Written by Tahna Weston (Antigua Sun)
The former head of the Financial Services Regulatory Commission (FSRC), Leroy King, allegedly sought advice from Sir Allen Stanford’s legal counsel pertaining to questions being raised by the Eastern Caribbean Central Bank (ECCB).
Director of Public Prosecutions (DPP) Anthony Armstrong made mention of the matter while making submissions in the extradition matter before Chief Magistrate Ivan Walters on Monday (25 Jan).
King has been charged by the Securities and Exchange Commission (SEC) with taking hundreds of thousands of dollars in bribes to ignore wrongs in relation to the alleged Sir Allen Stanford $8 billion Ponzi scheme. He is facing ten counts of conspiracy to commit mail fraud, seven counts of conspiracy to commit wire fraud, conspiracy to obstruct the SEC, and conspiracy to launder illegal proceeds.
The SEC’s complaint alleges that King facilitated the Ponzi scheme by ensuring that the FSRC conducted sham audits and examinations of Stanford International Bank Limited’s (SIBL’s) books and records. They also allege that in exchange for bribes paid to him over several years, King made sure that the FSRC did not examine SIBL’s investment portfolio.
Armstrong said that King faxed letters which were in his handwriting to Maurice Alvarado, Stanford’s Financial Company’s (SFC) general legal counsel. The letters were faxed to Alvarado at the SFC Houston office. The correspondences sent to the legal counsel were letters from the Eastern Caribbean Central Bank (ECCB) addressed to King regarding affiliate companies of the Bank of Antigua (BOA), which speaks to the supervision of SIBL and Stanford Trust Company Limited STCL).
Armstrong said that in one of the hand-written letters King writes, “My good friend” (referring to Alvarez.)
In another letter written to the attorney, he (King) again writes, “To America’s best and greatest attorney. Maurice, I am sending you two versions – one short and one long with a little more knockout punch. I prefer the shorter version, a little more subtle and diplomatic.” It was further quoted in that letter by King to Alvarez, “Any other idea? Must conclude tomorrow. Will send you a package to include the annual report for SIBL and STCL.
“I am sending a message to these guys that the institutions concerned are not run of the mill, they are great quality institutions and the numbers speak for themselves. Please do not bill me (laugh) Thanks a million, Lee (short for Leroy.)”
The DPP asked the court why King would be sending these letters from the ECCB concerning SIBL and STCL to his “good friend Maurice Alvarado” when he is refusing to disclose any information to the US regulatory body (the SEC).
On 23 Feb., 2007, King wrote to James Davis seeking further guidance as to how to respond to the ECCB’s request.
Armstrong also revealed that King wrote a letter to Davis under the header “Private and confidential” in which he asked “How can we fix this?”
The DPP told the court that Davis admitted to seeing certain monies being passed and when he (Davis) inquired about the sums, he was told that these were monies to be paid to King. Davis said the payments to King were done by cash.
Armstrong told the court that there are questions about cash deposits which were made to King’s account at Bank of America and JP Morgan Chase. The DPP pointed out that there is evidence to support the claim made by Davis that Stanford would provide regular bribe payments to King in exchange of him turning a blind eye to the alleged Ponzi operation. According to Armstrong, this is evident from the cash deposits which were made to King’s accounts in Atlanta, Georgia at the two banks.
He said that between 2 Feb. 2005, to 2 Feb., 2009, there were regular cash deposits made to the Bank of America account from as much as US$15,000 to as little as US$1,800, whilst at his account at JP Morgan Chase there were similar regular cash deposits made from 9 Jan., 2003, to 4 Feb., 2009, from as high as US$9,700 to US$2,000.
The DPP told the court that an independent auditor conducted investigations into SIBL’s financial statements among other documents and determined that the large investments being alleged did not exist.
However, Armstrong said that King reported to the SEC officials that SIBL was solvent and a good quality institution which was fully compliant with the requisite offshore banking regulations.
The DPP quoted from the report of the auditor, senior managing partner Karyl Vancassel of FTI Consulting Incorporated. In it Vancassel outlined, “In its monthly report issued in Dec., 2008, SIBL claimed to have had 8.6 billion in total assets and spent 8.4 billion in investment portfolios. FTI’s analysis to date reveals that the value of all virtual non-cash assets listed on 31 Dec., 2008, SIBL’s balance sheet was substantially overstated.”
The auditors concluded that any third-party analysis of SIBL’s actual internal records, similar to the type that FTI conducted, would have indicated the vast majority of investments (listed in SIBL’s report) did not exist or were grossly overstated as of 30 Sept., 2008.
Armstrong also referred to the evidence of James Davis in which he stated that in the third week of January last year (2009) he (Davis) met Leroy King in Antigua and that he (King) appeared very stressed. Davis said at that time SIBL was facing increasing scrutiny from the SEC, and added that he (Davis), Sir Allen and Laura Pendgast had received subpoenas from the SEC.
According to Armstrong, King told Davis that he (King) had been contacted by the SEC and asked him (Davis) if “We are going to make it”, to which Davis said he understood what King asked to mean whether the fraud that they had been engaged in was going to be exposed. Davis said he told King he thought they were going to be alright.
The DPP invited the court to consider that if King was not part of the conspiracy to defraud potential investors, then “who is he referring to as we and why would he be concerned if we are going to make it.” Davis said that King and Stanford were close friends.
Armstrong revealed that Stanford had handed to King an $8,000 Super Bowl ticket, which he said was part and parcel of the bribes. He added that was the comfort of being an active participant of the alleged Ponzi scheme.
King had a trading account with Charles Schwab and he later closed the account and withdrew the funds of $410,000 and $150,000.
Armstrong said that there was no written statement to support reasons why King took the money from trading account.
He admitted, though, the United States (US) government is not claiming that those proceeds are from any illegal activity.
Armstrong said that the monies, however, would have been subjected to forfeiture proceedings. He said King was given “notice of forfeiture” on the indictments that were filed in June, last year.
King’s attorney, Dane Hamilton QC, objected at this stage and told the court that there were no indictments (filed against King) at the time (when the monies were withdrawn).
Armstrong responded that King would have tried to minimise such consequence (forfeiture) in light of what was going on in Jan., 2009. He said an offence can be committed by an act of commission or omission.
According to Armstrong on 21 June, 2005, a correspondence was sent by King to Elizabeth Jacobs, deputy director of Securities and Exchange Commission (SEC), notifying her that any further investigations into SIBL was “totally unwarranted.”
“Why would he (King) say so if he was not investigating SIBL?” Armstrong inquired.