Wednesday, January 23, 2013

Corruption: Stanford International Bank CFO sentenced to five years in fraud scheme

U.S. Attorney’s Office 
Southern District of Texas

HOUSTON—James M. Davis, 64, formerly of Baldwyn, Mississippi, the former chief financial officer of Stanford International Bank (SIB) and Houston-based Stanford Financial Group, was sentenced today to five years in prison for his role in helping Robert Allen Stanford perpetrate a fraud scheme involving SIB and for conspiring to obstruct a U.S. Securities and Exchange Commission (SEC) investigation into SIB.

Today’s sentence was announced by U.S. Attorney Kenneth Magidson of the Southern District of Texas; Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; FBI Assistant Director Ronald T. Hosko of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration (DOL EBSA) Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell of the U.S. Postal Inspection Service (USPIS); and Chief Richard Weber, of Internal Revenue Service-Criminal Investigation (IRS-CI).

The prison sentence was imposed by U.S. District Judge David Hittner of the Southern District of Texas, who also sentenced Davis to serve three years of supervised release. As part of Davis’ sentence, the court also imposed a personal money judgment of $1 billion, which is an ongoing obligation for Davis to pay back criminal proceeds.

During the sentencing proceeding, Judge Hittner noted that Davis began cooperating with the government in early 2009, shortly after SIB’s collapse. Judge Hittner also noted that over the following three years, Davis provided substantial assistance to the authorities in the investigation and prosecution of others, including testifying at Stanford’s trial; testifying during the trial of Gilbert T. Lopez, Jr. and Mark J. Kuhrt, Stanford’s former chief accounting officer and global controller, respectively; and preparing to testify against Laura Pendergest-Holt, Stanford’s chief investment officer. Holt eventually pleaded guilty; Stanford, Lopez, and Kuhrt were convicted at trial. Stanford and Holt are currently serving 110 years and three years in prison, respectively. Lopez and Kuhrt are in federal custody and await sentencing, scheduled for February 14, 2013.

As part of his 2009 guilty plea, Davis admitted that he was aware of Stanford’s misuse of SIB’s assets, kept the misuse hidden from the public and from almost all of Stanford’s other employees, and worked to prevent the misuse from being discovered. In addition, Davis acknowledged that in January 2009, when the SEC sought testimony and documents related to SIB’s entire investment portfolio, he conspired with others in an effort to impede the SEC’s investigation and help SIB continue operating.

The investigation was conducted by the FBI, USPIS, IRS-CI, and DOL EBSA. The case against Davis is being prosecuted by Assistant U.S. Attorney Jason Varnado of the Southern District of Texas, Deputy Chief Jeffrey Goldberg, Deputy Chief William Stellmach, and Trial Attorney Andrew Warren of the Justice Department Criminal Division’s Fraud Section. The Justice Department also thanks the SEC for their assistance and cooperation in this matter.