The former chief financial officer of R. Allen Stanford's $7 billion Ponzi scheme was sentenced to a five-year prison term for his role in the scheme. James Davis, 64, began cooperating with authorities soon after Stanford's scheme unraveled and played an instrumental role in the successful prosecutions of several Stanford associates, including Stanford himself. United States District Judge David Hittner seemed to recognize the value of this cooperation in making a downward departure from the 10-year sentence urged by prosecutors. Davis pled guilty in April 2009 to charges of conspiracy to commit mail/wire/securities fraud, mail fraud, and conspiracy to obstruct an SEC investigation, but his sentencing was delayed while he continued to cooperate with authorities.
Stanford masterminded a $7 billion Ponzi scheme that purported to offer above-average returns through the sale of supposedly-safe certificates of deposit ("CD's"). The scheme spanned several decades, and attributed its ability to pay the unusually-high returns to Stanford's unique investment strategy. However, the operation was nothing more than a massive Ponzi scheme that ranks second only to Bernard Madoff's infamous scheme. Stanford used investor funds for a variety of unauthorized purposes, including funding a cricket team and making millions of dollars in personal loans. Stanford was convicted and received a 110-year sentence in June 2012.
Davis played a key role in helping Stanford perpetuate his massive fraud. In his position as CFO, he oversaw the operations of Stanford International Bank ("SIB"), which included making false ledger entries to misrepresent SIB's banking performance to regulators. Originally chartered in Montserrat, Davis was instrumental in moving operations to Antigua after he became concerned over heightened scrutiny from regulators. Over the course of the scheme, Davis conspired with other employees to manipulate SIB financials to consistently show profits from operations and convince investors of the safety of the CD's. As a result of Stanford's blood oath with Antiguan banking regulators, Davis also assisted in making bribe payments to avoid Antiguan oversight.
Davis is the latest - and likely last - to be sentenced from the government's largely successful prosecution of Stanford co-conspirators. Besides Stanford, prosecutors also obtained the convictions of chief investment officer Laura Pendergest-Holt and accounting executives Gilbert Lopez Jr. and Mark Kuhrt.
In addition to his sentence, Judge Hittner also ordered Davis to pay $1 billion in rstitution to defrauded investors.
A copy of Davis's plea agreement is here.