Stanford Day 13: Davis leaves the stand

By Patsy R. Brumfield / Daily Journal

HOUSTON, Texas – Former Stanford CFO James Davis completed his testimony today, with perhaps an ex-creative employee now living in China to answer questions about the collapse of the financial empire.
Tuesday, prosecutors said they likely will wrap up their case Monday against fallen empire chief R. Allen Stanford.
Stanford, 61, is accused of masterminding a $7.2 billion Ponzi scheme on investors in certificates of deposit bought through his Stanford International Bank Ltd. in Antigua. He blames Davis for a decades-long fraud while Davis says he was just following Stanford’s mandates to cook the books and siphon off $5 billion from depositors without their knowing it.
Davis says the billions went to pay Stanford company expenses and to support his boss’ playboy lifestyle and risky business ventures.
(Below is a running account from the courtroom. Please excuse typos and glitches likely as I type quickly. For all courtroom reports and trial news, read it all Follow me on @realnewsqueen, and use hashtag #stanfordtrial to see all the running comments about the trial.)
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10:09 a.m. – (Prosecutor William Stellmach questions Davis, who once lived near Baldwyn, and worked from Stanford offices in Tupelo and Memphis.)
Scardino – Talking to judge about Stellmach, exhibit and questions to witness. We finally realized the exhibit isn’t designated as government’s. Govt. put a non-in evidence exhibit out there. Trying to say Davis authorized Swiss bank $$ to Bank of Antigua account. Objects that they knew it wasn’t in evidence, and in questioning him First ask for mistrial
Scardino – Then ask to instruct jury to disregard anything they saw or heard about Exhibit 2011. If we hadhad chance to examine, would have objected.
STELLMACH – Document was produced in discovery. Identified by defense as exhibit. Defense #16,311 is the same.
SCARDINO – First time I’ve heard of it. I will take a look. (He’s looking at it) Apparently it is one of ours. Doesn’t change fact that they most prove it up.
STELLMACH – They were going to offer. Claim they were sandbagged/
STELLMACH – Shown to us on our way up to examine this witness. No notice. Form them to get on a high-horse, and to claim about this? If want to exclude it, … I propose to offer it as defense exhibit.
SCARDINO – Big difference in showing it to them,… they didn’t do that, Just put it up there.
STELLMACH – Now offer it as an exhibit. Clearly bank record certification. No queston to authenticity. They were sitting on a document.
scardino – GOVT HAS NO AUTHORITY … money transferred to receiver.
stellmach – THEY CROSSED WITNESS. Claim he pocketed the money. WE intend to show otherwise.
JUDGE – HEARD ENOUGH. What about instruction?
STELLMACH- I could deal with it to question witness and go back over it.
JUDGE – Just thinking plenty in record now. YOUR TENDER of 2011, denied. Moving into his exhibit 16,311 DENIED. Let everything stand as it is. If you think exhibit instruction is appropriate, I will give.
STELLMACH – If I am not allowed to present exhibit, I would like an instruction. What is it?
Instructed to ignore Govt. Exhibit 2011.
10:17 – STELLMACH – Scardino asked you about being a coward?
DAVIS – RECALL, (Also said being a govt witness scared the devil out of you?) Yes sit.
(If you believe as Scardino implied, that what you wrote here was true? Did you believe it to be true about your conduct for Stanford, would you have pled guilty and faced 30 years in prison?) No sir. (Recall on cross, asked about destruction of laptop, thumbdrive?) Yes sir. (Also about it on direct q?) Yes. (How soon did you tell govt you destroyed them?) Soon, very soon. (Shows piechart from Miami meeting – on computer thrown into pond?) Yes. (But looks like it was recovered?) Yes. (But Stanford data from bank, depositors… weren’t destroyed?) No sir.
(Other records destroyed?) No sir. (Scardino says you got a pass on destruction?) Recall. (One count?) Yes, one count of conspiring to obstruct an SEC investigation. (So, question about responsibility for destruction?) I have. (Scardino suggesting that no one else has destroyed documents?) Yes.. (Asked about Juhrt, Lopez, Holt?) Yes. (Didn’t ask about STanford?) NO sir.
(Aware of bonfire outside Stanford home in Carib to burn docs?) Yes. (Another one?) Yes. (Q from Soc Gen to Bank of Antigua acct you had signatory power. What Happened to it?) Don’t know. Under control of Bank of Antigua. (Once went in, was any taken out?) OBJECT – (After $6M transfer, did a single penny come out?) No sir, it didn’t as far as I know. (As of Feb. 20, 2009, money still there?) It was.
(Also asked about consolidation?) Yes. (You were shown exhibit … chart and docs about consolidation … recall this?) Yes sir. (Zoom in …what does that say?) internal draft for discussion only, Feb. 6, 2009. (So as of then, had it taken place?) No (Ever took place?) No sir. (Never off drawing board?) Never. (So all companies on this chart, to be grouped under SIBL, were any ever transferred to bank?) No sir. (So by time organization stopped in Feb 2009, who still owned them?) Mr. Stanford. (Exhibit – shows spreadsheet tracking money to Mr. STanford’s personal companies?) Yes. (These on consolidation?) Yes. (Under total balance?) That’s the total over time as of date of the report that had been sent to these companies on behalf of Mr. Stanford. (Not their value? CD money flowed to theM?) Correct. (Were these companies repaying debt to bank?) No, not to my knowledge. (What about commercial airlines?) They closed, stopped operating. (How did these businesses sty open?) Funneled money on daily, weekly , monthly from CD accts. (SIBL CD money loaned to STanford? Total 2007?) $5.97 million
(Four yeaRS LATER….?) OVER $2 BILLION (DAILY OUT OF CD MONEY?) In excess of $1 million. (Consolidation, if it had taken place, who would have owned those companies?) Mr. Stanford. (Under plan, assets of bank?) Bank holding. (But what about loans to RAS?) Still exist. (Money gone but would consolidation have wiped out loans on paper?) It would have wiped it out. ($2B in CDs to RAS?) Yes. (So, consolidation, bank would have gotten companies with huge losses?) Yes sir.
(Described plan as smoke and mirrors. Why?) Because the CD money that actually was spent on various projects over the years was reported to the public.. prosective investors and current one way and when in actuality was being handled the opposite, through meetings and presentations … all put togetehr for promoting CD sales, to tell people that their money was safe. They were bamboozled by smoke and mirror show. A drama.
(Were depositors ever told bank would repay through private companies?) No sir (Don’t worry about CD money because bank will repay you with a restaurant?) No sir. (Talked about proiposed consolidation… asked about total assets.. here shown as $10.3 billion. Is that accurate?) No sir. (Why?) Because the third line from top shows assets at fair value. It reflects the erroneously inflated numbers previously reported on financial statements. Prob about $5.5-6 billion. (So, total assets … included reported assets of SIBL?) Yes sir. (End of 2008, how much was missing from those assets?) $5.5-6Billion
(Would consolidation allow bank to repay depositors?) NO sir. (What meant by smoke and mirrors?) Yes. (Also questions about your contact with RAS. Scardino suggest he was absentee owner, not in contact with you?) (Said he had finger on the pulse, you did?) Yes sir. (Exhibit – address book?) That’s his address book. (Turn to your entry …Tupelo ofc, number of other numbers, home, ofice fax, home fax, 2 mobile numbers, other Tupelo number, additional numbers, your assistant’s number … about 14 numbers for you?) Yes sir. (Did he ever have any problems finding you to get status of organization?) Not that I know of.
(Recall Scardino talked about damnation … saying that all we can do is take your word for it, no other evidence? True?) No, follow the money. (If we take your word, look at exhibit – for what depositors were told about CD investments?) It’s written in that brochure, very clearly. (Annaul reports RAS signed, you too sometimes?) Yes. (Exhibit – spreadsheet? Take your word for it?) No sir, that’s not myself only, on this paper. Other accoutants knew of it. (That the loans were ever disclosed, your word for it?) No sir. (Exhibit – 2008 weeklly summary. Your word for it?) No sir. ( Document …top part, your word that RAS was copied on tracking reports?) No sir.
(Not going to march through Soc Gen records … but your word that 10s of millions flowing out to RAS personal accounts?) No sir. (Recall about $990K loan you took at end of 2008, early 09?) Yes sir. (Scardino asked at length?) Yes. (More than an hour?) Yes. (In 2008, what was rate CD money RAS taking out daily?) $1-1.5 million (Also asked about a boat on your pond in MS?) Yes sir …. DAVIS GETTING VERY EMOTIONAL ON STAND. RED FACED. HE’S LOOKING DOWN, DRINKS WATER. TRIES TO COMPOSE HIMSELF.
Yes, I remember. (Gtv exhibit … ) (Your boat was 12-14 feet long?) Yes. (Exhibit – Do you recgnize it?) It is a yacht of Mr. Stanford, it was. (Exhibit – pic of yacht. How big?) Believe it was 100 feet. (Compares with your boat?) (Fair comparison for what you got and what he did?) No sir. (Well his yacht was 100 feet. your boat was 12 … is that a fair reflection of how this was done?) Yes fair of how this was divied up>
(This is govt exhibit – document, letter from you to Blaise Freedli at Soc Gen for 731 acct. shows number of transfers… what were amounts and to whose account they went?) $8M to RAS, $8M to RAS, $6M to RAS. Total $22 million. (For one day?) Yes. Sept. 6, 2003. (One day in CD money from Soc Gen?) Yes. (You in 20 years?) About $14 million (So RAS withdrew more in one day wthan your entire participation in fraud?) Yes.
SCARDINO – (Money to capitalize other companies?) Yes, (Money to you went into your pocket?) Yes. (Millions … that Stanford got $22 M in one day, you got $14M… it wasn’t used for business purposes?) Yes in my pocket. (This exhibit money … was used to RAS accts to capitalize these companies, right?) Yes, coming from CD deposit holders. (Not a fair comparison with your money and his in one day?) Yes, a fair comparison.
(Stellmach asked you that RAS loans were not disclosed. You said familiar with international reporting standard?) Yes, familiar. OBJECTION – (He did talk about loans disclosed) OVERRULED – (So, loans not disclosed… did not have to be disclosed under international standards, did they?) I don’t know. (During Stellmach … he asked you question and you pointed at me. Remember?) I was pointing to the defense table at the other end. At RAS. (Trying to communicate with him?) I was pointing toward Mr. STanford. (Would you be willing to talk to his lawyers?) You can talk to my attorney OBJECT – SUSTAINED
(You said, follow the money… when you pointed?) I did. (Established you were CFO, one in charge of following the money?) Yes, at Mr. STanford’s direction. (You put phony numbers down? You did that?) I did put phony numbers at his direction. (Address book … showed lots of numbers for you?) Yes. (He could have gotten you any time?) Yes, and vice versa. (You said had hard time reaching him, that’s the issue?) Yes sir. (You kept a book too?) (You kept a ledger of everything that happened, didn’t you?) I had entries in books, yet? (Where is it?) OBJECT – BEYOND SCOPE .. SUSTAINED
(Did you keep data, do you ahe that/) OBJECTION – SUSTAINED. (Talked about … govt exhibit … discussed line that talked about fair market value. Remember?) Yes sir. (Stelmach referred to line… financial assets at fair value? Phony response? Who put number there?) Accounting department, under my instructions to prepared consolidation. (Smoke and mirrors … numbers weren’t real … numbers you put down?) I put them down, yes. (Number is real… $8.329 billion … put on the document?) It’s not real, inflated based on our fraud. (Instructed people to put i?) Yes. (Where are books that show the real number?) Well, the books are where they are. I don’t know where they are at this point in time.
(Exhibit – {this is JD’s talking points to DC lawyers} …. WHICH IS IT.. consolidation. Say it nver got off the ground, but you’re talking here about more than a concept. You had meetings to talk about it before implemented?) You do. (What you were trying to do?) Yes (Exhibits … plans and ideas about how consolidation was going to work. Wasn’t concept. People rolled up sleeves and putting on paper?) Concept prior to putting on paper. (Going on for some period of time.. you said for years in talking points?) Yes (Talked about $2B loan to RAS, you said wiped out? You told him?) It would not be there if consolidation took place. (Wiped out?) Yes. PASSES WITNESS
Stellmach … questions about international accounting standards.. back to 1999, that RAS fully paid the loan, who made decision to take dlsclosure out?
DAvis – RAS
(Ever discussed international standards that allowed him to take it out?) No sir (Ever say it’s OK, standards to allow us to say one thing and do another?) No sir
(Also asked on re-cross, exhibit – about Sept. 26, 2003 transfer from Soc Gen slush fund 731 … to RAS’ different personal accounts… $22M … were transfers in 731, were they accounted for within spreadsheet to track loans to him?) No sir. OBJECT… (Scardino suggested that it was used to capitalize companies … Soc Gen isn’t in spreadwheetO OVERRULED.
(So amt borrowed in spreadhseet… include Soc Gen transfers? $2B does it include RAS money from Soc Gen or was Soc Gen in addition to $2B?) It was in addition. ($2B to his companies, then total amount from Soc Gen?) Yes, separately.
(Also asked about real accounting records to back up the assets. This spreadsheet was one record, right?) Yes sir. (Also records kept by Memphis group for what Tier?) Actually cash and securites, Tiers 1 and 2 (Records tracking 25% bank assets, what depositors told?) Yes. (Also records tracing real estate transactions… bank bought and inflated?) Yes sir. OBJECT – SUSTAINED. (RECORDS EXIST?) Yes. (Shown ins tatements?) No
(Were depositors ever told that 75% put in inestments they wre never told?) Never
SCARDINO – (Remember what RAS told you to put in records? … Stellmach asked about what RAS instructed you to do or not?) I don’t recall. (Regarding loans to shareholders.. talking about it for days? When Stellmach asked about what RAS said to tell you to do about disclosing loans to share holders?) Yes, remember subject (You told Stellmach what RAS told you to do or not? We’d have to believe you to believe what RAS did or didn’t do? You don’t have any documents about his instructions to you, do you? Believe you?) Yes sir.
STELLMACH – Money in Soc Gen was CD money?
Davis – Yes. (Must we believe you?) No. (Lots of records… $2B to RAS companies, never disclosed? your word for it?) No sir.
SCARDINO – (FAzel talking to him … note from assistant … ) You kept track of the numbers, didn’t you?
Davis – Yes sir
(When put them down, did you ask RAS to put them down or disclose them?) No sir
GOVERNMENT – Stellmach, Mr. Davis, who ran the company?
Mr. Stanford, (Who owned the company?) Mr. Stanford. (Who profited from conduct?) Mr. Stanford.
11:01 – SCARDINO – If we want him recalled, we want him available. If we put on evidence, we want to recall him, if necessary. Not asking if he can stay, only available to come back.
JUDGE – I’ll determine if I agree for him to return. Excused, free to leave.

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