HOUSTON – Before the prosecution's star witness in the fraud trial of jailed Texas tycoon R. Allen Stanford finished testifying Wednesday, he pointed to his former boss sitting at the defense table.
"Follow the money," James Davis said, replying to a prosecutor's questions about what happened to billions of dollars in investor funds the charismatic Stanford is accused of stealing through a massive Ponzi scheme.
Stanford is accused of orchestrating a 20-year scheme that bilked investors out of more than $7 billion, mostly through the sale of certificates of deposit, or CDs, from his bank on the Caribbean island nation of Antigua. Defense attorneys have tried to show that Davis, who was the chief financial officer for Stanford's various companies, was behind the alleged scheme.
During four days of testimony, Davis, 63, told jurors he and Stanford worked together to falsify bank records, annual reports and other documents in order to conceal the fraud and deceive investors about what the bank was actually doing with their deposits.
Investors "were bamboozled by a smoke and mirrors show," Davis said.
Stanford's attorneys, in relentless and sometimes contentious questioning of Davis, sought to paint him as a liar, a crook and the true leader of the alleged Ponzi scheme. They said it was Davis, alone, who altered documents and requested that bribes be sent to an auditor to help hide the alleged fraud, and they suggested Davis would testify to anything to avoid a lengthy prison term.
Davis pleaded guilty to three fraud and conspiracy charges in exchange for a possible reduced sentence.
"You were the one who was in charge of the money?" asked Robert Scardino, one of Stanford's attorneys.
"At Mr. Stanford's direction," Davis said.
Authorities allege Stanford used depositors' money to operate his businesses, pay for his lavish lifestyle and bribe regulators and auditors. They also say he lied to depositors by telling them their money was being safely invested.
Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate and that he could have paid back investors if authorities hadn't seized his companies.
Stanford is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted. Stanford was once considered one of the U.S.'s wealthiest people, with an estimated net worth of more than $2 billion. He's been jailed without bond since being indicted in 2009.
On Wednesday, Davis told jurors that in the months leading up to the seizure of the bank and Stanford's other businesses the financier was spending more than $1 million per day of CD deposits to keep his various failing enterprises afloat. Prosecutors allege Stanford used more than $2 billion of depositor funds as personal loans.
While questioning Davis, prosecutor William Stellmach told jurors that in late 2008 and early 2009, Stanford had bonfires outside his home on the U.S. Virgin Islands in which he destroyed bank records and other documents. Stanford's bank and other businesses were put in receivership in February 2009.
After Davis finished testifying, an Internal Revenue Service agent told jurors about bribes prosecutors allege Stanford made to an Antiguan regulator.
Stanford's trial, in its third week, could last up to six weeks.
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