HOUSTON, Feb 3 (Reuters) - Texas financier Allen Stanford drew on a secret Swiss bank account for personal
expenses like yacht maintenance and to pay bribes, the
government's top witness said at Stanford's fraud trial on
Friday.
Stanford, 61, is accused of bilking thousands of investors
out of their savings by selling fraudulent certificates of
deposit through his bank in the Caribbean. Prosecutors say the
$7 billion Ponzi scheme is one of the biggest white collar
crimes since Bernard Madoff's scam. Stanford has pleaded not
guilty to all charges.
"The monies flowed from Stanford International Bank CDs to
this slush account at SocGen," former Stanford Chief Financial
Officer James Davis told jurors. "It was a slush fund."
Davis, 63, said Societe Generale account number 108731 was
known only to himself and to Stanford. Stanford tapped the
account regularly for millions of dollars at a time to pay for
expenses like maintenance of his fleet of private jets and his
100-foot yacht, the "Sea Eagle."
As Davis testified, Stanford sat, head down, taking notes.
Davis is the only person among those charged in the alleged
Ponzi scheme who has pleaded guilty. He is the government's star
witness.
Prosecutors accuse Stanford of misleading investors by
telling them CD proceeds were invested in safe financial
instruments like blue-chip stocks and bonds. Instead, Stanford
used funds for illiquid investments like Caribbean real estate
and start-up companies starved for capital, prosecutors said.
Asked why Stanford deposited funds from the Swiss account
into an account in Antigua, Davis said it was partly to pay
bribes to Leroy King, a regulator in Antigua, where Stanford's
bank was based.
"He said that, for one purpose, it was to pull cash out to
pay bribes to the regulators, Lee King," Davis said.
Davis also testified that profit figures attributed to the
bank's operations and reported to investors were made up by
Davis and approved by Stanford.
"Did Mr. Stanford know the profit was a fake?" asked federal
prosecutor William Stellmach.
"Yes, he did," Davis replied.
Davis testified that the bank "always" reported an annual
profit on paper, but never actually made a profit.
When asked why the bank needed to show a profit in annual
reports distributed to investors, Davis said: "Mr. Stanford said
if there was no profit, you could not sell a CD based on a bank
that was losing money."
The profit had be "reasonable," Davis said, based on global
financial conditions.
"My instructions were clear from the beginning: We report a
profit," Davis said.
Davis also testified about numerous promissory notes
totaling hundreds of millions of dollars that Stanford created
to show that money he was taking from the bank would be
considered loans, rather than income, on the advice of a tax
consultant.
Officials at the bank were unaware of the promissory notes,
which were not disclosed in annual reports to investors, Davis
said.
And Stanford never repaid the notes, Davis testified.
(Reporting by Anna Driver)
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