Stanford’s finance chief pleads guilty
By Sheila McNulty in Houston and Stacy-Marie Ishmael in London
Published: August 27 2009 16:25 | Last updated: August 27 2009 16:25
James Davis, the second-highest ranking executive at the scandal-hit Stanford Financial Group, pleaded guilty on Thursday in a cooperation agreement with investigators probing Sir Allen Stanford’s involvement in a $7bn Ponzi scheme.
Mr Davis, 60, was dressed in a wrinkled grey suit that hung off his shoulders and was subdued as he pleaded “guilty, your honour” to three felony counts and agreed to forfeit $1bn. The charges against him carry a maximum prison term of 30 years.
Sir Allen, who had been due to appear in court on a separate matter, was hospitalised early on Thursday morning with an irregular heart beat and an extremely high pulse, David Hittner, the presiding judge, told the courtroom.
Mr Davis, the former chief financial officer at the group he helped build, befriended Sir Allen during the 1970s, when both were students and roommates at Baylor University.
US regulators alleged in February that the men had sole control of the so-called ”tier three’’ assets that accounted for four-fifths of the purported billions held by the Antigua-domiciled Stanford International Bank.
If the authorities are able to use Mr Davis’ testimony to prove Sir Allen’s culpability or implicate other top executives, they will recommend a lighter prison term, but there are no guarantees; Judge Hittner is known for his tough sentencing.
In the government’s case against the wife of Andrew Fastow, former chief financial officer of Enron, Mr Hittner refused to accept the agreement she had with prosecutors for a 10-month sentence – five months in prison and five in a halfway house or in home detention. Judge Hittner sentenced her to one year in jail on a tax charge and one year of supervised release.
Philip Hilder, who represented Enron whistleblower Sherron Watkins, said the authorities were “hanging a carrot’’ over Mr Davis, implying “the more he cooperates, the more time he will get off.’’
Mr Davis will not be sentenced until the case against Sir Allen has been tried, according to Mr Hilder, so the authorities can judge how well he cooperated.
Sir Allen has pleaded not guilty to all the allegations against him, but his attempts to mount a defence have been complicated by his difficulties retaining legal counsel.
The businessman’s assets, estimated at more than $2bn, have been frozen since February and he has not been able to pay his legal team.
Earlier this month Dick DeGuerin, who had been leading Sir Allen’s criminal defence, asked to withdraw from the case in part because he had not been paid for his work to date. But presiding Judge David Hittner overturned that request.
Sir Allen had also sought to retain another high-profile attorney, Robert Luskin of Washington’s Patton Boggs.
But any representation by Patton Boggs would have been contingent on Sir Allen regaining access to some of his frozen funds, according to court documents.
“Mr Stanford is in limbo at the moment,’’ Mr Hilder said. “It’s a very uncomfortable place to be.’’
Mr Davis’s protégé, Laura Pendergest-Holt, Stanford Financial’s chief investment officer, is also facing criminal charges. She has pleaded not guilty, but it is expected the authorities will seek help from Mr Davis in her prosecution, as well.
Testifying against Sir Allen, Ms Pendergest-Holt and others is likely to be difficult for Mr Davis, given the portrait painted of the executives as tightly knit friendsand family.
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