Feb. 1 (Bloomberg) -- A prosecutor introduced a $330 million promissory note signed by R. Allen Stanford as evidence at his criminal trial that the financier secretly borrowed money from his bank to build a lavish “Stanford World in Antigua” and lure rich new clients.
“Rich people do not get impressed very easily,” Stanford said in an undated video clip shown to his jury yesterday in Houston federal court. “They have to go back literally blown away, saying ‘I have a confidence and a trust that I will do business in that part of the world.’”
Stanford, videotaped while speaking to a gathering in Antigua, said his goal in building the private airplane hangar, restaurants, cricket grounds and banking facilities on 20 acres surrounding Stanford International Bank Ltd. was to convince the “richest people in the world” it was safe to invest there.
Stanford, 61, was indicted in June 2009 on charges he led a $7 billion investment fraud based on certificates of deposit issued by the Antiguan bank. He’s accused of 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the allegations. If convicted on the most serious charges, he could be imprisoned for 20 years.
Assistant U.S. Attorney Gregg Costa asked government witness Arnold Knoche, a former president of Stanford Development Corp., if he knew where the money came from for “Stanford World in Antigua.”
“He told me he had his personal resources, that he’d take care of it,” Knoche testified in the second week of trial. “I always wondered where the money was coming from because it was a huge amount.”
Knoche testified that Stanford never said he used depositors’ funds on real estate developments in the Caribbean or elsewhere. He also said he never suspected illegal activity during his 16 years with Stanford’s organization. Knoche said he resigned in 2003 because he was tired of the constant travel.
Costa showed Knoche a copy of a Stanford International Bank promissory note for $330 million signed by Stanford personally in December 2003. Knoche said he wasn’t aware Stanford had borrowed any money from his bank, and said he would have been concerned if he had known.
“The depositors at the bank were told there were not loans being made,” he said. Knoche said promotional materials for the bank’s CDs said the funds were placed in conservative, liquid investments and that the bank “has never made and will never make loans.”
After reviewing Stanford International Bank’s annual reports for 2002 and 2003 on the witness stand, Knoche concluded that Stanford’s promissory note wasn’t disclosed to depositors.
Prosecutors contend Stanford skimmed more than $1 billion of depositor money for personal use, including funding the Caribbean real estate ventures, several regional airlines, a private fleet of airplanes and yachts, and a collection of unrelated private equity investments.
The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
--Editors: Peter Blumberg, Andrew Dunn
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