James Davis, former Stanford CFO, resumes direct testimony.
Davis describing workings of Stanford's brokerage business in US, 85% of clients' investments tied up in CDs at Stanford's bank. Drew attention of SEC, NASD. Lawyers expressed concerns to Stanford, Davis that brokerage set up just to sell foreign CDs.
Trial resumes, former Stanford CFO James Davis still on stand.
Davis testifies about Miami meeting of Stanford executives in early 2009, at which Davis and Stanford first admitted to executives extent of non-liquid assets in Tier III (real estate, private equity, other forms in which bank was not supposed to invest). Many execs expressed shock, some tears. Stanford said he was responsible, it was all his fault, and he was very sorry.
Stanford had arrived late at the meeting, after Davis made initially revelations. After meeting, Stanford told Davis, "Jim, you melted. If I'd been there, I never would have let you done that." Davis replied, "You weren't there."
Davis says he informed Stanford executives that profits and losses reported in financial statements for several years were inaccurate. Stanford chief compliance officer Lisa Stinson said numbers would have to be restated, that regulators and bank depositors would need to be notified of restatement, and that until then sales of CDs in the US would have to be halted. Stanford not supportive. CD sales in US halted, but international CD sales continued.
Davis admits to having attempted to conceal evidence -- computers and thumb drives detailing extent of fraud (e.g., use of investor money to purchase real estate, private equity, etc.) -- by tossing it in lake in front of his Mississippi home. Later revealed this to federal investigators and computers ultimately recovered.
Davis testifies to having taken loan from Stanford Int'l Bank of $880K, half in December 2008, half in January 2009, with approval of Stanford. Money put into businesses in town close to where Davis lived in MS. Businesses seized by receiver after Stanford Financial Group closed. Davis' home in MS and bank accounts all seized.
Davis estimates having earned $14 million working for Stanford in 21 years. Not inclusive of donations Stanford's made to Davis' church, loans from Stanford Int'l Bank.
Asked where the missing billions of dollars went, Davis says, "To Mr. Stanford...and to myself, $14 million." GOVERNMENT PASSES WITNESS.
CROSS EXAMINATION OF JAMES DAVIS BEGINS. Robert Scardino, Stanford's lead defense counsel, conducting cross.
Scardino, "In your first meeting with the FBI and government investigators, did you tell them you were a liar?" "Yes." "Did you tell them you were a fraudster?" "And you were still able to reach a deal with them to testify?" "A deal was reached, yes."
Scardino: "Was there a moment at which they revealed to you that they decided that while you had been lying, you were now telling the truth?" Davis: "I agreed to tell the truth, and I'm telling the truth. Truth. Truth." Scardino: "As opposed to the previous 16 years. How do we know you're telling the truth now?"
Scardino: "How much money did you turn over to the govt in accordance with your [plea] agreement?" Davis: "I don't know the number." Scardino: "Was it not important that you turned over the money that you stole?" Davis: "I did not steal. Money I received was wages and bonuses." Scardino: "Which is it, did you steal or did you not?" Davis: "I've already admitted to being a liar and committing fraud." Scardino: "And that's not stealing?" Davis: "It is."
Judge Hittner calls 20 minute break.
Judge talking with government and defense lead counsels before calling in jury.
Jury called back. Trial resumes.
Discussing loan Davis requested to draw from Stanford International Bank (conventional loan), $880K, as indicated on Davis' cell phone.
Davis testifies that money he borrowed from Stanford Int'l Business was for businesses and real estate he owned in Baldwyn, MS. Businesses included art gallery and interior design firm. Davis says started businesses in 2002-3. Got money from salary and wages, but ultimately from CD holders.
Partner in one of businesses was with Laura Pendergast Holt. Scardino: "Woman you had an affair with?" Davis: "Yes." Scardino: "Did you deceive your wife with that relationship?" Davis: "Yes." Scardino: "When was that?" Davis: "2001, 2002, 2003." Scardino: "Lied to your wife?" Davis: "Yes, sir."
Scardino continues focus on extent of Davis' Baldwyn business investments. Shows banking statement from Farmers & Merchants bank for Davis Holding Companies. Davis testifies that money went from this account into Baldwyn businesses. Scardino: "Was your business set up like Stanford was, money went into one business and flowed into others?" Davis: "I guess I learned from the master."
Statement by F&M Bank, as of July, account was -$58K. Scardino: "Weren't you the guy making $2 million a year?" Davis: "Yes." Traces down through account, with Davis continuing to write checks in negative. "You kept writing hot checks." And then something happens, wire from Stanford Venture. "We have to take your word for it that Mr. Stanford approved the transfer, don't we?"
Scardino: Davis ultimately borrowed $990K from Stanford Int'l Bank. "You needed money didn't you?" Davis: "Everyone needs money." Scardino: "But you needed more, even more than the $14 million Mr. Stanford had already paid you?" Davis: "I asked for it, Mr. Stanford approved it, and ultimately it came from CD investors." Scardino: "But it came from Mr. Stanford? It was his money?" Davis: "He approved it." Scardino: "We have to take your word for that?" Davis: "No, sir."
Scardino runs through Stanford board of directors from 1999 annual report. Scardino: "You say the fraud was up and running in 1999?" Davis: "Yes." Scardino: "Because you were running it." Davis: "WE were running it. We. [Stanford and Davis] We." Scardino: "We have to take your word for that, don’t we?" Davis: "Just follow the money."
Several go rounds between Scardino and Davis with Scardino attempting to get Davis on record as saying he was responsible, as CFO, for putting phony profits in annual report. Davis continues to say he did this at Stanford's direction until Judge Hittner tells him to answer yes or no. Davis says yes.
Scardino now asking about computers, thumb drive Davis testified on direct that he'd thrown in lake.
Scardino asks whether agreement not to charge Davis with destroying evidence and obstruction of justice was part of plea agreement? Davis: "That was not part of the plea agreement."
Scardino: "Did you sit down with FBI and try to establish source of information so they could reconstruct evidence on your computers so that they could determine whether they wanted to call you as a witness?" Davis: "Yes." Scardino: "Nobody tried to reconstruct the evidence?" Davis: "I don't know."
Davis testifies he met Laura Pendergest Holt in bible class he was teaching with his first wife at First Baptist Church in Baldwyn. Affair began 8 years later, around time he hired her to work for Stanford. Says Laura was 19. Says he met Laurie, his current wife, while married to his first wife, Ruth. Says Laurie was 17 at time he met her. Scardino: "I guess point is that you've betrayed everyone you've had a relationship with."
COURT ADJOURNS FOR DAY. TESTIMONY TO RESUME TOMORROW MORNING.