Stanford Ponzi Scheme Prosecutor Begins Closing Arguments

R. Allen Stanford “flushed” investor money away on failing businesses, yachts and cricket tournaments, a U.S. prosecutor told a jury in Houston.

If Stanford’s customers knew what he was really doing with their money, they wouldn’t have bought certificates of deposit issued by his Antigua bank, Justice Department lawyer William Stellmach said in federal court today at the close of the financier’s five-week investor fraud trial.

“The truth is that he flushed it away,” Stellmach said.

Stanford, 61, is accused of leading a $7 billion international fraud scheme funded through the sale of CDs issued by Stanford International Bank Ltd. Some of the CDs were sold in the U.S. by the Houston-based securities firm, Stanford Group Co.

“There was no deceit and this man is not guilty,” defense lawyer Ali Fazel said in his closing argument.

Stanford faces 14 criminal counts, including charges of mail fraud and wire fraud that carry maximum sentences of 20 years in prison, obstruction of a U.S. Securities and Exchange Commission investigation, and conspiring to commit each of those crimes.

The financier has been jailed as a flight risk since being indicted in June 2009.

His attorneys rested their case on Feb. 27, telling U.S. District Judge David Hittner that their client wouldn’t testify in his defense.

Jury Instructions

“The defendant is presumed by law to be innocent,” Hittner told the jurors today as he gave them instructions. The jury began deliberations just before 4 p.m. local time.

For closing arguments, Stanford was in the packed courtroom dressed in a navy blue double-breasted suit, a light blue shirt and, for the first time since the trial began, a necktie. As Stellmach addressed the jury, Stanford sat at the defense table taking notes and occasionally shaking his head.

The prosecutor outlined for the jury what he called the three big lies of the alleged scheme: Stanford was making safe, liquid investments; clients’ money was protected by banking regulations and regulators; and Stanford had sufficient assets to repay investors.

“For him, the bank was his own personal ATM,” Stellmach said.

Banking Disclosures

During the trial, Stanford’s lawyers argued that his banking disclosures complied with internationally accepted accounting standards. They also contended he had sufficient assets to honor his commitments until being sued by the U.S. Securities and Exchange Commission in February 2009.

The federal judge overseeing the SEC case in Dallas ordered a freeze of Stanford’s assets and appointed a receiver to marshal and liquidate his holdings to repay investors.

“He sank billions to keep afloat his businesses in the Caribbean,” Stellmach said, describing the businesses as ’’money pits.’’

By 2008, the bank owed investors $7 billion that didn’t exist, Stellmach said. “Mr. Stanford had been digging that hole for years with his lavish lifestyles and loser companies.”

$2 Billion

Stanford took $2 billion in loans from the bank, the prosecutor said, hypothetically enough to build Houston’s Reliant Stadium and buy its resident National Football League franchise, the Houston Texans, and still have enough money to own the city’s National Basketball Association team, the Houston Rockets.

“It wasn’t OK for Allen Stanford to lie, cheat and steal for 20 years,” Stellmach said in his conclusion. “Allen Stanford is guilty beyond a reasonable doubt.”

Fazel then told jurors there are gaps in the “evidentiary bridge” built by prosecutors and cautioned them not to leap to the conclusion that Stanford is guilty.

“This case isn’t about Reliant Stadium, it’s not about Rockets and it’s not about the Texans,” Fazel said at the outset of his closing comments. “It’s about assumption, presumption, guesses and reasonable doubt.”

“Just because you’re indicted with something doesn’t mean you’re guilty,” Fazel said.

After about 35 minutes, Fazel yielded to his co-counsel, Robert Scardino, who joined in criticizing the prosecution. Scardino challenged the credibility of former Stanford finance chief James M. Davis, whom he described as the government’s “key witness.”

Baylor University

Davis, whose relationship with Stanford traces back to when they were Baylor University roommates, pleaded guilty to fraud-related charges in 2009 and agreed to cooperate with the prosecution. He testified against Stanford for five days.

“The key witness in their case has got to be one of the biggest liars you ever heard about or read about,” Scardino said of Davis. He told the jury that to believe the government’s case against Stanford, “you have to believe Davis.”

Scardino echoed Fazel’s theme that investors weren’t deceived and had been told they were taking a risk.

“It’s the bank’s money, they can invest it however they wish,” Scardino said. “It just wasn’t the depositors’ business to know how it was invested.”

The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).

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