By Patsy Brumfield/NEMS Daily Journal
* Follow the latest court events, testimony on Djournal.com or Patsy R. Brumfield’s Tweets live from the Texas courtroom @realnewsqueen #stanfordtrial.
HOUSTON, Texas – Former Baldwyn entrepreneur James M. Davis’ credibility will rise or fall in the next day or so during blistering cross-examination as his former boss’ key accuser.
Davis, 63, insists R. Allen Stanford told him to fake the profit numbers for nearly 20 years for CD investment returns through Stanford International Bank Ltd. in Antigua.
Stanford’s lawyers insist Davis was the one calculating the phony numbers to support his own greed and personal relationships.
“I’m a liar, I’m a fraudster,” he agreed with defense questions.
Stanford faces many years in prison if convicted on 14 counts that he committed various frauds to perpetuate a $7.2 billion Ponzi scheme on bank CD buyers.
Davis pleaded guilty to his part in August 2009 but won’t be sentenced until he testifies for the government in this and a related trial, in which Baldwyn native Laura Pendergest-Holt is a defendant. She was Stanford’s chief investment officer when the empire came crashing down in early 2009.
More than 20,000 investors worldwide lost their life savings, including more than 1,000 in Mississippi through offices in Tupelo, Jackson and Memphis.
Monday was Day 11 in the Stanford trial. Late in the day, the government said it expects to complete its case by early next week. Judge David Hittner presides.
Davis wrapped up initial questions from the government about the final days of the Stanford financial world, then took a verbal lashing from the defense.
* He admitted to multiple affairs after his first marriage.
* He admitted to running up a negative $73,000 balance at Baldwyn’s Farmers amp& Merchants Bank in late 2008 and 2009, when he asked Stanford for a $880,000 business loan.
* He admitted he threw his laptop, a computer hard drive and an external thumb-drive into the lake in front of his Union County mansion west of Baldwyn to keep federal agents from knowing what he knew.
Davis wept and his lips quivered after he mentioned Stanford’s $500,000 gift to his church and their “misappropriation” of more than $2 billion from CD customers.
“Where did it go, the billions?” prosecutor William Stellmach said.
“To Mr. Stanford,” Davis said, weeping, “and some went to myself… $14 million.”
On cross-examination, defense attorney Robert Scardino had Davis in his crosshairs. The Texas attorney was aggressive for one minute, then softened his tone to change the mood.
Just before Monday action ended, Scardino got Davis to admit to a string of affairs from his first marriage and during his second one.
Davis admitted he cheated on his first wife with the woman who became his second wife, then had an affair with Pendergest-Holt and then cheated on her with two other women.
But before Scardino took over, Davis revealed that he and Stanford became increasingly concerned about the future of the alleged scheme to bring CD investors to SIBL, then use the deposits to fund Stanford’s playboy lifestyle of jets, yachts, Cricket enthusiasms and risky real estate deals.
In particular they began to hear questions about the high level of CD sales as part of the company’s brokerage investment program.
Davis also claimed several employees were fired when they questioned the truth behind the continued high rate of return on the CDs.
At one point, Davis said he made plans to quit and told Stanford so, with no response. Then, he said he went to the Human Resources Department to work out a plan to leave the company by the end of 2009.
In his final year with Stanford, Davis said he was paid nearly $2 million in salary and bonuses – across his nearly two decades it came to $14 million.
He said the stress of the job was “killing me,” noting he thought he’d had a heart attack while in Antigua but it turned out to be a panic attack.
By the end of 2007, he said the bank’s cash and investment assets totaled $1.5 billion while it owed CD depositors $6.6 billion. Stanford’s personal loan take came to $5 billion, Davis claimed.
Stanford’s empire was costing $1 million a day to run, he said.
By the summer of 2008, as the world economy went into the tank, Davis said he told two very high placed executives about the dangerously low cash situation. “The emperor has no clothes,” he said he told them.
That’s when Stanford came up with the idea to turn a $65 million real estate purchase into a $1 billion bookkeeping “infusion” by inflating values. The empire crashed before this could happen.
Ultimately SIBL and Davis were subpoenaed to bring detailed investment documentation to the U.S. Securities and Exchange Commission.
Company high-ups met in a Miami, Fla., airplane hangar in mid-January 2009 to map out strategy for the SEC hearing in Fort Worth, Texas, the next week. That’s when Davis revealed to them the almost-complete nature of how bad the finances were and the details of the so-called Tier 3 investments, which were Stanford’s personal dealings few knew anything about.
“Shock, that’s how they reacted,” Davis recalled about his revelation when Stanford failed to show for the meeting. He said his nephew, Danny Bogard, who ran the U.S. brokerage business, broke down in sobs.
After several days of waiting on Stanford, Davis said he showed up and told his team it was his fault and that he was sorry. They also told SIBL’s president his account numbers were not accurate. He refused to appear before the SEC.
So, they decided Chief Financial Officer Laura Pendergest-Holt would testify before the SEC, but Davis said he told her just to stick with what she knew about cash and securities. Ultimately, Holt told the SEC she didn’t know anything about Tier 3.
Holt, two former Stanford executives and an ex-Antiguan bank regulator face similar charges in September in Houston.