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Allen Stanford trial hears of scramble to cook books as last millions ran out

Mogul’s former deputy tells how bankers planned real estate transactions to revalue m in property at .2bn

Allen Stanford used fake accounting to prop up his offshore bank in its waning days as withdrawal requests from investors poured in, Stanford’s former top deputy has said.

Faced with a worrying number of withdrawals in 2008, Stanford came up with a plan to make a 0m capital infusion into the bank, said James Davis, Stanford’s former chief financial officer and the US government’s top witness.

Stanford is on trial in federal court in Houston charged with running a bn Ponzi scheme from his bank in Antigua. Prosecutors allege Stanford, who has pleaded not guilty, sold fraudulent certificates of deposit and used the proceeds to buy jets, luxury homes and Caribbean real estate.

In the spring of 2008 Stanford’s accountants inflated the value of about 1,500 undeveloped acres in Antigua that Stanford had bought for m. The accountants planned a series of property transfers to put the real estate back on the bank’s books with a value of more then .2bn, Davis told the court.
“No actual cash or assets were going into the bank?” William Stellmach, a federal prosecutor, asked Davis. “No, sir,” Davis replied.

The transaction was meant to fill a hole left by Stanford’s spending, which became apparent as investors took their money out of the bank, Davis said.
But by the end of December 2008 Stanford International Bank had only m in cash, far less than the bn it claimed to hold, according to documents Stellmach showed to jurors. The US Securities and Exchange Commission seized Stanford’s businesses and assets in February 2009.

Davis, 63, said stress related to keeping the scheme going eventually took a toll on his health, causing him both physical and mental problems. “The fraud that I was participating in was killing me,” Davis told the jury.

Stanford, the largest private landowner in Antigua and a onetime 20-20 cricket mogul, was known as “Sir Allen” after being knighted by the island’s former prime minister.

Stanford was once considered one of the United States’ wealthiest people, with an estimated net worth of more than billion. He’s been jailed without bond since being indicted in 2009.

He is on trial for 14 counts, including mail and wire fraud, and faces up to 20 years in prison if convicted.

Stellmach asked Davis why, after realizing there was fraud, he continued working for the financier.

“I wanted to please Mr. Stanford. I was a coward. I was embarrassed and he signed my paycheck,” said Davis, who told jurors he made m in salary and bonuses during his employment.

Davis pleaded guilty in 2009 to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. The plea is part of a deal Davis made with the US justice department in exchange for a possible reduced sentence. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds