Stanford Financial Group CFO Pleads Guilty to Charges Related to $7 Billion Scheme...

Stanford Financial Group CFO Pleads Guilty to Charges Related to $7 Billion
Scheme to Defraud Investors

WASHINGTON, Aug. 27 /PRNewswire-USNewswire/ -- James M. Davis, 60, the former
chief financial officer of Houston-based Stanford Financial Group (SFG),
pleaded guilty today to fraud and obstruction charges related to a $7 billion
scheme to defraud investors, Lanny A. Breuer, Assistant Attorney General of
the Criminal Division, and Tim Johnson, the U.S. Attorney for the Southern
District of Texas, announced.

Davis was charged in a criminal information, filed on June 18, 2009, with
conspiracy to commit mail, wire and securities fraud; mail fraud; and
conspiracy to obstruct a U.S. Securities and Exchange Commission (SEC)
investigation. The criminal information also seeks forfeiture of up to $1
billion in fraud proceeds.

According to the plea documents, Davis admitted that as part of the scheme, he
and his co-conspirators defrauded investors who purchased approximately $7
billion in certificates of deposit (CDs) administered by Stanford
International Bank Ltd. (SIBL), an offshore bank located on the island of
Antigua. Davis further admitted that he and his co-conspirators misused and
misappropriated most of those investor assets, including by diverting more
than $1.6 billion into undisclosed personal loans to a co-conspirator, while
misrepresenting to investors SIBL's financial condition, its investment
strategy and the extent of its regulatory oversight by Antiguan authorities.

According to the plea documents, Davis and his co-conspirators began in 1990
to make false entries into the general ledgers of SIBL relating to revenues
and revenue balances. Despite this false reporting, Davis and his
co-conspirators promoted SIBL's investments as being "well-managed, safe and
secure" and touted in SIBL's annual reports false year-by-year percentage and
dollar increases in the purported value of SIBL's earnings, revenue and
assets.

Davis further admitted in the plea documents that he and his co-conspirators
used bogus revenue numbers for each year to generate the desired "Return on
Investment" that was reported to investors. These "reverse engineered" numbers
were developed using a secret instruction sheet that Davis admitted was
provided to employees in SFG's accounting group with instructions on to how to
make changes to the spreadsheets to generate the false adjusted revenue
figures.

Davis also admitted in the plea documents that in order to effectuate the
scheme, misrepresentations were made to investors about who managed SIBL's
entire non-cash portfolio of assets. Specifically, Davis admitted that 80
percent of SIBL's portfolio, internally referred to as "Tier III," was not
managed by global money managers, as was represented to investors, but was
actually made up of illiquid investments. These included at least $2 billion
in personal loans to a co-conspirator, which were disguised as investments,
and overvalued real and personal property, including interests in real estate
that SIBL had acquired in 2008 for approximately $65 million, but was
ultimately valued on SIBL's books at $3.2 billion. Davis admitted that none of
these facts were disclosed to investors.

According to the plea documents, Davis admitted that he and his
co-conspirators promoted the sale of SIBL CDs by representing to SIBL CD
investors that SIBL's operations and financial condition were being
scrutinized by Antigua's bank regulator, the Financial Services Regulatory
Commission (FSRC). Davis also admitted that he knew these statements to be
false, because he and his co-conspirators had funneled bribe payments to a
bank regulator, who is also an accused co-conspirator, in order to ensure that
Antiguan regulators would not properly examine the financial statements of
SIBL.

Also according to the plea documents, from 2005 through February of 2009,
Davis admitted that he and his co-conspirators made a number of
misrepresentations to the SEC in order to impair and impede the SEC's
investigation.

Davis has also agreed to the entry of a preliminary order of forfeiture in the
amount of $1 billion.

In related cases, Robert Allen Stanford, chairman of SFG; Laura
Pendergest-Holt, the chief investment officer of SFG; Gilberto Lopez, SFG's
chief accounting officer; Mark Kuhrt, SFG's global controller; and Leroy King,
the administrator and chief executive officer of the FSRC, were indicted on
June 18, 2009, on fraud and obstruction charges related to the scheme. Each
are charged with conspiracy to commit mail, wire and securities fraud; wire
fraud; mail fraud; and conspiracy to commit money laundering. In addition,
Stanford, Pendergest-Holt and King are charged with conspiracy to obstruct an
SEC investigation and obstruction of an SEC investigation. A trial date has
not been set.

Also, on June 19, 2009, the U.S. District Court for the Southern District of
Florida unsealed an indictment charging Bruce Perraud, a former SFG global
security specialist at SFG's Ft. Lauderdale, Fla., office, with one count of
destruction of records in a federal investigation. Perraud is scheduled to
stand trial on Sept. 21, 2009.

An indictment is merely an allegation. Defendants are presumed innocent until
and unless proven guilty in a court of law.

The case is being investigated by the FBI's Houston Field Office, Internal
Revenue Service - Criminal Investigation and the U.S. Postal Inspection
Service. The case is being prosecuted by individuals from the Criminal
Division's Fraud Section, including Paul E. Pelletier, Principal Deputy Chief;
Jack Patrick, Senior Litigation Counsel; Matthew Klecka, Trial Attorney; and
Allan Medina, Fraud Section Law Clerk, as well as Gregg Costa, Assistant U.S.
Attorney for the Southern District of Texas.

The Criminal Division's Asset Forfeiture and Money Laundering Section
continues to assist the trial team by working with our foreign counterparts to
facilitate the freezing of assets in the United Kingdom, Canada, Switzerland
and other countries. The Criminal Division's Office of International Affairs
and the U.S. Attorney's Office for the Southern District of Florida also
continue to provide assistance in this matter.

SOURCE U.S. Department of Justice

U.S. Department of Justice Office of Public Affairs, +1-202-514-2007,
+1-202-514-1888 (TDD)