IRS saw no fraud in Stanford loans, accountant says

HOUSTON — The Internal Revenue Service knew R. Allen Stanford was taking loans from his Antigua bank and found nothing wrong with the arrangement, the Texas tycoon's tax lawyer testified at Stanford's fraud trial Tuesday.
“The IRS always treated those as loans to Mr. Stanford,” said Larry Campagna, who represented Stanford in personal and business tax disputes with the IRS in 1998 and again in 2003.
Two other defense witnesses testified before U.S. District Judge David Hittner decided Stanford's coughing from an apparent cold needed medical attention and stopped the trial early.
Campagna said the IRS did change its position on the correct way to characterize payments from Stanford to his Houston-based Stanford Financial Group, the parent company of his scores of business operations. He was sole owner of Stanford Financial and its subsidiaries.
Although the tax agency ruled those should be listed as loans on 1998 tax returns, it said the payments should be recorded on 2001 and 2002 returns as dividend payments to Stanford, Campagna said.
Defense attorney Robert Scardino asked Campagna if anything about the returns prompted the IRS to ask criminal investigators to initiate a fraud probe.
“No,” Campagna said before he was dismissed from the witness stand.
Stanford, a native of Mexia, is accused of leading a fraud that prosecutors allege took $7 billion from clients who bought certificates of deposit in his bank in Antigua. They were led to believe their money was invested conservatively, according to prosecution testimony, while much of it really went to personal loans to Stanford for his pet business projects and luxurious lifestyle.
Osvaldo Pi, an accountant who went to work for Stanford Venture Capital in 2001, also testified. He spent much of his time on the stand explaining venture capital, private equity and other financial terms to jurors.
Pi said his job included identifying investment opportunities for Stanford Venture Capital, and that it raised millions of dollars for companies Pi and others vetted for risk and potential.
In the trial's fifth week, the defense is attempting to show that Stanford was interested in legitimate investments, that he was consolidating his companies to make them more manageable, and that the companies would have remained solvent if the U.S. government hadn't filed a fraud suit and shut them down in February 2009.
Karen Pittman, a librarian for Andrew College in Georgia, testified Stanford hired her to research whether he was related to Leland Stanford, founder of Stanford University in California. Stanford touted the relationship in his promotional brochures although university officials deny any kinship.
Pittman said she found a common relative, but after two years of research could not say for sure.


source