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More Casualties from Stanford Mess

The government asked jurors to reject claims by ex-Chief Accounting Officer Gilbert Lopez, 70, and former Global Controller Mark Kuhrt, 40, that they were duped by Stanford and his finance chief into creating false financial statements, which investors relied on to buy $7 billion of fraudulent certificates of deposit (CDs) from Antigua-based Stanford International Bank (SIB).

“Gil Lopez and Mark Kuhrt were faced with the same choice over and over again, to either help Allen Stanford lie to his customers and misuse their money, or say ‘I don’t want to be part of it,”’ prosecutor Jeffrey Goldberg said during closing arguments in Federal Court on Wednesday. The men chose to “keep it secret and actively work to keep others from finding out about it.”

Lopez and Kuhrt, who went on trial on Oct. 17, are the last two Stanford executives to be criminally tried for their roles in a Ponzi scheme built on bogus CDs. Early investors were paid above-market returns with funds taken from later investors, and the accountants helped cover up SIB’s insolvency for years before US securities regulators seized the operation in early 2009 on suspicion of fraud, prosecutors said.

Appealing Verdict

Stanford, 62, was convicted in March of masterminding the fraud scheme and is serving a 110-year sentence at a Federal Prison in Florida. He is appealing the verdict and his sentence.

Federal prosecutors told jurors that Lopez and Kuhrt meticulously tracked about $2 billion Stanford “sucked out” of the bank to fund risky private ventures including Caribbean airlines, resort developments and international cricket tournaments. The accountants didn’t disclose these loans or additional funds that Stanford took to underwrite a lavish personal lifestyle of private jets, yachts and waterfront mansions, the government said.

Stanford told CD buyers their money was invested in conservative liquid assets and overseen by international money managers. Evidence at his jury trial showed that Stanford and his top deputy, finance chief James M. Davis, secretly controlled more than 80 percent of the bank’s investments, much of which was loaned to Stanford or used to underwrite his other businesses.

Investment Returns

Jurors heard Lopez, Kuhrt and Davis testify during the four-week trial. In 2009 Davis pleaded guilty to his role in the scheme, testified against Stanford at his trial, and is awaiting sentencing.

Lawyers for Lopez and Kuhrt told jurors the accountants relied on investment returns provided by Stanford and Davis, and never intended to create false financial records or break any laws. The accountants also lobbied Davis to disclose Stanford’s borrowings to investors and were overruled, they said.

The accountants’ lawyers said Stanford was consolidating the private ventures he funded with investors’ cash onto the bank’s balance sheet in late 2008 and early 2009. The accountants were prevented from completing the rollup by the government seizure of Stanford’s companies, their lawyers said.

If convicted of all charges, each of the men faces a possible sentence of more than 20 years in prison.

Re-printed from Bloomberg Business News



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