updated 7/13/2009 2:49:56 PM ET 2009-07-13T18:49:56

The former finance chief of Texas billionaire financier R. Allen Stanford's business empire is remorseful for helping swindle investors out of $7 billion and wants to make amends for what he did, his attorney said Monday.

James M. Davis, Stanford Financial Group's ex-chief financial officer, made his first court appearance after being charged last month as part of the federal government's criminal case against Stanford.

Stanford, Davis and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are accused of orchestrating a massive Ponzi scheme.

During a court hearing Monday, Davis pleaded not guilty to conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. Davis was also granted a $500,000 bond at his hearing.

David Finn, Davis' defense attorney, said he expects his client to return to court next week and plead guilty to all three counts as part of an agreement with prosecutors.

"He feels awful he did wrong," Finn told reporters.

During the court hearing, prosecutor Gregg Costa said Davis has been cooperating with investigators for months and that a plea agreement has been worked out in the case. Costa declined to comment after the hearing.

Finn said Davis, 60, has been helping investigators in their attempts to locate missing money that was taken from investors. Prosecutors say nearly $1.2 billion of the $7 billion Stanford and his co-defendants are accused of bilking from investors can't be accounted for.

"Words can't express the sorrow he feels for letting all those people down," Finn said.

Davis did not speak with reporters after he posted bond and left the courthouse.

Finn said Davis' plea agreement does not guarantee he will get a reduced sentence. Davis faces up to 20 years in prison for the most serious charge against him.

"Obviously you're hoping down the road your cooperation will be appreciated by the government or by the trial judge," Finn said.

Image: Former Stanford Financial Group Chief Financial Officer Davis leaves federal court in Houston after appearing before magistrate on charges related to investigation into the company
Richard Carson  /  Reuters
Former Stanford Financial Group Chief Financial Officer James Davis.

Prosecutors allege Stanford and the executives at his now-defunct Houston-based Stanford Financial Group 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 are accused of misrepresenting the bank's financial condition, its investment strategy and how it was regulated.

"This thing was smoke and mirrors and duct tape for the last 15 years," Finn said of Stanford's business empire.

Stanford, Pendergest-Holt, Lopez and Kuhrt pleaded not guilty last month to the charges in a 21-count indictment issued June 18. Stanford is being held without bond while the other three are free on bond.

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

Finn said Davis, who was Stanford's roommate at Baylor University for one semester, did not financially benefit from the scheme and currently only has $15,000 to his name.

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.

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.

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.

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


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