In testimony today, forensic accountant Alan Westheimer said fraud defendants Mark Kuhrt and Gil Lopez told their superior, James Davis, chief financial officer of the Stanford Financial Group, that the loans should spelled out in the company’s 2006 annual report.
Kuhrt, former Stanford Financial global controller and Lopez, former accounting chief, hired Westheimer to interview them and help present their case because they have invoked their Fifth Amendment rights against self-incrimination.
In his testimony today, Westheimer described Kuhrt and Lopez as “mid-level accounting managers” who discharged their obligations by making the recommendation to Davis.
Davis has pleaded guilty to charges in the case and is cooperating with prosecutors.
The indictment alleges that investors were told the CDs were invested in liquid assets and easily could be converted to cash, when some of the investors’ money actually went to Stanford and his ventures.
International law requires the bank to report such “related party transactions,” Westheimer testified. Kuhrt and Lopez knew this and told Davis the information should be in the financials.
“They told me they had absolute faith in Mr. Davis,” Westheimer said, and believed he was “carrying out is responsibilities appropriately.”
More from AP: It’s a wrap. Lets wait for her ruling.
U.S. District Judge Nancy Atlas on Friday wrapped up a four-day hearing in which she listened to testimony detailing Stanford’s financial dealings at his now defunct companies.
Attorneys for the insurer, Lloyd’s of London, argued that evidence, including the bank’s annual statements and e-mails, showed that Stanford misused bank deposits for personal loans and two ex-executives helped hide this through false records, which violates the insurance policy’s money laundering clause.
If Atlas determines Stanford and Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller, committed money laundering, one of the charges they face in a federal indictment, they might have to pay back the millions of dollars they have so far received for their legal bills. Atlas said she would issue her ruling at a later date.
“Mr. Kuhrt and Mr. Lopez conspired for years with … Mr. Stanford to cook the books and rob investors of billions of dollars,” Barry Chasnoff, an attorney for Lloyd’s, said Friday during closing arguments in the hearing.
A fraud examiner hired by Lloyd’s, testified this week that Stanford secretly used billions of dollars in bank deposits as loans, which prosecutors say helped pay for his lavish lifestyle, and that Stanford inflated the value of real estate holdings to hide the loans and make the bank appear profitable.
However, Stanford’s attorneys argued the once flamboyant billionaire ran a legitimate business that helped develop Antigua. They acknowledged Stanford was not a “hands on guy” and didn’t know all the inner workings of his more than 100 companies but contended he didn’t misuse bank deposits as personal loans and that this money actually went to support other companies and investments.
“Maybe he was negligent, maybe he should have been a little more careful. But whatever he did does not rise to the level of criminality,” said Bob Bennett, one of Stanford’s attorneys. “Mr. Stanford was not at the center of anything illegal or wrong.”
Attorneys for Kuhrt and Lopez said their clients were not aware of any fraud at the bank and informed others about concerns they had with the bank’s operations.
“If there was a fraud committed here, it’s a fraud we were totally unaware of and totally in no way did we participate in,” said Richard Kuniansky, Kuhrt’s attorney.
Lopez’s attorney, Jack Zimmermann, said there was no proof his client knew bank records were false and that Lopez was duped just like the bank’s investors.
Stanford, Kuhrt and Lopez, who all declined to testify, have alluded that the real culprit was James Davis, Stanford’s former chief financial officer, who has pleaded guilty in the case and is cooperating with prosecutors.
In his plea agreement, Davis detailed how he, Stanford and others manufactured profits and that he and others artificially inflated the bank’s assets to hide that Stanford was using bank deposits as personal loans.
Alan Westheimer, a fraud examiner hired by Kuhrt and Lopez, testified he found no proof the two ex-executives manipulated bank records to hide the alleged fraud.
The insurer’s case mirrors the accusations made against Stanford and the two ex-executives by prosecutors in the criminal case in Houston and by the Securities and Exchange Commission in a lawsuit it filed in Dallas.
The hearing gave a preview of some of the defenses Stanford and the ex-executives might present at their criminal trials. Prosecutors and FBI agents working on the criminal case attended the hearing.