Accused swindler Allen Stanford was hospitalized with a high pulse rate on Thursday, hours before he was to appear at a court hearing where his former top aide entered the first guilty plea in a $7 billion fraud case.
James Davis, 60, pleaded guilty to three felony counts as part of a plea deal with federal investigators. Davis was the former chief financial officer of Stanford International Bank, which is accused of swindling investors out of $7 billion through a Ponzi scheme involving certificates of deposit issued by Stanford's Antigua bank.
Davis' plea deal signals that the U.S. government is likely to bring more charges in the Stanford case, said David Finn, Davis' lawyer.
Stanford, 59, missed a court appearance to decide his legal representation because he was hospitalized. The once high-flying financier and cricket promoter was Davis' long-time friend and his former college roommate at Baylor University in Waco, Texas,
At 5:30 a.m. CDT (1030 GMT) Mr. Stanford was found to have an irregular electrocardiogram and an extremely high pulse rate, U.S. District Judge David Hittner said at a hearing. He was taken to Conroe Regional Medical Facility.
Dick DeGuerin, Stanford's lawyer, said his client has a history of high blood pressure and has had trouble getting medication at the Conroe, Texas, jail where he is being held awaiting trial.
The Conroe Regional Medical Facility declined to release any further information about Stanford.
Stanford is the second high-profile fraud case to shake public confidence in Wall Street and the U.S. financial regulatory system, after veteran financier Bernard Madoff pleaded guilty to a massive Ponzi scheme that could have cost investors as much as $65 billion.
The plea deal will put tremendous pressure on Stanford to plead guilty, said Tom Melsheimer, a former federal prosecutor now practicing in Dallas.
Clearly, this is bad news for Mr. Stanford, Melsheimer said. In a financial fraud case cooperating insiders are always key to the government's proof. Davis is likely to take the stand and testify against Stanford, he said.
Davis, who has been cooperating with government prosecutors for the last six months, has signed a plea agreement. As part of that deal, he has agreed to forfeit $1 billion, which will allow the government to seize any assets it might recover.
According to the plea deal released by the U.S. Justice Department, Davis admitted to falsifying financial records from Stanford's Antigua bank starting in 1990.
Stanford asked Davis to falsify entries in the bank's general ledger to report false revenues and reverse-engineer portfolio balances, according to the document.
Stanford bribed Antigua's top financial regulator, Leroy King, to look the other way and mislead the U.S. Securities and Exchange Commission, the document said.
The plea agreement describes a blood oath that Stanford performed with King in 2003 where the Antiguan regulator agreed that he would not kill the business of Stanford's bank in return for bribes. King generally referred to Stanford as Big Brother, the document said, and Stanford lavished King with SuperBowl tickets and flights on his private jets.
In 2008, in an attempt to cover up a $2 billion loan to Stanford himself, Davis and others created a real estate transaction where they bought 1,587 acres in Antigua for $63.5 million and revalued it at $3.2 billion months later.
Davis apologized for his actions outside the courthouse after the hearing.
I did wrong. I'm sorry, Davis, who was accompanied by his wife, said. I apologize. I take responsibility for my actions.
He faces a maximum of 30 years in prison on the conspiracy, fraud and obstruction charges, and will be sentenced on November 20. But that date will likely change as the Davis continues to cooperate with prosecutors.
Davis has been free on $500,000 bail since his initial court appearance in July when he pleaded not guilty.
Davis' attorney told reporters after the hearing that his client is doing manual labor on a family farm in Michigan, earning $10 per hour, quite a departure for a man who earned millions.
Stanford, who has pleaded not guilty to the charges, implied in media interviews before his arrest that Davis was responsible for the fraud, a notion that is hotly disputed by Davis' attorney, Finn.
Allen Stanford uses people, Finn said, adding that his client has been manipulated by Stanford since they were college students.
(Writing by Chris Baltimore, Editing by Gerald E. McCormick,, Steve Orlofsky, Leslie Gevirtz)