Feb. 8 (Bloomberg) -- R. Allen Stanford’s businesses collapsed in part because the stock market imploded and a court- appointed receiver destroyed much of the companies’ value after they were seized by the government, Ex-Stanford Financial Group Co. finance chief James M. Davis told jurors.
Davis, testifying yesterday for the government under a plea deal at Stanford’s federal court trial in Houston, was shown a letter he wrote shortly after regulators seized Stanford’s companies in February 2009.
“There was from the start never a thought to put the clients in harm’s way in this process, never a hint of criminal intent,” Robert Scardino, a lawyer for Stanford, read from the letter, which Davis said he wrote to an attorney he was trying to hire to defend him at the time.
“The underlying global business growth model remained strong,” Davis wrote in the letter, adding that some of Stanford’s businesses were moving toward profitability.
“Isn’t that 180 degrees opposite from what you’ve been telling this jury?” Scardino asked Davis. “You said these companies had no value.”
Davis responded, “A number of the companies Stanford owned were growing; they were worth something.” The 2009 letter “could be true under certain circumstances,” he said.
The former finance chief told jurors he changed his mind a month after writing that letter, when he met with his current attorney, who persuaded him to seek a plea deal. “But at the time I was still lying,” he said of the letter. “I was still in the middle of it.”
Davis’s testimony may bolster Stanford’s defense that he never intended to defraud investors of $7 billion through what the government says was a Ponzi scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank.
Stanford’s lawyers claim accountants were in the process of consolidating companies the financier funded with $2 billion in secret bank loans onto the Antiguan bank’s portfolio when regulators stepped in and stopped the process.
Stanford’s attorneys told jurors several times that the financier was a hands-off visionary who left the details of running his companies to others, primarily Davis.
“So you were running the company?” Scardino asked Davis.
“No sir,” Davis replied. “His attention was desperately needed,” Davis said of Stanford.
Davis testified he hopes his cooperation will lead to leniency when he is sentenced. Under the terms of his plea deal, Davis, 63, faces as long as 30 years in prison.
Davis said while he doesn’t wish to spend the rest of his life in prison, he’d rather be there than free and “bound as I was for the last 20 years with Allen Stanford.”
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).
--Editors: Michael Hytha, Douglas Wong
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