After lunch: Davis details alleged fraud, weeps on stand about his part

By Patsy R. Brumfield / Daily Journal

3:07 P.M.
HOUSTON, Texas – Just before the lunch break, former Stanford CFO James Davis began to tell about the looming dire financial straits for Stanford International Bank Ltd and that impact upon the entire empire.
He said an inner-circle meeting was called in mid-February in Miami to figure out what do to about crashing CD sales and a depositor run on the Antigua bank in the midst of a harsh financial crisis worldwide.
The group in Miami met three days until their leader, R. Allen Stanford, agreed to come from St. Croix, Virgin Islands, and lead them “out of the Wilderness.” Meanwhile Davis said he’d showed the group about the existence of the secret Tier 3 “money hole,” which was billions in money Stanford allegedly siphoned out of the bank for his own personal and commercial uses.
“They were shocked,” Davis told the jury, judge and courtroom. He said he expected that reaction as they considered how to address subpoenaes from the U.S. Securities and Exchange Commission for detailed information about SIBL assets.
(Below is a running account of the trial’s Day 11 first afternoon segment, likely to get a break mid-way and go until 6 p.m. Please excuse the typos and glitches likely as I type fast.)
• • •
1:15 p.m. – (Davis still questioned by prosecutor William Stellmach)
(Back to pie chart for Miami meeting, before RAS showed up. JUDGE – KNEW Tier 3 existed, just didn’ tknow what was in it?) Davis- correct. (You explained how you came up with these numbers… before, what had they been led to believe about assets?) Same style and content of Tier 2.) Nothing about real estate, private equity, RAS loans… no sir. (Execs at meeting – anything different of Tier 3 than depositors or advisers told?) No. (When you showed and they were shocked? They said shock?) They did. (About notes to RAS, $2B …what was essence of what they said?) They were taken back in a negative way that notes receiveable from RAS, that 51% Tier 3 at least was real estate. (prvate equity?) In lesser degree, yes. (Did anybody cry?) Several people cried. Bogard – very next morning he reacted by sitting down, getting ready and broke down in sobs, in tears. (Didn’t say they were inflated assets?) No sir
(After presentation by you, what happened next?) Essentially RAS finally arrived after that. Middle of day. (What happened?) He sat down, I said this is what’s reported this morning. I put chart up, explained section by section, what had been shared. Everyone was still there. (RAS said?) He took the fllor, I sat down. Just as Jim has shared in this chart. (Did he say just learned?) No, said he was responsible for htis. It’s his fault, He’s very sorry. (Say international standards allowed him to say one thing to depositors and do another?) Don’t recall that. (Ever say that?) I don’t recall him saying that.
(RAS say anything else?) He said that is, in fact, the truth. And then beyond tht, there’s actually much more value reported in chart. (More than $6.3B in Tier 3?) Yes, real brick and mortar assets worth more than depicted in this chart,yes. (Remember any questions about SIBL statements, inaccuracies in them?) Rodriguez, pres of bank. He asked if his financials were correct. The Bank’s. (Who reponded?) I believe I did. Told him that the financials were not correct. (RAS contradict you?) NO sir. (At any point in presentation, in Tier 3, did RAS ever contradict anything you said?) No … (RAS arrives, what happens at meeting?) A lot of tears, remorse. (Who?) I suppose RAS, he was hugging necks, tears. (Next?) Meeting broke for the day and resumed Friday morning. (Before resumed, speak to RAS?) I did. (Where?) In hotel lobby, bar/reception Intercontinental near office. (Did you tell him you were going to do this?) I don’t believe I did.
(What told him you would do?) Configure what was in Tier 3, for presenters at SEC meeting. (To identify loans?) NOt specifically. (Or content of Tier 3?) No, I did not. (That night with him in lobby bar of hotel, did he say anything about earlier in the day?) Yes, he said I was naive and I had melted. Jim you melted. If I’d been there, I’d never have let you done that. (You said.) You weren’t here. (Then, another meeting Friday?)
(Who at that meeting?) Same group. (Bogar sobbed?) Yes. (What happened?) Mr. Sjoblum got up, walked around and put his hands on Bogar’s shoulder, said a prayer. (RAS show up?) He was there. Friday. (Decision about next steps?) Some steps shared by Lena Stinson. (Who is she?) Compliance officer, global group, put her over brokerages too. Stanford employee. (Which company she worked for?) SFG Global, St. Croix. RAS owned it, entirely. (What did …OBJECTION?) (Company ??) SFG Global or Co. or both. (You worked for?) Stanford Financial group. Services to entire affiliated group of Stanford companies.
(Stinson proposed?) That financial statements would have to be re-stated backwards. The years impacted .. to show that Tier 3 had taken place. (JUDGE – WHAT MEANS RESTATED?) (Why Tier 3 impacts this?) This is the basic accounting fraud – OBJECTION – SUSTAINED (Financials by bank until this moment – explained accurate or not?) I said they were not. (Stinson said?) To re-state them accurately. (Means to do what?) Earlier statments of bank, the numbers in balance sheets etc would have to be changed to reflect the truth. (Then who told?) REgulators, for one, investors most importantly. (CD depositors?) Yes. (So going back, saying here are new statements?) Yes.
(Talk about selling CDs until it was corrected?) Yes, Said can’t sell any CDs at this point. (Sjoblum say?) He actually concurred with Ms. Stinson. JUDGE – You say everyone present, except you and RAS, …. items were included but not value up there. Davis – lacking value. JUDGE – People making suggestions didn’t know they values were off? Davis -yes, sir probably. (Sjoblum said ?) To do forensic auditor to get to bottom of Stanford Financial Group Ltd. financials. Forensic is regular auditor but more specific to uncover or detect fraud that might be taking place.
(Stinson, Sjoblum make recommendations. What RAS say?) He wasn’t supportive of points made. (Ultiamtely what happened?) CD sales ceased. Those after fact were returned. International sales continued. (Forensic audit?) No. JUDGE – Percentage mix in U.S. and foreign CDs? DAVIS – About 20 percent U.S. to the whole. (Any decision to go forward about SEC testimony?) Yes. (Rodriguez and Holt to testify?) Yes, that was the plan. (On Friday, decision?) Yes. (Who made it?) Sjoblum and Alvarado’s recommendation, decided that Laura Holt would go. Rodriguex said he was not going. (Why?) He could not speak to SEC after learning what was in Tier 3.
(When did Holt speak to SEC?) On Tuesday, 10th. (Did she?) Yes. (Speak with her before?) I did. (Called her?) Night before. (Why?) Well, I wanted to see if she got there safely, how she was doing. Didn’t want her to perjure herslef. On other hand, didn’t want her to describe Tier 3 as seen on previous Thursday. (Why not?) Because this was an accounting fraud and what was reported was just the opposite, it was a lie. It was our lie. Lies. (Told Holt to say?) I told her to tell them what she knew about, Tiers 1 and 2. (Not to talk about Tier 3?) Yes.
(Did she mention RAS?) She said that she wanted to talk to RAS, promised to meet her Friday evening and he didn’t show up. Trying to speak to him before testimony. Never returned her call.
(Did she testify?) Yes. She told me. She gave me a recap. Told them in Tiers 1 and 2, about Stanford Investment Model. Said they would have to speak to me, RAS about Tier 3. (Where were you?) I flew to Nashville and met my wife. She was at needle art show. Drove to our home. (Speaking to RAS over weekend?) Yes, conversations and texts. (What discussing?) For one, finding funds to honor the withdrawal requests of clients. And discussing muy coming back to Miami that week. (While at home, did you do anything about evidence, computers at home?) I toss computers and flash drive/media into the lake in front of my house. (Info on them?) Contained spreadsheets. personal drafts of letters. information on the Oracle system that tied out companies together. (How soon after cooperations began, when shared?) First meeting I had with authorities.
(Did you go back to work?) NO sir. Judge – computers retrieved? Davis – I believe they were. (Still speaking with RAS?) Finding money to honor withdrawal requests of clients – CD production, interntaionally, my coming back to Miami, which I did on Wednesday of that week. Calling from my home in Northeast MS.
(In Miami?) Went to Hotel and met with RAS. We discussed a number of subjects, some I shared about flying to Washington, D.C. on Friday to meet with some attorneys. (Did that happen?) We did. RAS and myself. (Why?) Consultant to D.C. to refer him to an attorney and me. (Last time saw RAS?) Wednesday of the following week, 18th of Feb.
(Did he ever tell you that because bank was selling CDs, the information in marketing materials or statements didn’t have to be accurate?) No sir. (Exhibit – bank disclosure that RAS fully repaid $13.5million loan to bank?) (When made, discussing it?) RAS said it had been determined by thenchief counsel Suarez that $$ was being spent … (No, my question was what RAS said why it had to be made that it was repaid?) Because it didn’t look good to have a footnote to have bank owner with loans, in terms of selling CDs to public.
(Getting paid how much?) $65K per year plus bonus. (Increased?) Ultimately $900K base. Equal bonus. (Loans?) Yes, I did. December 08, January 09. Got his OK to take $$ from bank?) Yes. (Exhibit – shows cell phone with text message on it … says?) I would like to draw … December or November … OBJECTION – PROVE IT UP (REcognize the phone?) I wrote it. (What a picture of?) My Iphone… November last 2008. Sent to RAS. SAys ,…. I would like to draw 880K, not thru payroll but as conventional loan into a company. Tax otherwise eats it up in lieu of next bonus. On notes of baldwyn businesses … can go thru Venture Capital.. half now, half January. (Response?) Texted me … He approved it. Withdrew money fro the bank.
(What happened to money?) Put into businesses in a town close to where I live, Baldwyn MS in a renovation project. (Anything happen to them since?) They were seized bythe receiver in this case? (Kept any?) No sir. (Home?) Seized. (Bank accts?) Seized. Live in Michigan. Jus completed work for a fruit farm. Have social security and small pension. (Ever calculated earned with RAS?) $14Million over 21 years.
(Did RAS make any donations to churches or charities for you?) $500K to my church.
(Besides all that, receive any other money or gifts from RAS?) No. (Skim any from accounts?) No. I always went through Mr. Stanford. (Over $2B misappropriated by the scheme you pleaded guitly to?) DAVIS LIPS QUIVERING….. YES YES (Where did it go?) The billions? Mr. Stanford and some went to myself (said last part very quietly) $14 million