HOUSTON, (Reuters) – A plea agreement signed by Allen Stanford’s former top aide signals that more people in the wide-ranging $7 billion fraud case may face charges, a lawyer involved in the case said yesterday.
“Read the plea agreement language very, very carefully,” David Finn, a lawyer representing Stanford’s former chief financial officer said after a hearing in which his client pleaded guilty to three felony counts.
“I think you will be able to determine that the government is not finished with their indictments,” said Finn, who previously worked as a federal prosecutor in Texas.
James Davis, 60, admitted in court to helping carry out a Ponzi scheme centered around certificates of deposit issued by Stanford International Bank in Antigua.
He faces a maximum 30 years in prison, but his full cooperation with prosecutors is likely to reduce the sentence.
Stanford, 59, faces 21 criminal counts related to the alleged fraud. He is in jail awaiting trial and has denied any wrongdoing.
Laura Pendergest-Holt, Stanford Financial Group’s chief investment officer, accounting executives Gilberto Lopez and Mark Khurt and Antiguan regulator Leroy King are also charged in the scheme. All except King have pleaded not guilty. King is awaiting extradition to the United States from Antigua.
The plea document, signed by Davis who is the former chief financial officer of Stanford Financial Group and the firm’s offshore bank in Antigua, alleges wrongdoing as early as 1988 when Stanford had an offshore bank on Montserrat.
The document also mentions the roles of individuals identified only as Outside Attorney A, Stanford International Bank
Executive A and Stanford Financial Group Attorney A, who allegedly played in the fraud or in attempted cover-ups.
A representative from the U.S. Department of Justice was not immediately available to comment if more people will be charged in the fraud.
Over a period of 10 years, Davis and others created phony documents that inflated revenue and assets that were meant to reassure the firm’s CD investors and disguise $2 billion in loans to Allen Stanford, according to prosecutors.
For example in mid-2008, using a series of flips through businesses controlled by Stanford, Davis and others turned a $65 million real estate deal into one that was valued at $3.2 billion on the offshore bank’s books, according to the plea agreement.
Davis, with the help of Lopez and Khurt would also prepare fictitious investment reports to give to Antiguan regulators each quarter. To create falsely inflated values for the offshore bank’s assets, Davis would extrapolate values and do the calculations manually, the plea deal said.
They later created a spreadsheet to generate the bogus revenue numbers, the plea agreement said.
To throw regulators off the trail of the alleged fraud, Davis and his co-conspirators bribed officials in Antigua. King, who was head of Antigua’s Financial Services Regulatory Commission (FSRC) received more than $200,000 in bribes, according to court documents.
In 2003, Stanford performed a “blood oath” brotherhood ceremony with King and other FSRC employees in a bid to ensure they would continue to look the other way when reviewing the offshore bank’s books, according to the plea agreement.
“During the course of the fraud scheme King routinely referred to Stanford as ‘Brother’ or ‘Big Brother,’“ the agreement read.
King also forwarded a confidential correspondence he received from the Securities and Exchange Commission to Stanford and another bank executive. Stanford would then help King draft misleading responses from his regulatory agency, the plea said.
And sometime in 2003, two FSRC examiners who worked for King “were becoming aggressive and suspicious in their examination” of Stanford International Bank’s financial statements, according to a bank employee.
Stanford sought to reassure the bank employee, saying he trusted King would take care of the nosy regulators because of the bribes and the brotherhood oath, prosectors said in the plea deal.
Both employees “soon thereafter were reassigned or replaced,” according to the plea deal.
