"It wasn't a fraud. It wasn't a pie in the sky. It was an investment he hoped would make a real return," Robert Scardino, one of Stanford's attorneys, said as he prepared to defend the financier at his fraud trial in Houston federal court.
Prosecutors, who are set to present their first witness Wednesday, contend the financier ruined the dreams of people who deposited money in his Caribbean bank as part of efforts to save for retirement or for their children's education. Stanford is on trial for 14 counts, including wire and mail fraud.
"He told them lie after lie after lie. He stole from them, taking their hard earned savings so he could live the lavish lifestyle of a billionaire," federal prosecutor Gregg Costa told jurors Tuesday during his opening statement in Stanford's trial.
Stanford faces up to 20 years in prison if convicted. The 61-year-old is expected to testify during the trial, which will likely last at least six weeks.
Costa told jurors that Stanford's business empire was built on a scheme centered on sales of certificates of deposit from a bank Stanford owned on the Caribbean island of Antigua, which promised substantially higher rates of return on the CDs than U.S. banks and promised investors their money was safe.
The prosecutor said Stanford instead sank investors' money in a variety of his own businesses, including two airlines, and that many of these businesses failed. Costa also accused Stanford of using up to $2 billion of investors' money as personal loans to buy homes and yachts and fund cricket matches.
"He treated depositors' savings like it was his own personal piggy bank," he told the jury.
Once considered one of the United States' wealthiest people, with an estimated net worth of more than $2 billion, Stanford became so prominent in his adopted country of Antigua, where he took on dual citizenship, that he was knighted by the Caribbean island's government and became known as "Sir Allen." His financial empire spanned the U.S., the Caribbean and Latin America.
Stanford's business empire was run through the Houston-based Stanford Financial Group, but at its heart was Antiguan-based Stanford International Bank.
Prosecutors say Stanford used money from the sale of the CDs, which were sold to clients from more than 100 countries, to pay off those purchased earlier once they matured and to support his other businesses.
Costa said more than $300 million of depositors' savings was funneled to two airlines Stanford ran in the Caribbean, $20 million to an entity whose purpose was to pay expenses related to Stanford's yacht and $37 million to a company whose purpose was to promote cricket tournaments in which Stanford gave out million-dollar prizes.
The prosecutor said Stanford and three former executives at his companies covered up their misdeeds by fabricating the bank's records and bribing Antiguan regulators and auditors with more than $3 million and with perks such as Super Bowl tickets.
Stanford's scheme fell apart in 2008 when his bank was running out of money and investors couldn't be paid back, Costa said.
But Scardino told jurors the financier was a clever businessman who for 22 years paid investors every penny he promised them. Scardino said Stanford didn't need to steal depositors' money and use it as personal loans.
Scardino suggested that the ex-chief financial officer for Stanford's company, James Davis, is the real culprit behind the financial fraud alleged by prosecutors. Davis has pleaded guilty and is expected to testify on behalf of prosecutors during the trial.
Scardino said Stanford had been paying back his investors but that stopped when authorities seized his companies and began selling them off.
Stanford has been in jail since his arrest 2 1/2 years ago. His trial was delayed after he was declared incompetent due to an addiction he developed in jail to an anti-anxiety drug and he underwent treatment. He was also evaluated for any long-term effects from being injured in a September 2009 jail fight. Stanford was declared fit for trial last month.
Once Antigua's richest citizen, primary banker and its largest private employer, Stanford had his assets seized and now has court-appointed attorneys.
The three other indicted former executives are to be tried in June. A former Antiguan financial regulator was also indicted, and he awaits extradition to the U.S.
Stanford and the former executives are also fighting a Securities and Exchange Commission lawsuit filed in Dallas that makes similar allegations.