Legal News

True Blood: When Spitting in Your Palm and Shaking Isn?t Good Enough

By Ashby Jones

We devoted not an insignificant amount of space on Thursday to the plea agreement reached between James Davis, the former chief financial officer of Stanford International Bank, and federal prosecutors (here, here) — and mentioned in passing in the latter post a "blood oath" ceremony between Stanford CEO Allen Stanford and a Caribbean banking regulator.

On Friday, the NYT takes a closer look at this intriguing “blood oath” ceremony. Reporter Clifford Krauss opens the article with a bit of humorous understatement, saying Stanford’s “relationship with the chief regulator of his Antigua bank, Leroy King, was closer than most.” Continues Krauss:

At a meeting in 2003, they became blood brothers, cutting their wrists and mixing their blood in a "brotherhood ceremony" that Mr. Stanford's chief financial officer said promoted an elaborate scheme to hide a multibillion-dollar fraud from American and other regulators.

The ceremony seemed to strengthen the bond between King and Stanford. King shortly thereafter received Super Bowl tickets, valued at thousands of dollars, for himself and his girlfriend. And he later received bribe payments from a secret Swiss bank account that Davis said he was told to handle by Stanford. Click here and here for other LB posts on Leroy King.

What did King do for Stanford in return? The year following the ceremony, King alerted Stanford to a confidential letter he had received from the SEC seeking information about the Stanford bank's investment portfolio. Stanford then helped draft "a false and misleading response" to the S.E.C., according to the plea agreement.

In September 2006, King tipped Stanford off to another letter from the SEC, and later helped put other regulators off of Stanford’s trail.

In February, after Stanford's offices in Houston were raided by federal authorities, King said, "I am absolutely sure that my banking system is clean."

Another detail in the Times story. Davis’s lawyer, David Finn, said Davis was now working on a farm in Michigan for $10 an hour, “as an expression of penance.”

"He had a very heavy heart," Finn said. "He was very contrite, and not all of my clients are."

Full post as published by Law Blog - WSJ.com on August 28, 2009 (boomark / email).