Antigua

Allen Stanford Trial - Week Four

The prosecution rested its case after 3 and half weeks of presenting Allen Stanford as the leader of a massive, multi-billion dollar Ponzi scheme.

The week started with Lula Rodriguez, a former Stanford Financial employee who was in charge of public relations (talk about a tough job). She joined Stanford in March 2008, and her testimony revealed that the job never got any better as it progressed. When the Madoff Ponzi scheme was revealed, she said there was a sense of fear within Stanford Financial that clients woudl pull their investments in response. Rodriquez's job was to develop talking points for investors and others who inquired about Stanford's operations. Allen Stanford did not make her job easy. Rodriquez said she learned that Mr. Stanford had a $20 million sponsorship of a cricket tournament only after he scheduled a news conference to talk about it. Where did the money come from for this? Rodriguez said she had no idea and Mr. Stanford was less than forthcoming.

Another witness, FBI Agent Robert Martin, took the stand as one of the last witnesses the government called prior to resting its case. Martin is a banking (fraud) expert and his job was to track the money. "All of it [money] was going into his 100% owned companies, his possessions, his expenditures," Martin said in his testimony. Martin's analysis was that there was a $7 billion "hole" between the bank's actual and reported assets at the time regulators seized Stanford's operations on suspiciion of fraud in February 2009. His story matched the testimony of CFO James Davis and Antigua banking regulators. Even the "legitimate" businesses of Mr. Stanford's ran into problems. Two Caribbean airlines that he owned went through $33 million before shutting down. Unfortunately for investors, they never wanted or knew that their investment was in any airline.

As the defense started to present its case, it gave a list of 26 potential witnesses that it "might" call. Missing from that list was Allen Stanford, who the defense team said would testify. They can still call him to the stand but right now it does not look like they will. Their first witness was Joan Stack, who headed global human resources for Stanford Financial from 2007-2009. Stack testified that Mr. Stanford was missing during critical times when investors wanted to hear from him and that James Davis, Stanford Financial's CFO, was the guy calling the shots. Davis has pled guilty and was the star witness for the prosecution. His testimony was that he was a puppet for Stanford....nobody wants to be the one in charge of an alleged Ponzi scheme.

Chances are that this trial is coming to a quick end within the next week. Mr. Stanford's best defense may be that he is not fit to be prosecuted because he does not understand where he is (reference earlier defense strategy to have case delayed because of Stanford's mental state as a result of a prison beating). Allen's own rambling testimony may be his best defense. I think it is hard to defend that a CEO did not know what was going on inside of his own company. It did not work for the CEO's of Enron (Ken Lay) and WorldCom (Bernie Ebbers)....it won't work for Stanford, and nobody has called the company legitimate yet...not even the first defense witness.

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Allen Stanford Trial - Week Three

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As trials go, the Allen Stanford trial is moving along quickly as the star witness for the prosecution, James Davis, completed his testimony in the third week of the trial. Stanford, who founded Stanford Financial, is defending himself of charges that he ran a Ponzi scheme over 20 years by luring investors into what was supposed to be a safe, certificate of deposit, investment. Instead, prosecutors say "investors" were funding an extravagant lifestyle for Stanford.

Davis, who was a long time friend and college roommate of Stanford at Baylor University, provided exact answers to prosecutor's questions as he continued his testimony. "No actual cash or assets were going into the bank?" William Stellmach, a federal prosecutor asked Davis. "No sir," said Davis. Davis testified that he and others at Stanford Financial inflated the value of a 1,500 acres of undeveloped land in Antigua that Stanford had purchased for $64 million. The plan was to value the land at $3.2 billion. Davis said that this had to be done to cover the outrageous spending of Allen Stanford, who had spent most of the deposited money in the bank on personal items like yachts and homes. Why did Davis go to such lengths to hide Stanford's fraud, "I wanted to please Mr. Stanford. I was a coward. I was embarrassed and he signed my paycheck." Stanford signed a lot of paychecks to Davis....about $14 million worth. Davis has plead guilty and hopes to win a more lenient sentence because of his cooperation and testimony.

Once Davis left the stand, Antigua's supervisor of international banks, Paul Ashe, took the stand. He stated that records he received from Societe Generale SA in early 2009 listed $250 million in Stanford International Bank Ltd.'s Swiss investment account as of mid-2008. However, Stanford bank records that Ashe had examined earlier showed over $1.25 billion in the same account at the same period of time. "I was shocked," Ashe said in reference to his discovery. "It suggested the document shown to us (by Stanford employees) when we did the examination was altered, forged." Ashe testified that he was looking into issues concerning Stanford, based on his suspicions, when the Securities and Exchange Commission seized Stanford's operations in February 2009. Stanford's defense strategy has been that the SEC's seizure made the bank insolvement, causing a run on the bank with depositors demanding their money bank. However, Ashe told the jury that "The SEC didn't make the bank insolvent. The bank was already insolvent."

The first victim also took the stand in the trial. Dianne Hammer, a retired U.S. Air Force medic testified that she had lost most of her retirement savings in certificates of deposit at Allen Stanford's bank (now defunct). As the stock market in the U.S. deteriorated in 2008, Hammer testified that she sought safety of her income in certificates of deposit and increased her Stanford CD holdings from $50,000 to $260,000 after a consultation with a Stanford Financial broker. That broker also advised her to invest the majority of her elderly parents' wealth with Stanford as well....which she also did. In total, Hammer's family has lost more than $500,000. It was compelling testimony.

The prosecution is expected to rest its case next week, setting the stage for Allen Stanford to take the stand in his own defense.

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Fraud

Allen Stanford Trial - Week Two

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It takes some of these long trials to get going, but the Allen Stanford trial ramped up big this week.

On Tuesday, Stanford, if he did not know it already, had really ticked off a woman in Antigua. Marian Althea Crick said she remembers Allen Stanford as trying to use his charm to pursuade her to overlook regulations in the small island nation where she was a director of a regulatory agency that oversaw financial institutions like Stanford's bank he opened there in the 1990's. Ms. Crick, who is now chairman of the Financial Services Regulatory Commission in Antigua, said she complained to Antiguan authorities when Stanford was also put on the board that regulated banks in Antigua....a clear conflict. Her quote on the stand was, "It reminded me of a saying we have at home, it was a classic case of the rat being put in charge of the cheese." However, there was no clear violation that she could point to that incriminated Stanford...but the there is plenty of that to come in this trial. You have to admit, once you clear out the regulators, it looks like you set the stage for some big things.

Crick resigned as a regulator in 2002 and was replaced by Leroy King. King was accused of taking a part in hiding Stanford's alleged fraud as well as a few million dollars in payments from Stanford financial....along with a few Super Bowl tickets (tis the season). King is still in Antigua fighting extradition to the U.S. to face charges.

Another witness for the government was Mark Collinsworth, who was a research analyst at Stanford Financial Group, Co. in the U.S. Collinsworth painted a picture of Stanford as not being that engaged with the business and that he never received any direction from Stanford to falsify financial statements. He also said that James Davis, former CFO at Stanford and is cooperating with government, had hired people who had no business working for a financial institution. Davis once hired one of his former farm hands as a commodities analyst and his preacher as an analyst for Middel Easter affairs. What's the harm if the whole thing was a fraud.

And what is a good fraud if you can't have some fun in the midst of it. Henry Amadio, a former accountant for Stanford in Houston, testified that he kept a secret report for Allen Stanford to track the flow of over $2 billion from the Antiguan bank to other entities controlled by Mr. Stanford. Prosecutors believe that the promises Stanford made to depositors who thought they were investing in a safe investment, was nothing but a rouse to fund yachts, homes, jets or far flung enterprises that were risky. Amadio worked directly for Mark Kuhrt at Stanford Financial. Kuhrt was arrested and charged in the scandal in June 2009, the day after Allen Stanford was arrested.

On Thursday, it was James Davis, Stanford's former roommate at Baylor, former friend and former CFO at Stanford Financial, who took the stand. Davis said in his testimony that, "I was involved in faking the numbers, but he was the chief faker." Sounds like a new business term. Davis (63), who is a government witness after pleading guilty in 2009, has a lot riding on this testimony as he is hoping to get a prison sentence that will be short enough that he can live out some of it in the free world. Davis had some admissions of his own as he talked about his 3-year affair with Stanford Financial's Chief Investment Officer, Laura Pendergest Holt. He noted that Stanford approved of the affair by saying, "That's good; she'll be loyal." Holt is still planning on going to trial later this year, so I'm sure this story is going to be repeated again in a few months.

Davis said that he knew Stanford was a fraud back in 1991 (18 years prior to his arrest), so why did he stay, "I believed in Mr. Stanford - wrongfully so.... but I continued to stay there and lie with him," he told Assistant U.S. Attorney William Stellmach under questioning.

Davis has a lot to say. He is expected to be on the stand next week as well.