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STANFORD TRIAL: Witness testifies about mystery investment portfolio

Published:Tuesday | January 31, 2012 | 3:05 PM

A jury was told Monday that Stanford International Bank (SIB) in Antigua had been placed assets worth billions of dollars in a mysterious portfolio known as Tier III and controlled by Texan financier R. Allen Stanford and a few other people.

Testifying at the start of the second week of Stanford's US$7 billion fraud trial, former Stanford executive, Mark Collinsworth said he understood that Tier III contained conservative investments such as bonds and blue chip stocks, but that he had no personal knowledge of the portfolio.

He said Tier III accounted for US$5.5 billion of the bank's investments in 2008, compared to about US$1.5 billion for the Tier I and II portfolios combined.

Tier 1 contained cash and liquid assets, he said, and Tier II contained more aggressive investments.

He said that his supervisor, Stanford Chief Investment Officer Laura Holt did not discuss Tier III with subordinates.

Holt is one of four defendants who were indicted separately from Stanford and will be tried later. Stanford's former chief financial officer, James Davis pleaded guilty to three felony counts and will testify for the prosecution.

Stanford is accused of operating a US$7 billion investment scam, mostly through certificates of deposit (CDs) through the SIB. He denies the charges.

The prosecution alleges that customers were led to believe the CDs were invested conservatively, but that the money really went into Stanford's risky business ventures and jet-setting lifestyle.

During his testimony, Collinsworth said that investment advisers were told not to provide clients with details about the tier structure, but later acknowledged under cross-examination that no law requires clients to receive such information.

Collinsworth also said that Stanford had little involvement with the Memphis office, telling the court that in the 10 years he worked for Stanford, Stanford came to Memphis only twice.

In describing the operations of the Memphis branch, Collinsworth said Holt and Davis hired friends and relatives with little financial background for key positions including a close Davis friend with no experience in the Middle East who was hired as an analyst on that region, and a Russian analyst, hired by Holt, who had been born there but left as a child.

The trial is expected to last six weeks.