CIO Gets Five-Year Sentence for Fraud

Allen Stanford’s Ex-CFO James Davis Gets 5-Year Sentence

By Laurel Brubaker Calkins and Andrew Harris, Bloomberg News,Jan 22, 2013

http://tinyurl.com/a3chqrc

Former Stanford Financial Group Co. finance chief James M. Davis was sentenced to five years in federal prison for his role in a 20-year, $7 billion international fraud scheme.

U.S. District Judge David Hittner in Houston also sentenced Davis, who faced as long as 30 years in prison, to three years of post-release probation. The court also imposed a $1 billion money judgment against Davis.

Former Stanford Financial Group Co. Chief Financial Officer James M. Davis was sentenced to five years in federal prison. Photographer: F. Carter Smith/Bloomberg

Prosecutors had sought a 10-year term for Davis, 64, who pleaded guilty to felony charges in 2009 and testified against financier R. Allen Stanford, who is serving a 110-year sentence in a federal prison in Florida. Davis’s attorney asked the judge to cap the sentence at four years, citing his client’s cooperation and early acceptance of responsibility.

“I’m not here telling your honor that Mr. Davis was a saint,” the attorney, David Finn, told Hittner today. “From our first meeting he has been remorseful, contrite and has tried to make amends for the harm he has done.”

Stanford’s business empire included the Antigua-based Stanford International Bank Ltd. which offered certificates of deposit and the Houston-based Stanford Group Co. brokerage that sold them. In a trial before Hittner last year, Stanford was found guilty of lying to investors about what the bank was doing with their money. Jurors found he had used more than $2 billion of it to finance a lavish personal lifestyle of private jets, yachts and mansions.

17,000 Victims

The scheme victimized more than 17,000 investors in the U.S. and elsewhere in the Americas. A federal court appointed receiver in a civil case filed against the bank in February 2009 this month asked for permission to begin distributing $55 million of the money recovered, representing about one percent of the estimated $5.1 billion lost.

Stanford is appealing his conviction.

Davis was the second-highest ranking member of the Stanford organization. He and Stanford roomed together while they were students at Baylor University in Waco, Texas. He pleaded guilty to conspiracy to commit wire, mail and securities fraud; mail fraud; and conspiracy to obstruct a U.S. Securities and Exchange Commission probe.

“I’m ashamed and I’m embarrassed,” Davis told the judge today. “I’ve perverted what was right and did wrong. I hurt thousands of investors, I betrayed their trust, also that of associates, neighbors and friends, my family and this court and this country. Everything that I was part of, I failed them and I’m sorry.”

Trial Testimony

Davis testified for 10 days during Stanford’s 2012 trial and for several additional days in the subsequent trial of the two top-ranking accountants in Stanford’s organization, who were also convicted.

Prosecutor Jason Varnado today cited that testimony and Davis’s investigative assistance in asking the court to impose a sentence of 10 years.

“Mr. Davis’s cooperation was outstanding,” Varnado said. “This cooperation is what we want to encourage. His sentence should reflect his model.”

The judge concurred, saying the punishment would reflect Davis’ early surrender and his effort to “educate the government.”

Hittner said he would recommend Davis be sent to a U.S. prison camp near his Memphis,Tennessee, home and gave him 60 days to surrender.

CIO Sentence

Stanford Chief Investment Officer Laura Pendergest Holt last year was sentenced to three years in prison after pleading guilty to obstructing a U.S. Securities and Exchange Commission probe.

The accountants, Gilbert Lopez and Mark Kuhrt, were found guilty in November for their roles in helping hide the fraud. Their sentencing is set for Feb. 14.

“It seems like nothing,” Angela Shaw, an advocate for Stanford investors, said of the five-year sentence after attending today’s hearing. Still, she said, Davis appeared to show remorse. “It seemed real, unlike everybody else in the case.”

The case is U.S. v. Davis, 09-cr-335, U.S. District Court, Southern District of Texas (Houston).