FRIDAY WRAP: Davis ends week for US v. Stanford

By Patsy R. Brumfield / Daily Journal

4:55
HOUSTON, Texas – Before the mid-afternoon break, former Stanford CFO James Davis began to describe mounting concerns that the U.S. Securities & Exchange Commission was sniffing around their doors.
It was about the U.S.-based sales program for certificates of deposit sold through Stanford International Bank Ltd. in Antigua.
In 2005, this inquiry apparently is the first documentation that someone thought what was going on was a Ponzi scheme.
(Below is a running account for the final segment of this week’s trial of R. Allen Stanford, Davis’ ex-boss who’s on trial alone for his involvement in a $7.2 billion scheme to defraud the CD purchasers.
For other running reports of testimony, written since the trial’s second week, when the Daily Journal began its reports, go to www.djournal.com and click on the Allen Stanford Trial News icon.)
Please forgive the typos and glitches likely when I type as fast as I can … patsy
• • •
4:15 – Judge says looking to end at 5 or close to it. (JURY GETS EXCITED.)
(Shellmach – think we’ll end right on time…. To Davis, back to letter from FSRC prepared with RAS and Alvarado … 2nd graph) (Says SEC doesn’t have any documentation. King responds by saying … ) FSRC extends to SEC invitation to visit offices to review what FSRC’s SIBL reports. As is customary with such a request, memo of understandiing to both must be entered into such a visit. Look forward to successful MOU… would form basis of working together.
(Did come time when talked about letter with RAS?) Yes. (When?) One other time, Feb. 2009. RAS said Alvarado and he had written the letter. (How came up) I shared with him that I had no faith in Alvarado in helping us with the fraud… Feb. 2009, and RAS said he had no faith in Tom Sjloblo, outside counsel. I said Alvarado isn’t doing anything but yelling and hollering, no resolution to our problems. He said MY God, Jim, Mauricio wrote the letter! (Mr. Alvarado?) Yes, letter of 2006. (Final days… Hewlett, bank auditor and accountant – had he been hired before you started with RAS?) Yes. (Did RAS say who hired Hewlett?) Yes, RAS.
(What did RAS say about selected Hewlett for bank?) Said saw his shingle hanging from office, that God had led him to Hewlett. (Explain why so fortunate?) Said he could rely upon him to audit the bank, GIB, and not ask too many questions. (Wht did Hewlett firm audit include?) Very similar to other certified auditors. He would verify the amounts listed on balance sheet and subsequent statements, with one excepetion. Not verify amounts in investment section in a comprehensive way. Did’t require financial statement from investment house or banks to verify amounts. (What info was he given about bank assets?) He was given the same info that was in promotional materials for the bank as well as govt. reports such as FSRC.
(But was he given any other to back up reports, like acct statements from money managers?) NO. (Did he ask for it?) Yes, he mentioned rquest for a number of years. (Did he ask you for them?) I said yes, you should have them and will. (How long?) 16 years. (Did Hewlett ever raise that topic and threaten to quit?) No sir. (Every year that Hewlett was auditor, did he issue an opinion in annual report that he verified assets of the bank?) Yes, he wrote it and signed it. (Ever told about $2B RAS loans?) No. (Ever given backup info for bank assets invested?) Yes, given info on all assets excluding Tier 3 items, “The Hole.”
(Did RAS talk about fees to Hewlett?) (Say paying anything else?) Yes, we talked about that. (What did RAS say about other payments to Hewlett, beyond audit fees?) He said payments above and beyond normal fees. Also in later years, made loans to Hewlett thru B of Antigua Ltd. and other payments subsequent to that loan. (Did RAS say any parrtiular acct. he was using to do that?) Talked to me about fees being paid, I talked to him about fees from slush account directly to Mr. Hewlett. (From slush fund, auditing fees or something else?) These fees were bribes, not recorded on books.
(Why transfers weren’t on books?) Basially becaise they were so far in excess of normal charges in those services rendered by Mr. Hewlett. (Davis… draw diagram of payments from RAS to Hewlett?) Davis … draws in flip chart…big circle at top, line down to another circle, line down to another circle. (Was Hewlett paid any other way? Draw that?) Davis puts separate circle out from top circle with line to it. …. (So, walk us thru) Yes sir. SIBL CD money sent two places to Hewlett … one normal audit fees from SIBL, visible. (In addition?) Yes … SIBL CD money to this Swiss acct… money went to Hewlett’s personal account in London, England, suburb.
(Why paid in 2 diff accounts?) Hewlett told me that he wanted excess amts in London because didn’t want revenue dept. of Antigua to be aware of them.
(What did RAS say payments from Swiss accts to Hewlett’s in London?) He didn’t tell me frequency. (Understand later?) I told him wire transfer on monthly basis. (Who negotiated?) I did, with RAS’ knowledge. Yes, he approve amts. (Exhibit – bank records Societe Generale …letter March 14, 2002… to Blaise Freedly, who was he?) Freedly was SG banking officer in charge of SIBL accts in Switzerland. (Also on SIBL advisory board and paid a fee for that?) Yes. (Amt to Hewlett’s acct in London?) Davis – correct something? You asked about BF being advisory… it was to SFG, not bank. Paid fee for that. (Look at letter … amount to Hewlett?) 80K Sterling… about $180K in U.S. at time.
(Another transfer …FEb. 26, 2003 – what say?) To increase Hewlett’s pay from 10K Sterling to 15K Sterling per month. (Who made decison?) I made and informed RAS. Approved. (CBG statement to Hewlett … U.S. ) Was $23,682 per month going forward. (Nov. 1, 2005 – to Hewlett?) $125K U.S. (Why?) Related to furnishings and information processing equipment that Hewlett adding to new offices. (Talk to RAS about Hewlett’s new offices in Antigua?) Yes. (Why he said?) RAS arranged for new offices to be built. (Why?) Said Hewlett should have higher profile in Stanford companies. Higher profile, bigger building, bigger staff. (Old offices?) Small, upstairs, In center in town on small street.
(Month later, Dec. 1, 2005 – transfer to Hewlett $125K. What?) Related to staffing increase for Mr. Hewlett … to staff new offices. (Higher profile, did RAS say why for bank’s auditor?) Yes. (What did he say?) There would be inquries in person an dotherwise, and potential clients and others came to island… a building would be necessarily advantageous to sales and growth of the company. (Feb. 10, 2006 doc – $100K to Hewlett acct in Virgin Islands, Why?) no sir. (April 30, 2007 – ? what there?) Wire transfer to Hewlett for 16K Sterling. (Discuss increase?) Don’t know that. (Another doc …email to you .. from?) Freedly’s associated at Soc Gen (Reponse from you May 19, 2008, copy RAS?) Want to change monthly debit amt to CAS Hewlett… increase to 20K STerling effective payment June 15 and monthly until further notice… James Davis.
(Why payment increased?) He hd Mr. Stanford over the barrel. (RAS say why?) We had … remember RAS said he was greedy but that payments should continue at this rate. Hewlett was greedy. (Aug. 27, 2008 … you to Freedly, amounts?) 60K Sterling to Hewlett’s London account. Two of that amount, separated by one week’s time. (Total 120K British pounds?) Was prob about twice that in U.S. dollars.
(Back to exhibit – letter from Montserrat Nov. 1990 – one reason for ejection was failure to appoint an auditor. Did he say he could replace Hewlett?) No sir. (Concern if Hewlett wasn’t available any more to sign off as bank’s auditor? Yes. (Tell you?) Concern was that without Mr. Hewlett, the fraud would be detected. Indispensible. (Ras about Hewlett physical condition?) Said he was concerned and ensure Hewlett to have physical exam in Houston, Texas. Houston Diagnostic Center. Don’t recall (who paid for it?
(Jan. 1, 2009, what happened to him?) Hewlett passed away. (How learned?) Call from Antigua individual. (Share with RAS?) Yes called him. (Tell him?) Said Hewlett had passed away. (RAS said?) He was the lucky one.
4:55 COURT RECESSES UNTIL MONDAY.