HOUSTON, (Reuters) – Allen Stanford funneled $2 billion of investor money from his offshore bank to pay operating expenses at his other companies, including money-losing airlines and his cricket concerns, a former Stanford Financial Group accountant said today.
Stanford, 61, is on trial in federal court in Houston for leading a $7 billion Ponzi scheme from his offshore bank in Antigua in what prosecutors call one of the largest white-collar crimes since Bernard Madoff. The Texas financier has pleaded not guilty to all charges.
Henry Amadio, a former accountant for Stanford in Houston, told jurors he created a top-secret report for Stanford tracking the flow of $2 billion from Stanford International Bank in Antigua to other entities he controlled. The funds were spent by Stanford over a number of years leading up to 2009, when the government seized the businesses.
“There’s no doubt that those amounts came from Stanford International Bank,” Amadio told the jury of five women and 10 men. He compiled the reports using wire transfer records provided by Stanford’s treasurers, he said.
The funds, marked as loans at the offshore bank, were never repaid by Stanford, the accountant said.
Prosecutors accuse Stanford of misleading investors who bought certificates of deposit (CDs) from his bank in Antigua. The investors were told their deposits were invested in safe, liquid investments.
Instead, the government alleges, the funds were used to pay for Stanford’s yachts and private jets or were put into illiquid entities like private companies.
More than $300 million in deposits were used to pay salary and expenses for Stanford’s now defunct, money-losing Caribbean Star and Caribbean Sun airlines, Amadio said.
Millions of dollars of deposits were also spent on Stanford’s passion to promote the sport of cricket in the Caribbean, he said.
Robert Scardino, an attorney for Stanford, told the jury that there was nothing wrong with the owner of a company borrowing money from that company.
“Is it not perfectly OK to loan the owner of the company for whatever they want?” Scardino asked, adding that most of the money flowed to start-up companies that needed capital.
Amadio, who worked for Stanford from 2002 until 2009, said keeping the reports under wraps was a top priority. He was told he would lose his job if he shared the data with anyone.
Former Chief Financial Officer James Davis also told Amadio to refer to Stanford’s bank in Antigua as “the company down south” in any materials.
“Everything was to be on a need-to-know basis,” Amadio testified.
Amadio has not been charged in the case but could still be prosecuted if his testimony is found to be untruthful under a deal he reached with the government.
His reports were also stored on an external hard drive that the accounting department nicknamed “the football.” In 2006, “the football” was moved to Antigua from Houston, Amadio told the jury.
The U.S. Securities and Exchange Commission started an investigation of Stanford CDs in 2006, Gregg Costa, the U.S. attorney leading the case, said.
Mark Kuhrt, who is also charged in the alleged Ponzi scheme and was Amadio’s boss at Stanford Financial Group, attended the trial for the first time since it began last week.
Kuhrt shifted in his seat as Amadio told the jury he told his former boss he was concerned about the growing amount of investor money that was being used to pay for Stanford’s other businesses.
Also today, the receiver for Allen Stanford’s money management firm filed a $1.8 billion lawsuit against two prominent New York law firms and an attorney who worked at both, alleging they played roles in a massive Ponzi scheme run by Stanford.
Ralph Janvey, the court-appointed receiver for Stanford Financial Group, filed suit on Friday in federal court in Washington against the law firm Proskauer Rose, the law firm Chadbourne & Parke, and Thomas Sjoblom.
