Stanford's Attorneys Say Ex-CFO Was Behind Fraud

Published February 8, 2012 12:45AM (EST)

HOUSTON (AP) — Attorneys for jailed Texas tycoon R. Allen Stanford suggested to jurors Tuesday that letters, emails and other documents show it was not the financier but his top money man who was actually behind an alleged Ponzi scheme that took billions from investors.

During relentless and sometimes contentious questioning of James M. Davis, the former chief financial officer for Stanford's companies, the financier's attorneys claimed it was Davis alone who altered financial statements and requested that bribes be sent to an auditor as part of efforts to hide the alleged fraud at Stanford's Caribbean bank.

They also accused Davis of lying in his testimony, in which he accused Stanford of orchestrating the fraud, in order to get a reduced sentence. Davis pleaded guilty to three fraud and conspiracy charges in 2009 as part of a deal he made with prosecutors in exchange for a possible reduced sentence.

"You better say something here so (the prosecutors) will go to bat for you," said Robert Scardino, one of Stanford's attorneys.

"I'm here to tell the truth," said Davis, who is the prosecution's star witness and has testified for four days.

Prosecutors allege the 20-year scheme centered on the sales of certificates of deposit, or CDs, from the bank on the island nation of Antigua and bilked investors out of more than $7 billion. Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate and that he could have paid back investors if authorities hadn't seized his companies.

Authorities allege Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle, and bribe regulators and auditors. They also say he lied to depositors by telling them their money was being safely invested.

Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.

During cross-examination, Scardino accused Davis of being the sole person who created documents that inflated the value of the bank's holdings to $6.3 billion when in reality it was about to collapse. Davis said the figures were falsified under Stanford's direction.

Scardino also showed jurors letters prosecutors allege were requests made by Stanford for payment of bribes from a secret Swiss bank account to the outside auditor of the financier's Antiguan bank. The letters were signed only by Davis, who worked for Stanford for 21 years.

"Mr. Stanford's signature doesn't appear on that?" Scardino asked.

"No sir," replied Davis.

On a large drawing pad placed on an easel next to the witness stand, Scardino wrote some of the words Davis has used during his testimony to describe himself: liar, hypocrite, adulterer, fraudster and coward. The list stood next to Davis for much of his testimony Tuesday.

Scardino also accused Davis of stealing $6 million that had been transferred in December 2008 from a secret Swiss bank account held by Stanford.

Davis said he didn't steal the money and when questioned again by prosecutors clarified the $6 million had been transferred to another Swiss account held by Stanford's other bank on Antigua. Davis said the money remained there until it was seized by authorities in February 2009.

Scardino presented to jurors a memo Davis wrote in February 2009 ahead of a meeting with potential defense attorneys in which he praised the bank's operation's, called Stanford a "gifted individual" and wrote there was "never a hint of criminal intent."

Davis said when he wrote the memo, for a meeting both he and Stanford were to attend, he still hadn't come clean about the fraud.

"I was still lying at this time," he said.

Scardino also accused Davis of being a tax cheat and underreporting his income in 2006 by as much as $1.2 million. Davis said he's paid more than $120,000 in back taxes.

While being questioned by Scardino, Davis would often answer questions requiring only a yes or no answer with longer responses where he added that both he and Stanford took part in the fraud. This upset Scardino and eventually prompted U.S. District Judge David Hitter to have the jury step out for about five minutes while he spoke with Davis.

"Mr. Davis you are going to have to answer just the questions either attorney asks you. ... No more volunteering," Hitter said.

Davis was to resume testifying on Wednesday as prosecutors continue to question him again.

Stanford was once considered one of the United States' wealthiest people, with an estimated net worth of more than $2 billion. He's been jailed without bond since being indicted in 2009.


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By Salon Staff

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