US$7B Ponzi scheme-accused R. Allen Stanford changed the numbers of his offshore bank’s 2003 annual report to make them more favourable, a court in Houston, Texas heard yesterday.
According to the Houston Chronicle, the testimony was provided by an executive involved in producing the report.
Stanford stated that the bank had more money than shown on the report and made the change, said marketing consultant Ron Rossi, who helped prepare the 2003 and 2004 annual reports for Stanford International Bank in Antigua.
The Houston Chronicle said that Rossi had done freelance work for Stanford previously and went to work for him full time in January 2004.
Rossi testified that he and Stanford worked on the annual report in the Houston headquarters offices of Stanford Financial Group, the parent company of the bank and other Stanford interests.
Rossi told the Houston trial that he told Stanford it was improper to change figures that had been approved by an auditor, but that Stanford replied that it was permissible because as a private company, the bank wasn’t required to produce an annual report at all.
Rossi’s testimony corroborated that of an earlier witness, a graphic artist who said he saw Stanford and his chief financial officer, James Davis, changing numbers on an annual report before sending it to be printed, the Houston Chronicle reported.
Davis pleaded guilty to three felony charges and is cooperating with the government. He ended more than four days of testimony earlier this week as the star witness.
Luxurious life
He told the court in testimony that certificates of deposit issued by the Antiguan bank and marketed as conservative investments were used for risky business ventures and Stanford’s luxurious life of yachts, private jets and seaside estates.
The jury also heard from CD investors yesterday, as the trial concluded its third week in U.S. District Judge David Hittner’s court. Prosecutors said they will close their case on Tuesday.
Defence lawyers told jurors early in the trial that Stanford would testify, but he’s not committed to taking the stand.
Meanwhile, Bloomberg reported yesterday that a retired U.S. Air Force medic told jurors that she lost four-fifths of her savings and her dream of a comfortable retirement on now-worthless certificates of deposit from Stanford’s bank.
“Being in the military, I was just a middle-class, hard- working person who took care of my family and made my ends meet,” a tearful Dianne Hammer testified in Stanford’s fraud trial in federal court in Houston. “You really don’t get rich serving in the military.”
Bloomberg reported that Hammer’s broker at Stanford Group Co. and marketing brochures from Stanford International Bank didn’t say that investors were supposed to have a net worth of US$1 million or annual incomes of US$250,000 to buy CDs from the Antiguan bank.
Testifying for prosecutors, Hammer, 54, said she increased her Stanford CD holdings from US$50,000 to US$260,000 in August 2008, after she discussed deteriorating financial market conditions with her Stanford broker.
“He said since it was an overseas bank, it was safer than banks in the U.S. were at the time,” she said. The adviser also recommended she combine investments with her elderly parents so the family could qualify for a higher interest rate on their joint holdings at SIB, she said.
Cricket Tournament
Bloomberg said that Costa showed Hammer a photo of a yacht that Stanford spent US$13 million refurbishing and a photo of the former financier standing beside a glass case filled with US$20 million, the prize money awarded to winners of a cricket tournament Stanford sponsored.
“If you’d known that millions of dollars in CD money was going to rebuild yachts and to cricket prizes like in that glass case, would you have bought the CDs?‘‘ Costa asked. ‘‘Do you wish you had some of the money in this yacht or in this glass case?’’
Stanford had become deeply involved in West Indian cricket – particularly the popular T20 – a move that some saw as a means to attract more money from unsuspecting Caribbean investors. Several local institutions lost large sums in the Stanford scam.
US$1B missing
Earlier this week, an Antiguan banking regulator told the jury he was “shocked” to find US$1 billion missing from Swiss bank accounts belonging to Stanford’s Antiguan bank, days before U.S. regulators seized the company on suspicion of fraud in February 2009.
Paul Ashe, Antigua’s supervisor of international banks, testified that records he received from Societe Generale SA (GLE) in early 2009 listed US$250 million in Stanford International Bank Ltd.’s Swiss investment account as of mid-2008. Stanford bank records Ashe examined in the same timeframe showed US$1.25 billion in the same account, Bloomberg said.
“I was shocked,” Ashe testified in federal court in Houston. “It suggested the document shown to us when we did the examination was altered, forged.”
Bloomberg said that prosecutors have presented evidence suggesting that Stanford bribed Leroy King, then Antigua’s top banking regulator, to hide the fraud.
Ashe also told the court that he found no mention of Stanford’s sizeable borrowings in Stanford International Bank’s investment portfolio records. Under Antiguan banking laws, any significant loans to bank insiders must be “fully secured by cash, and the cash should be placed within the bank itself, not in another bank,” he said.
If Stanford International Bank had revealed Stanford’s loan was part of its investment portfolio, “that would’ve been the end of the bank,” Ashe testified. “This loan would’ve been illegal. It would’ve been reckless, irresponsible and downright negligent.”
In early February 2009, after Stanford bank executives supplied Antiguan regulators with new records Ashe said made him suspicious, the Financial Services Regulatory Commission opened another examination of SIB. Ashe told the court, according to Bloomberg, that he was still conducting that exam when the U.S. Securities and Exchange Commission seized Stanford’s operations on Feb. 17, 2009.
Two days later, island regulators appointed an Antiguan receiver to oversee Stanford’s bank, which was then “in chaos,” Ashe told jurors. “There was no leadership. Customers were screaming for their money.”
Stanford’s attorneys have told jurors the financier was in the process of consolidating more than 100 private companies and investments onto the bank’s ledgers in late 2008. They said the consolidation would have zeroed out Stanford’s loan balance and repaid all depositors if the SEC had not stepped in and stopped the process. They contend the court-appointed U.S. receiver has destroyed much of the value of Stanford’s companies through mismanagement.
“The SEC didn’t make the bank insolvent,” Ashe told the court. “The bank was already insolvent.”
According to the Houston Chronicle, the court also heard that regulator King made numerous bank deposits totaling around half a million dollars soon after Stanford made withdrawals from his accounts.
Calford Young, a criminal investigator for the U.S. Internal Revenue Service, said he also discovered that Stanford gave the Antigua regulator tickets to the 2004 Super Bowl in Houston and the 2006 game in Detroit.
King, former head of the Financial Services Regulatory Commission in Antigua, is accused of taking bribes to keep regulatory heat off Stanford’s operations in that Caribbean island nation.
King, an American citizen, is one of four defendants besides Stanford himself who have been indicted in connection with the operations of Houston-based Stanford Financial Group and its affiliated companies.
Stanford is the only defendant on trial now and is being held without bail.
Under questioning by prosecutors, Young walked jurors through details of Stanford’s and King’s bank transactions.
According to the Houston Chronicle, Young testified that King reported an annual salary of US$70,000 on tax returns from 2003 through 2008. A review of his bank records, however, indicated he made cash deposits of about half a million dollars during that period into accounts in Antigua and the U.S., Young said.
He also identified records of withdrawals Stanford made from his account in Antigua shortly before King’s deposits.
During cross-examination, defense lawyer Ali Fazel noted that the amounts of Stanford’s withdrawals and King’s deposits were different.
“Are you telling the jury every single one of those deposits made into Mr. King’s account was bribe money from Stanford?” Fazel asked.
“No,” Young replied.
In other testimony, the Houston Chronicle reported that Young identified a letter the SEC sent King in 2006, saying it was investigating Stanford International Bank in Antigua.
Under questioning by Assistant U.S. Attorney Gregg Costa, Young also identified a letter King wrote to the SEC weeks later saying the bank was in compliance with Antiguan banking regulation and that the investigation was unwarranted.
