updated 7/1/2009 5:03:25 PM ET 2009-07-01T21:03:25

The former chief financial officer of indicted Texas financier R. Allen Stanford's business empire will plead guilty to charges alleging he helped swindle investors out of $7 billion, his attorney said Wednesday.

James M. Davis, 60, Stanford Financial Group's ex-chief financial officer, reached a deal with prosecutors in which he'll plead guilty to three counts he faces as part of the federal government's criminal case against the Texas financier, attorney David Finn said.

Davis is set to make his initial court appearance in Houston on July 13. Finn said Davis will not enter his guilty plea until a later court hearing.

"We are cooperating and will continue to do so," Finn wrote in an e-mail Wednesday.

Ian McCaleb, a Justice Department spokesman, declined to comment.

Stanford and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt of his now-defunct Houston-based Stanford Financial Group are accused of orchestrating a massive Ponzi scheme. Prosecutors allege they misused most of the $7 billion they advised clients to invest in certificates of deposit from the Stanford International Bank in the Caribbean island of Antigua. They have pleaded not guilty to the charges in a 21-count indictment issued June 18.

Davis was charged with conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation in court documents also issued June 18.

Stanford, who has been in custody since his indictment, remains jailed after U.S. District Judge David Hittner on Tuesday revoked a $500,000 bond after concluding he was a "serious flight risk."

Davis was the top finance official for Stanford Financial Group and the Antiguan-based bank.

Prosecutors say Davis, along with Stanford and the other executives, conspired to defraud investors of $7 billion by misrepresenting the bank's financial condition, its investment strategy and how it was regulated.

Also indicted is Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission. King, accused of taking bribes from Stanford to overlook irregularities at his bank, is awaiting extradition to the United States.

During Stanford's detention hearing last week, a forensic examiner testified nearly $1.2 billion of the $7 billion Stanford and his co-defendants are accused of bilking from investors can't be accounted for.

Helping probe
"We have been helping the federal investigators in their attempt to locate the missing millions," Finn said.

Davis will enter a not guilty plea during his July 13 court appearance due to procedural and technical reasons, Finn said.

Davis will appear before Hittner at a later date and enter his guilty plea, Finn said.

Stanford, Pendergest-Holt, Lopez, Kuhrt and King are charged with wire fraud, mail fraud, conspiracy to commit mail, wire and securities fraud and conspiracy to commit money laundering.

Stanford, Pendergest-Holt and King are also charged with conspiring to obstruct a Securities and Exchange Commission investigation and obstruction of an SEC investigation.

Investigators say Stanford secretly diverted more than $1.6 billion in investor funds as personal loans to himself to pay for his lavish lifestyle.

Stanford was considered one of the richest men in America with an estimated net worth of more than $2 billion. Dick DeGuerin, his defense attorney, says his client is now penniless.

The SEC filed a lawsuit in February accusing Stanford and his top executives of committing crimes similar to those in the indictment.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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