By Patsy R. Brumfield/NEMS Daily Journal
HOUSTON, Texas – Ex-Antiguan bank regulator Leroy King won’t be at Sunday’s Super Bowl.
He’s fighting extradition to the U.S. as an indicted co-conspirator in the $7.2 billion allegations of a Ponzi scheme through Stanford International Bank Ltd. last based on Antigua.
On Friday, James Davis, former Stanford Financial Group chief financial officer, told a 15-member jury that his then-boss, R. Allen Stanford, repeatedly bribed King to keep the bank out of trouble or scrutiny as Davis and Stanford faked financial reports across the company’s history.
Twice, Davis said Stanford gave King tickets to the SuperBowl in 2005 and 2009.
Davis said Thursday that Stanford, King and another Antiguan bank official took a “blood oath” during a late-night “ceremony” in which they cut themselves to show their allegiance to one another.
King wasn’t the only one, Davis testified, receiving Stanford bribes funneled through a so-called Swiss bank slush fund fed by CD deposits.
Stanford’s longtime bank auditor, CAS Hewlett of Antigua, “had him over a barrel,” Davis told the court, saying Hewlett’s verification of bank reports was a crucial piece of keeping the house of cards together across some 20 years.
But, Davis said, when he called Stanford to say Hewlett was dead on Jan. 1, 2009 – just six weeks before announcement of a U.S. investigation into the CD sales – their longtime boss answered cryptically: “He’s the lucky one.”
Friday ended 10 days of federal court action against Stanford, who was arrested in June 2009. He’s been in jail almost ever since.
Also accused in the massive investor fraud were Davis, who lived with his family near Baldwyn after the mid-1990s, Baldwyn native Laura Pendergest-Holt, who became Stanford’s chief investment officer, two other Stanford executives and King.
Davis pleaded guilty to his part in August 2009 and seeks leniency from a potential 30-year sentence if his “cooperation” with the government proves substantial.
He likely will testify against Holt and the others when they go on trial in Houston in September.
Davis, who once worked out of Stanford’s Memphis and Tupelo offices, is considered the government’s most important witness as far as direct knowledge of Stanford and the details of the alleged scheme, which Davis claims existed even before he went to work for his Baylor roommate in 1988.
Looking frail but speaking firmly, Davis on Friday took jurors through a series of self-drawn diagrams to explain how money came to the bank from depositors, how it then went to Stanford Financial Group Co., then up to 75 percent into Stanford’s personal accounts to fund his lavish playboy lifestyle and to pay construction and operating expenses for perhaps nearly 100 of his private companies.
Thursday, Davis said he saw no way Stanford ever was going to fill “The Hole,” which is what they called that money. Stanford assured him they could grow the company fast enough to keep deposits high and respond to customer withdrawals when they occurred.
But in 2008, when the economy sharply turned down and CD investors wanted their money in unusually large numbers, the money dried up and the empire came down.
Stanford’s attorneys insist that if the U.S. Securities and Exchange Commission investigation hadn’t caused a court-appointed receiver to freeze all the assets, SIBL could have made good on all commitments.
Davis is expected to answer prosecution questions for another day or so, then likely will face a blistering attack from Stanford’s defense, which insists Davis was the one who ran the scam and that their client was too busy elsewhere to know what was going on.
On Friday, Davis said that in addition to massive loans to Stanford from SIBL, his boss also funneled some $130 million through the Swiss bank account, all off the bank’s books and away from the knowledge of bank officials, regulators, CD depositors and potential clients.
“Did Allen Stanford ask you to transfer these funds into his account?” prosecutor William Stellmach asked Davis.
“Yes sir, he did, every single one,” Davis said.
Did he ever repay any of this money, Davis was asked.
Perhaps as much as $20,000 was the answer, although at some point $132 million in a separate venture capital business was inflated to a value of $327 million, and the bookkeeping transfer made it look like money was returned as a payment, Davis testified.
He also said Stanford congratulated him and shook his hand the day Davis and attorneys completed the maneuver to look like Stanford was servicing his loans and not using them as income, something the U.S. IRS was looking at hard.
Davis said that he and Stanford faked virtually all bank profit numbers from the bank’s beginnings as Guardian International in Montserrat. The only exception was the necessary show of a loss after the 2001 terror attacks on the U.S. when world markets went into a tailspin.
Davis said it wouldn’t have looked realistic to report a profit then. But as time rolled on, the scheme came closer and closer to discovery.
At one time, an IMF auditor got so curious that Stanford had him pressured off the island by using derogatory report about him.
Stanford also sent a plane to Tupelo in late 2008, Davis said, to pick up a corrected report of fake numbers that first went to an examiner with the wrong date on it.