Make us your home page

Stanford CFO pleads guilty

James M. Davis, center, former chief financial officer of now-defunct Stanford Financial Group, with his attorney, David Finn, leaves the federal courthouse in Houston on Thursday after pleading guilty to three counts in the investment fraud.

Associated Press

James M. Davis, center, former chief financial officer of now-defunct Stanford Financial Group, with his attorney, David Finn, leaves the federal courthouse in Houston on Thursday after pleading guilty to three counts in the investment fraud.

HOUSTON — The former finance chief for jailed Texas financier R. Allen Stanford said his boss created a business empire where "blood oaths" were taken to secure loyalty, bribes were paid from a secret Swiss bank account and investor profits were more fiction than financial genius.

New details about how Stanford, through his Houston-based Stanford Financial Group, allegedly bilked investors out of $7 billion were made public Thursday after James M. Davis, his former chief financial officer, became the first person to plead guilty in the case.

Davis pleaded guilty in Houston federal court to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation.

Davis, 60, made only a brief statement after his hearing.

"I did wrong. I'm sorry. I apologize. I take responsibility for my actions," he told reporters outside the courthouse.

But Davis' 23-page plea agreement provided new details of how Stanford's business began; how he, Stanford and others manufactured profits; and how panic set in as they tried to hold off federal investigators who were closing in on their scheme.

Asked why Davis defrauded investors for years, David Finn, his attorney, said it was greed.

To protect his scheme, Stanford paid more than $200,000 in bribes, as well as $8,000 for two tickets to the Super Bowl in Houston in 2004, to Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission. Stanford was a business icon in the Caribbean island nation.

Davis said Stanford secured King's loyalty in a most unusual way. "Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC. … This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of the bank," according to Davis' plea agreement.

Stanford had Davis get the bribe money from a secret Swiss bank account that was funded by investors' money. The account was also used to make bribes to the bank's outside auditor.

When the SEC began investigating Stanford's bank and contacted King by letter in 2005 and 2006 about its probe, Stanford and others in his company helped King write false and misleading response letters.

Stanford hospitalized

On Thursday, R. Allen Stanford, accused of orchestrating a $7 billion investment Ponzi scheme, was taken from the privately run prison where he is being held outside Houston to a local hospital with an irregular heartbeat and high pulse. Stanford had been set to appear in court for a hearing on whether he can get a new attorney. U.S. marshals spokesman Alfredo Perez said Stanford was undergoing tests at the hospital but declined to give more details.

Stanford CFO pleads guilty 08/27/09 [Last modified: Thursday, August 27, 2009 8:44pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.

Join the discussion: Click to view comments, add yours

  1. Carrollwood fitness center employs scientific protocol to help clients


    In 2005, Al Roach and Virginia Phillips, husband and wife, opened 20 Minutes to Fitness in Lakewood Ranch, and last month they opened the doors to their new location in Carrollwood.

    Preston Fisher, a personal fitness coach at 20 Minutes To Fitness, stands with an iPad while general manager/owner Angela Begin conducts an equipment demonstration. The iPad is used to track each client's information and progress. I also included one shot of just the equipment. The center recently opened in Carrollwood. Photo by Danielle Hauser.
  2. Olive Tree branches out to Wesley Chapel


    WESLEY CHAPEL — When it came time to open a second location of The Olive Tree, owners John and Donna Woelfel, decided that Wesley Chapel was the perfect place.

    The Olive Tree expands its offerings of "ultra premium?€ extra virgin olive oils (EVOO) to a second location in Wesley Chapel. Photo by Danielle Hauser.
  3. Massachusetts firm buys Tampa's Element apartment tower

    Real Estate

    TAMPA — Downtown Tampa's Element apartment tower sold this week to a Massachusetts-based real estate investment company that plans to upgrade the skyscraper's amenities and operate it long-term as a rental community.

    The Element apartment high-rise at 808 N Franklin St. in downtown Tampa has been sold to a Northland Investment Corp., a Massachusetts-based real estate investment company. JIM DAMASKE  |  Times
  4. New York town approves Legoland proposal


    GOSHEN, N.Y. — New York is one step closer to a Lego dreamland. Goshen, a small town about fifty miles northwest of the Big Apple, has approved the site plan for a $500 million Legoland amusement park.

    A small New York town, Goshen approved the site plan for a $500 million Legoland amusement park. Legoland Florida is in Winter Haven. [Times file  photo]
  5. Jordan Park to get $20 million makeover and new senior housing

    Real Estate


    Times Staff Writer

    ST. PETERSBURG —The St. Petersburg Housing Authority, which bought back the troubled Jordan Park public housing complex this year, plans to spend about $20 million to improve the 237-unit property and construct a new three-story building for …

    Jordan Park, the historic public housing complex, is back in the hands of the St. Petersburg Housing Authority. The agency is working to improve the 237-unit complex. But the latest plan to build a new three-story building for seniors will mean 31 families have to find new homes. [LARA CERRI   |   Tampa Bay Times]