Davis Testifies On Stanford Brokerage's Role In Ponzi Scheme

Davis described today how Stanford set up a brokerage firm in the U.S. in the 1990s, using money from depositors in Stanford International Bank.  The brokerage then began selling certificates of deposit in the Antigua-based bank to U.S. investors.  

Davis said, at one point, upwards of 85% of the assets under the brokerage’s management were invested in these CDs. He said Stanford became concerned enough about this that he commented to Davis about the need to broaden sales beyond CDs to avoid scrutiny from the Securities and Exchange Commission.

At the same time, Davis said, Stanford aggressively pushed the brokerage’s financial advisors to sell CDs over other financial products. He said Stanford rewarded high performers with raises and bonuses.

Davis described a crunch in the fall of 2000. He said CD sales, while steady, were not keeping pace with the amount of money being taken from depositors to pay for other Stanford businesses.

Davis said when he expressed his concern, Stanford responded by setting up a "Top Producers Club"  to inspire brokers to sell even more CDs. He said the incentives for top producers included additional monetary bonuses. Top salesmen were also invited to quarterly meetings with what Davis described as lavish, Hollywood-style entertainment, paid for with depositors’ money.

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