Texas court hears details of $7B Ponzi scheme

HOUSTON - Jailed Texas financier R. Allen Stanford helped to fake profit numbers for his Caribbean bank and funnel millions of dollars of depositor funds to a secret Swiss bank account used to pay for personal expenses, bribes to regulators and employee bonuses, the man who was in charge of the tycoon's books told jurors Friday.

James M. Davis, the former chief financial officer for Stanford's companies, testified that the financier's bank never reported having an unprofitable year because he and Stanford worked together to fabricate figures for annual reports and other documents.

Prosecutors allege Stanford masterminded a fraud in which he bilked investors out of more than $7 billion in a massive Ponzi scheme centered on the sales of certificates of deposit, or CDs, from the bank on the island nation of Antigua.

Davis, 63, said the fake profit numbers were part of the ruse to hide the fraud and show that CDs purchased by investors were doing well and that the bank itself was on solid financial footing.

"Was Stanford uncomfortable with reporting too high a [profit] number?" prosecutor William Stellmach asked Davis, the prosecution's star witness.

"No," Davis said before a packed courtroom that included Stanford's mother, one of his daughters and two of the financier's ex-employees - Gilberto Lopez and Mark Kuhrt - who have also been indicted and are free on bond as they await trial in September.

Authorities allege Stanford used depositors' money to fund his businesses and his lavish billionaire lifestyle and pay bribes to regulators and auditors. They also allege he lied to depositors by telling them their funds were being safely invested.

Stanford's attorneys contend the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They have suggested Davis, who worked 21 years for Stanford, is behind the fraud.

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