Former Stanford Financial Group Co. finance chief James M. Davis is seeking a prison sentence 26 years shorter than the potential 30-year term he agreed to after pleading guilty to his role in a $7 billion investor fraud, citing his cooperation with prosecutors.
Davis, 64, the second-highest ranking officer in the financial services empire of Texas billionaire R. Allen Stanford, will ask for four years in prison today when he is sentenced by U.S. District Judge David Hittner in Houston federal court, according to a defense filing in the case.
Stanford, 62, is serving a 110-year prison term after being convicted -- in part on testimony and evidence provided by Davis -- in March of stealing more than $2 billion from investors for personal use.
Davis agreed that he faced a maximum 30 years in prison and forfeiture of $1 billion when he pleaded guilty to three felony counts over his role in the Ponzi scheme in August 2009, two months after Stanford was indicted. In his plea deal, Davis said he would seek a shorter sentence only based on his cooperation and acceptance of responsibility for his crimes.
He “did not hedge his bets by waiting for a jury verdict against the main conspirator” before agreeing to plead guilty, David Finn, Davis’s lawyer, said in a sentencing memo that asks for a four-year sentence. “To characterize Mr. Davis’s cooperation efforts and assistance to the government as ‘extraordinary’ is an understatement.”
Both Stanford and Davis were accused of swindling more than 20,000 investors through a scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Davis began cooperating with the government about two months after the U.S. Securities and Exchange Commission seized Stanford’s businesses on suspicion of fraud in February 2009.
Davis testified for 10 days during Stanford’s 2012 trial and for several additional days in the subsequent trial of the two top-ranking accountants in Stanford’s organization, who were also convicted. Stanford, who is in a Florida federal prison, is appealing his conviction and sentence.
Davis told Stanford jurors that he manipulated financial statements, falsified investment records and misled employees and investors about the company’s true financial performance at Stanford’s direction for more than 20 years. He testified that he was in awe of Stanford and thought of him as a brother from the time they met as college roommates in 1973.
The former chief financial officer led prosecutors to a secret Swiss bank account Stanford tapped for bribes for auditors and Antiguan banking regulators and to siphon hundreds of millions in investor deposits to bankroll an array of money- losing private enterprises, according to evidence at Stanford’s trial.
Davis also directed agents to a pond on his Mississippi estate, where divers recovered computers and other evidence he had tried to destroy before deciding to admit his role in the fraud.
“Cooperation, especially to the extraordinary extent undertaken by Mr. Davis in this case, needs to be encouraged,” Finn said in the filing. “A sentence of even a decade of imprisonment on a 64-year-old defendant will certainly discourage similarly situated defendants from cooperating in the future.”
Finn asked Hittner to consider two other corporate criminals who were shown leniency, based on their cooperation in different multibillion-dollar fraud cases.
Andrew Fastow, the former CFO of Enron Corp., was sentenced to six years in prison after agreeing to a 10-year term in his deal to testify against Enron founder Kenneth Lay and Chief Executive Officer Jeffrey Skilling. Scott Sullivan, WorldCom Inc.’s finance chief, got five years after testifying against Bernard Ebbers, that company’s former chief executive officer.
The case is U.S. v. Davis, 09-cr-335, 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).
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