Accountant details Stanford investment spending

BY JUAN A. LOZANO

Friday, February 03, 2012

AN accountant who worked for tycoon R Allen Stanford testified Wednesday that he grew increasingly concerned that the financier wouldn't be able to return the US$2 billion he secretly borrowed from investors to pay for business and personal expenses, including millions to maintain his yachts and private jets.

Henry Amadio told jurors at Stanford's federal fraud trial in Houston that various businesses into which Stanford sunk money were basically a money pit that ate up investor dollars and didn't turn a profit. The money Stanford borrowed included US$330 million for two airlines and a US$20- million prize for a cricket tournament, Amadio said.

"As it continued to grow ... the concern was: Was it (investors' money) ever going to be paid back?" Amadio said.

Prosecutors allege Stanford masterminded a fraud in which he bilked investors out of more than $7 billion in a massive Ponzi, or pyramid, scheme centred on the sales of certificates of deposit, or CDs, from his bank on the Caribbean island nation of Antigua. Authorities allege he used depositors' money to fund his businesses as well as his lavish billionaire lifestyle and that 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 James Davis, the ex-chief financial officer for the financier's company, is behind the fraud. Davis has pleaded guilty in the case and is expected to be called by prosecutors this week.

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

Amadio said Davis also expressed concern about the growing amount of CD funds that kept Stanford's businesses afloat, even making the comment on two occasions that "the emperor has no more clothes".

"I interpreted that (comment to mean) that Mr Stanford didn't have any money to cover these debts," Amadio said.

The accountant told jurors the profits the bank purported it was making were not enough to cover the US$2 billion Stanford had borrowed by 2009.

"Was it even close?" prosecutor Gregg Costa asked.

"No," replied Amadio, who worked seven years for the Stanford Financial Group Co in Houston.

Amadio detailed for jurors the investor funds the financier allegedly poured into his many companies. They included US$30 million for expenses related to Stanford's six private jets; more than US$346 million for construction projects on Antigua; US$11 million for a newspaper on the island; nearly US$19 million to maintain Stanford's yachts.

Amadio also testified that in 2006, he was ordered to remove various documents he prepared, including a monthly report that tracked the amount of CD deposits going to Stanford's businesses, from the company's network drive and place them on an external drive and that this information would be held at the bank in Antigua.

Amadio said he was not aware that around the time this request had been made, the US Securities and Exchange Commission had begun investigating.

The accountant described a working environment full of secrecy where "everything was on a need to know basis" and where he could be fired if the monthly reports he prepared tracking investor funds were made public.

Amadio said one of the secrets he stumbled onto was a Swiss bank account with Societe Generale belonging to Stanford that detailed payments made to the outside auditor for Stanford's bank. Bank statements shown to jurors indicated payments of US$100,000 and US$125,000 made to the auditor in 2005 and 2006. Prosecutors allege Stanford used the account to bribe the auditor with millions of dollars to hide the bank's fraud.

Stanford was once considered one of the United States' wealthiest people, with an estimated net worth of more than US$2 billion. He's been jailed without bond since being indicted in 2009.

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Accountant details Stanford investment spending