Revelation of Blood Oath involving Stanford, Antiguan regulator and co-worker

“Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC. This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange

TEXAS, United States, August 28, 2009 – Another worker at Antigua and Barbuda’s financial regulatory body has been implicated in efforts to hide Sir Allen Stanford’s US$8 billion fraud, as revelations of a blood oath among Sir Allen, that worker and the country’s former chief financial regulator were made yesterday.

The revelations came in the plea agreement which former chief financial officer of the Stanford empire, James M Davis made with US prosecutors.

Davis, who yesterday pleaded guilty to charges of mail fraud; conspiracy to commit mail, wire and securities fraud; and conspiracy to obstruct a US Securities and Exchange Commission (SEC) investigation, told stories of the brotherhood ceremony involving ex chief executive officer and administrator of Antigua and Barbuda’s Financial Services Regulatory Commission (FSRC) Leroy King, Sir Allen, and an unnamed FSRC employee to keep the fraud that was ongoing at the Stanford International Bank (SIB) under wraps.

“Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC. This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of the bank,” the document stated.

It said King, who referred to Sir Allen as “Brother” or “Big Brother”, received more than US$200,000 in bribes, including SuperBowl tickets and flights on the investor’s private jets and that the bribe money was taken by Davis, on Sir Allen’s instructions, from a secret Swiss bank account.

According to the document which Davis signed, King also forwarded confidential correspondence he received from the SEC to Sir Allen and another bank executive. Sir Allen would then help King draft misleading responses from his regulatory agency, the plea said.

King also helped mislead regulators of the Eastern Caribbean Central Bank when they began raising questions about SIB, the plea agreement said. He faxed a proposed response to the Caribbean regulators to an unnamed lawyer working for Sir Allen. In it, King joked in a handwritten note: “Please do not bill me (laugh). Thanks a million, Lee.” The note was taken as an oblique reference to bribes already paid, according to the agreement.

It was sometime in 2003 that two FSRC examiners who worked for King "were becoming aggressive and suspicious in their examination" of SIB’s financial statements, according to a bank employee.

Sir Allen, however, sought to reassure the bank worker, saying he trusted King would take care of the nosy regulators because of the bribes he was getting and the brotherhood oath he had taken, the plea deal added.

According to the document, both of the snoopy employees were reassigned or replaced soon after that.

But it was around 2005 that King seemed to get worried about SEC investigations.

The plea agreement said that when the agency began probing SIB and writing to King that year and the next, “King appeared very stressed”.

“King related that he had again been contacted by the SEC. King asked Davis if 'we were going to make it?' which meant whether the fraud they had been engaged in was going to be exposed. Davis informed King that he thought they were going to be OK," the document said.

King, who was placed on house arrest in June after being held on a provisional warrant at the request of the US, is awaiting extradition from Antigua and Barbuda to the US to answer seven counts of conspiracy to commit wire fraud, 10 counts of conspiracy to commit mail fraud, conspiracy to launder illegal proceeds, and conspiracy to obstruct the SEC in their investigations into Sir Allen and SIB.

His attorneys were provided with the relevant papers this week, but sources indicate they will fight it.

Meantime, 60-year-old Davis faces a maximum 30 years in prison for his crime, but his full cooperation with prosecutors is likely to reduce the sentence.

Stanford, 59, remains in medical care after being hospitalised yesterday – hours before Davis’ guilty plea was entered – with an irregular electrocardiogram and an extremely high pulse rate.

His attorney, Dick DeGuerin said doctors want to keep him in hospital for observation for three to five days.