Almost final segment: Davis admits running negative balance at F&M Bank in Baldwyn

By Patsy R. Brumfield / Daily Journal

6:00 P.M.
HOUSTON, Texas – Defense attorney Robert Scardino went after former Stanford CFO James Davis when the government ended its direct examination of their star witness against R. Allen Stanford.
Scardino moves from pit bull to sarcastically friendly as he tries to break Davis’ earlier testimony that at Stanford’s direction, he helped him continue a 20-year scheme to use CD depositors’ money in Stanford International Bank Ltd. to fund Stanford’s playboy life style and numerous risky business ventures.
(Below is a rolling account of Monday’s final segment of testimony – questioning of Davis by Scardino. Please excuse the typos and glitches likely as I type fast as I can.)
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4:15 – Judge Hittner – I need to talk to the defense attorneys about something. Tell jury we’ll be with them shortly.
Judge tells Davis he can get up and move around while this conversation goes on at the bench. Davis moves off stand and turns his back toward Stanford.
4:29 – Jury returns to courtroom.
(Scardino per Davis – microphone check) (Mr. Davis, jump back to cell phoneloan – Do you remember … the date you took the photo of the cell phone that showed about asking RAS for loan?) Don’t recall the date. (Year?) Shortly after Nov. text message, so 2008? (Cell phone you took … appears in exhibit, remember type?) Yes. IPhone, I believe it was mine. (Still have it?) Yes. (Where?) In my travel bag, in Houston. (Bring it tomrrow to court ?) I guess. (What year Iphone was it?) Was probably first generation. (Appears in exhibit jury has seen?) Yes, that’s the phone.
(Have you ever tried to take message off, erase it and replace it with another message?) No sir. (Back to the money asked for RAS to advance to you… exhibit refers to money for purpose. Remember what?) Yes. sir. (What for?) I would like to draw … (What does that mean?) I meant a conventional loan. $880K (What you ended up borrowing?) I believe so, it was in two pieces, one Dec. one January. (When told govt. if you accessed it?) Don’t know. (Anyone say that’s what happened?) Don’t know. Didn’t see any. (Did you see if you got the money?) I know I got the money. (Did you look at docs to see that you got it?) I don’t recall.
(Remember Stellmach on direct examination… to bank acct., questioln?) Don’t remember that question. (… continues with phone text… ) not as payroll but convention into a company. (Are docs in travel bag?) They would not be in Houston. (Where located?) I don’t know where they are. (Tried to find them?) NO sir. (Did govt. ask you to produce those loan docs?) They did not ask me that. (text….) Tax otherwise eats it up. (Did you declare it on income tax?) No sir. (Did you file 2008 return?) No sir. (2009?0 No sir. (Is part of deal that you don’t have to file?) Attempted to file but records were seized and don’t know where they are. (Someone helping to prepare taxes? Paying them how?) Yes, haven’t paid them any funds. (Tax preparer hasn’t been paid?) No. (Just helping you out?) Ihave not been billed. (IRS in touch with you about 2008?) REsponded, (Tell Govt.l that IRS is knocking about tax bill?) Yes. ( Could create a problem if doesn’t chracterize propertly?) Yes.
(More on text…. in lieu of net bonuses or whtaever. ) It’s a followup to a verbal conversation with Mr. STanford. (Next line…. For notes payments and service on Baldyn bus. True?) Yes. Went to me, I owned those businesses. It went to me,because I owned them. (Loaned to business or you?) It went into a business. (Documents to verify? Or take your word?) Docs exist, all docs seized. (text … And RE Affairs .. what is that/) REal estate. (To pay business and real estate affairs?) Personal related to the businesses I mentioned in Baldwyn. I owned some real estate in Baldwyn. Not business, it was real estate purchased. (Say here … asking us to believe RAS OK/s it?) It is what it is, yes sir. (Any documents to back up need for $$ for real estate? Showed RAS documents?) He was aware of my business affairs in Baldwyn.
(What was Baldwyn business?) Several piece of real estate in downtown, they had businesses located in them. Art studio/gallery, interior design company… I owned. Started them 2002-3. (Money?) From salaries and wages, everything from CD holders. (Saiid didn’t steal?) Clarified that for you, I lied, I stole. (Asked RAS for … Also, working capital for first six months of 2009) For the businesses (Asking $$ with these businesses of yours, yours alone?) I think you’ve got it. (Owned with somebody else?) Other than wife. Restaurant 50/50 with Laura Holt, had an affair with Ms. Holt. (Live in Baldwyn?) Yes. (With wife?) Outside, in the country. (Go into business with woman you’re having an affair?) Yes, affair 2001, 2002, 2003 (Did you deceive your wife?) Yes sir.
(Go back to text message… ) It can go into Venture Capital, split into two parts. (Why Venture? It had assets?) Yes, it did. (You were CFO and knew where money was?) Yes, I also knew where money wasn’t. (Where money exists?) Yes, I committed fraud. (Two transactions…. in loan docs had lawyer prepare?) I don’t believe in agreement in two traunches. (You said got the money… where did it come from?) I don’t recall. (Not important to remember where or see where?) From Houston office, technically. (How transferred to you?) By wire transfer. (Explain what that is to jury?) It’s an order to a bank to send money. It’s done by wire, telephonix to another bank… one bank to another bank. (Not currency?) No. (It’s paper transaction?) It’s registered on paper. Actual transfer of currency.
(Text… say it’syour decision… acted immediately?) Action took place weeks later. (You instruct a bank to wire the money to another bank?) Maldonado did. (Was just like money?) Yes. (Like CD holders, it had value?) I don’t understand that. (When Mr. STanford’s Venture Capital company…. what bank used for those?) Possibly could be Trustmark Bank. We had 30-40 bank accounts. Can’t remember every one. (Instructed bank to wire almost $1 million out of bank/) Yes. (Was it STanford?) In this case, yes. (Have any docs to bank that RAS gave permission to take almost $1Million out of bank and give it to you?) Didn’t provide bank, no. (You didn’t have to… they knew you had his authority?) Yes. (Asked Maldonado?) I don’t know where doc is.
Davis – has hearing aids on. Just needs normal tone and not jumping around. I catch it all or otherwise will ahve to ask you to repeat it. JUDGE – We have extra equipment for that.
(Uncomfortable up there there?) I’m relaxed, go ahead. (Doc would show that you asked Maldonado, to verify, it’s in hands of receiver?) Doc and computer records. (Know if Assit. U.S. attorneys tried to them those docs so we wouldn’t have to take your word for it?) Believe they could get it. (Telling jury that it wasn’t you but Maldonado who instructed the bank?) It was my doing, wrong … OBJECT (Telling jury that it was you who made instructions for wire transfer?) Yes, sir I’ve already said that. (Remember, Stanford Venture Capitalists …. goes to flip chart … SVC, did you draw this? Told jury what?) Was a shell holding company. (Is it fake?) Real company that holds certain other companies and passes other funds through.
(You indicated it was a shell, to facilitate a fraud?) No, it’s a legally granted company, articles etc. but it’s a pass-through company. (So shell isn’t bad?) No, it’s a company not having employees, shell… (Got almost $1Million?) Got money butnot certain it came from it, but don’t know for sure. Got it from an account from Stanford Financial. (Purpose of asking RAS for money was to help with Baldwyn MS businesses?) Yes. (No other reason?) I don’t think so.
(Said SVC had not employees?) I don’t think they did. (Did it have employees?) Not to my recollection. (You were the CFO?) I was. (Explain CFO?) Chief financial officer in charge of finance and accounting, generally, in a company. (What you did?) Among other things, yes. (Particularly of?) Stanford Financial Group and Stanford International Bank. (Access to all of the accounting information?) Local controller had most of the details. (You keep track of the money, right?) CFO responsibility down the chain. (Track of investments?) It’s in that chain. (You basically knew what was really going on with these companies?) Yes, generally I did. (You were conduit for that info, more than anyone else in the company?) No, wouldn’t say that. (More than Kuhrt?) He had same access as I did. Lopex reported to me. Kuhrt reported to the global organization run by Mr. STanford.
(Title CFO indicates you’re in charge?) Bank and SFG, not Global. (Money to fund real estate and other things? Making $900K per year, plus bonuses? Yes) 2008 made in excess of $2million? (Includes money you stole or not?) Think it includes it. (No tax returns for 2008 or 2009?) No. (How much more than$2M?) More than $2M and less than $3M. Maybe $2.4 million. ($2.5million?) Could have been. (Can’t keep track?) I do when I have my records. (Receiver’s got your records)
(How about 2007?) $1.8/$1.9M (2006?) $1.6M considered it a lot. (A lot of expenses?) MOney put into those Baldwyn projects you’ve so well covered. One was with Ms. Holt. (How many companies were there?) Believe there were five. (Well, did you make a bad investment in Baldwyn?) Did i make a bad investment? I would say so, yes. (2008, real estae wasn’t doing too well, was it?) Generally, no. (One problem Stanford was having was with real estate. Generally in U.S. wasn’t doing too well.) No sir. (Did you need money to help fund them? Were you in bad shape or save any of that money you were making?) … six questions there. (Exhibit – Farmers & Merchants Bank … see what that is?) Yes I can. (What is it?) Statement from F&M Bank where had an account styled Davis Holdings. PO Box 70, Baldwyn MS. (Your acct?) Yes. Hd others. Prob six or severn. (All U.S.?) Yes. (Ever had one with Guardian in Montserrat?) Don’t think so. (With SIBL in Antigua?) I don’t think so. (All U.S.?) Yes, I believe so. (No Swiss?) No sir.
(This acct, used for?) account for administrative and accounting company Davis Holdings. CAsh would flow from this acct into other businesses in Baldwyn. (Wouldn’t it ahve been eaiser just to put money into their own accounts?) Possibly. (Set up like Stanford, money came in one and went out to others?) Learned from the master. (Money in and money out – let’s look at these. Statement shows… ) Nov. 28, 2008. Balance negative $58K. (In 2008?) Yes. (Aren’t you the guy making $2.5million?) Yes sir. (Your acct. is minor over $58K?) In negative… not too long. (When got negative needed way to put money in it?) Yes. (Easy way, it was from Allen Stanford?) IN this case, yes. (Spent $2.5M?) All gone, apparently. Went into investments in Baldwyn. (Docs to verify that?) They exist, don’t have them personally.
(Nov. 28, 2008 … keeps in negative. Keep writing hot checks… $37.69…. ?) Yes sir. (Explain that?) Hd overdraft provision granted by the bank. (Overdraft provision with the bank. Didn’t keep money in money market to cover them?) No. (In such bad shape, it stays negative all the way to the bottom on 12/10 negative $73K … then $5K hot check … negative $78K, right?) Yes sir. (You caused somethingto happen on next line?) Yes, approved by Mr. Stanford, I did. (We must believe it was approved by Stanford?) I’m telling the truth, also on IPHone. (Wire from JPW, Stanford Venture?) That’s what it says $390,000. Correct. (Write check for $270K?) A debit, yes. Deposited into one of the other companies. (Not to funnel money from Stanford to your pocket?) Yes sir. ((exhibit – F&M Bank … your bank?) Yes sir. (One of your banks?) Yes sir. (Davis Holdings LLC …top line commercial checking acct… same we looked at?) It is, yes sir. (Shows last balance 12/31/08 $1,524.98?) Right. (Didn’t take long to go through $330,000?) No sir.
(Soon after, in negative again… check puts you in negative once again?) Yes, sir (Wire from SVC …?) 1/14/2009 (Any question in your mind, that when got money came from SVC, now?) No question, clear. (Do it in same manner for month before to send instructions to send $600K into your acct at Farmers & Merchants?) Yes sir. (That’s $990K?) (What did… writing checks on it?) Yes sir. (One of last …. what did with that money?) Spent it, invested in Baldwyn businesses and spent it. (Needed the money, didn’t you?) Yes sir. (In fact you alwasy needed money, didn’t you?) Yes, everyone needs money. (More than RAS paying you?) At that point, yes sir.
(Already padi $14M and were writing hot checks?) Yes got $14M over 21 years. (Good motive to steal money, isn’t it?) Idon’t understand that. (Find you’re broke at end of 2008… needed more?) At end of day, it was taken from CD holders. (You took this money from Mr. STanford? You took it?) At his approval, I did. (Have to take your word?) No sir.
( Go back to exhibit – how much needed $880K?) Said took $990K? Loan documents reflect the $990K
(How long wearing hearing aids?) Several years. (Age?) 63. (Young man) Thank you sir.
(Govt Exhibit – document that some lawyer finds… in this case, govt., want to bring it in to show the jury… now it’s evidence …This is document, exhibit, that Stellmach talked to youa bout. Rememer it? What is it?) SIBL annual report 1999 cover. (What is annual report?) Annual report at end of fiscal year of a company. Sums up transactions, financial, for the business. (Prepares?) Accounting people. (Access to information?) Correct. (Something required?) I would say most boards of directors require it. If oversight agency, they require it. (Did Stanford board require it?) Yes, (You were on board. Who else?) RAS, James Stanford, … he is RAS father, was chair, then chair emeritus. (You said fraud going on in 1999… back to board. James was chair …?) Not in 1999… (Who else on board..?) Also Bill Goswick, a businessman from central Texas. Knew him 3-4 years before I was on board. Was in Auto sales, cattle ranching. (Who else?) Don Caldwell, was a judge. Met him and knew him. Knew him 3-4 years. (Around for a while, how old?) Late middle age. (Who else?) Kenneth Allen, was a barrister in Western Indies. Equivalent to our attorney in U.S. (Stanford board in 1999… say fraud up and running in 1999?) I know it was … we were… RAS and myself . (James Stanford, was he a crook?) I don’t know. (Say you and RAS conducting the fraud in 1999 – annual report run by board of directors, right?) Part of it. (James a crook?) I don’ tknow, not to my knowledge. (How bout the judge?) No, but RAS and I were. (British lawyer? Crook?) No, RAS and I were. (Of all on board only two were crooks?) Yes.
(Exhibit – from annual report… look at top line…) Profit and Loss Statement , end of 1999 … captures revenues less expenses and result is profit, hopefully. (Operating income, one item … topics, numbers for 1999 … shows figures?) It’s a lie. It’s my testimony that it’s a lie. (Operating profit … $3.8M? Who prepared this page of report?) Stanford Financial Group accounting dept., approved by me and RAS.
(Where numbers came from? Who gave Lopez these figures?) From accounting transactions each month. (Thought these numbers are a lie?) The numbers are intact through … (YOU said numbers are a lie?) Yes, part of them are correct. Overall effect is a lie. There is no profit. (Who phonied up that number?) I did at Mr. STanford’s direction. (Guy who phonied it up is YOU?) At RAS’s direction. I’m tellling you the whole truth. (BACK IN 1999, the guy who put his hand on the page with the number was you?) JUDGE – YES OR NO …. that’s jury’s decision. Answer yes or no. If you can’t, let me know.
(No one else?) No. (Lopez?) No, (Kuhrt?) at my direction. (You came up with phoney number?)Yes. (Doyou have docs that would have the correct number?) No sir. (Where are they?) I don’t know where they are? JUDGE – AT ALL? Davis – yes sir… accouting records in computer, wherever it is. (Did you work with govt to find real records for jury?) I’m sure they did. (Discuss it with anybody?) I was asked questions for threeyears. I answeredthem. (Anybody fro FBI ask you where real documents are?) Not in those words, no.
(No govt lawyer asked you that to prepare?) No (Wht did with real docs? Threw them in lake?) No real documents beyond what we discussed in courtroom. Tier 1 and Tier 2. (Next page … bottom… approved on behalf of the board, says?) Yes sir. My signature.
(Move to another topic – You testified …about a computer and thumb drive you threw in a lake?) Yes sir. (Who’s computer?) Mine. (Was it a laptop or desktop?) Two, laptop and a tower. Personal compjter and laptop corporate computer. (Laptop, like this?) Yes sir. (You took it and … threw it in lake?) I did. Standing on the shore. (Near?) In front of my house. (Lake in front?) Seven acres, mine and my wife’s. 12-foot alumnim fishing boat. (Seond computer? Like the kind sitting on the floor?) JUDGE – Like aCPU? Davis -yes, your honor. (How big was it? Shows it’s about 2 feet off ground, about 12 inches. Kept at house?) Yes. (Store information, Screen?)
STOP – GOING TO 6:05