogus certificates of deposit at Stanford’s Antiguan bank.
“Who ran the companies, you or Mr. Stanford?” Assistant U.S. Attorney William Stellmach asked Davis, who has been testifying under a plea agreement at Stanford’s fraud trial in federal court in Houston. “Who profited overwhelmingly from the conduct you described with the CD money?”
“Mr. Stanford,” Davis replied to both questions.
Davis identified a photo of an ocean-going sport yacht as one of several Stanford owned before regulators seized his assets on suspicion of fraud in early 2009. Davis told jurors yesterday he owned a small boat on the pond at his Mississippi farm.
“Mr. Stanford’s boat was 100 feet long; your boat was 12 feet long,” Stellmach asked Davis. “Is that a fair reflection of how this was all divvied up,” referring to proceeds each man realized from the alleged Ponzi scheme.
“Yes, that’s a fair reflection,” Davis told the jury. “Follow the money,” he added, pointing across the courtroom at his former boss.
Stanford, 61, has denied all wrongdoing and is fighting charges he misled investors about the safety and oversight of deposits at his bank. Prosecutors claim Stanford skimmed more than $2 billion to fund a lavish lifestyle and dozens of private companies that ranged from Caribbean airlines and real estate developments to cricket tournaments.
Stanford’s attorneys presented evidence during the five days Davis spent on the stand trying to paint the ex-CFO as a thief who stole millions of dollars from Stanford’s operations and ran the companies with little input from his boss.
“He had his finger on the pulse,” Davis testified yesterday, repeating previous assertions that Stanford directed him to falsify financial records, lie to Antiguan regulators and bribe bank auditors to conceal Stanford’s borrowings and keep investors’ cash flowing into Stanford International Bank.
“They were bamboozled by a smoke and mirrors show,” Davis said of investors who lost more than $7 billion through Stanford’s bank. “We reported to investors one way when in actuality their money was being handled the opposite way.”
Bribes to Regulator
Kalford Young, an Internal Revenue Service criminal investigator, also testified yesterday about banking records and internal e-mails he said supported Davis’s claim that Stanford bribed Leroy King, then Antigua’s top banking regulator, to conceal the fraud. According to the documents, Young said, Stanford gave King thousands of dollars in cash and club-level tickets to National Football League Super Bowl championship games.
Under questioning by Ali Fazel, another of Stanford’s lawyers, Young said he didn’t know why the financier would document such bribes with a paper trail Fazel described as “big enough for anyone and their mother to find.”
“Are you saying Mr. Stanford is bribing someone and copying his lawyer on it?” Fazel asked about e-mails in which Stanford discussed King’s tickets. “He’s bribing Mr. King, putting it on his credit card, and having the bill sent to his accountant?”
Stanford leaned forward at the defense table, grinning and chortling quietly as his lawyer questioned the IRS agent.
Under resumed questioning by prosecutors, Young testified that most white-collar criminal cases are built on paper trails. He said investigators obtained Stanford’s records after he lost control of the bank.
The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).