Stanford team targets Davis

By Patsy R. Brumfield/NEMS Daily Journal

HOUSTON, Texas – Government lawyers will try today to restore some credibility for their star witness in the $7.2 billion fraud case against fallen financier R. Allen Stanford.
That witness, former Stanford CFO James M. Davis, answered a barrage of questions Tuesday by defense attorney Robert Scardino Jr.
At one point, the former Baldwyn entrepreneuer admitted he’d lied to a Texas probate court and spent some $140,000 he repeatedly reported he’d invested for his two older sons from their mother’s life insurance policy after she committed suicide.
Monday, Davis admitted to five affairs and nearly 20 years of lies at the behest of Stanford, whom he claimed took billions from certificate of deposit investors through Stanford International Bank Ltd. in Antigua.
More than 20,000 investors worldwide lost their life savings and retirement funds when the bank collapsed in early 2009 under the weight of an investigation by the U.S. Securities and Exchange Commission. More than 1,000 of the investors were from Mississippi.
The trial began Jan. 23 and is expected to run six to eight weeks. Davis could complete his testimony today.
Across 11⁄2 days of cross examination, Stanford’s attorneys have tried to convince the federal jury that Davis was the one who committed the investor fraud and that Stanford knew nothing about it.
Attorney Robert Scardino Jr. also sought to convince the jury that Davis skimmed millions of dollars from the company as it was crashing toward oblivion in late 2008.
Scardino also pressed Davis to convince the jury that a 2008 plan to consolidate all Stanford’s disparate holdings, from broker/dealers and CD sales to yachts and an exclusive richest-of-the-rich Island Club could have worked, if the SEC hadn’t brought in a receiver, who shut everything down.
“It was still a fraud,” Davis kept saying repeatedly, insisting that every penny spent for his salary and everything else in the Stanford business came from CD depositors, who had no idea Stanford was using their money on risky ventures.
Late in the day, the defense turned Davis back over to the prosecutors, who aimed to restore Davis’ testimony about the alleged decades of lies he and college roommate Stanford told investors.
Scardino spent extensive time Tuesday pouring over Davis’ plea agreement with the government, repeating over and over again that Davis hoped for a leniency letter from prosecutors to Judge David Hittner, if Davis delivered “substantial assistance” in the case against Stanford and later against former Stanford executives, including Baldwyn native Laura Pendergest-Holt. They go on trial in September.
“Aren’t you afraid of going to prison for 30 years,” Scardino asked Davis.
“Sir,” Davis responded, “I would rather spend the rest of my life and be as free as I am now, than bound as I was the last 20 years with Allen Stanford.”
Davis told Scardino it took him about an hour to decide to cooperate with the government.
Under cross-examination, Davis also admitted Stanford gave him $500,000 in two checks, which he considered “bonuses,” but he laundered them through a Farmers & Merchants Bank in Baldwyn using an empty account for Crosswalk, a band his sons played in six years before.
While Scardino insisted Davis committed tax fraud with that money, as well as another $1.2 million in three payments from various banks, Davis said he’d been audited by the IRS across multiple years and had paid the taxes and penalties on the money he’d failed to report.
To get a conviction, the government must prove Stanford knew he was perpetrating a fraud on investors. Stanford’s lawyers said Tuesday they intended to prove that he believed his free-spending ways could be recovered at some point with successful businesses and he never intended to hurt anybody.
The defense contends if the receiver hadn’t stepped in and frozen all assets and business activity, Stanford might have been able to succeed.
Davis continues to remind jurors that investors were never told their money was going to his risky ventures or to promissory notes Stanford signed with the bank to fund his playboy lifestyle of private jets and yachts.
Scardino pressed Davis repeatedly about a $6 million withdrawal he requested from a Swiss bank into a Bank of Antigua account that only he and Pendergest-Holt had authority over.
“Do you know where the money is,” Scardino asked.
“Yes, I do,” Davis responded, as the court went into an afternoon break.
Ultimately, when the government returned to question Davis, he said the funds were held in Antigua until the receiver took them over in early 2009.
He also said he helped the receiver find money to recover from Stanford assets.
patsy.brumfield@journalinc.com

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