FILE - In this Aug. 24, 2010 file photo, R. Allen Stanford arrives in custody at the federal courthouse for a hearing in Houston. On Tuesday, Jan. 24, 2012, after much delay, federal prosecutors in Houston are due to begin laying out their case against Stanford, telling jurors that the 61-year-old?s business empire was built on smoke and mirrors and that he bilked investors out of more than $7 billion over 20 years as part of a massive Ponzi scheme. (AP Photo/David J. Phillip, File)
FILE - In this Aug. 24, 2010 file photo, R. Allen Stanford arrives in custody at the federal courthouse for a hearing in Houston. On Tuesday, Jan. 24, 2012, after much delay, federal prosecutors in Houston are due to begin laying out their case against Stanford, telling jurors that the 61-year-old?s business empire was built on smoke and mirrors and that he bilked investors out of more than $7 billion over 20 years as part of a massive Ponzi scheme. (AP Photo/David J. Phillip, File)
HOUSTON (AP) ? The dreams of people saving for retirement or for their children's education were ruined as Texas financier R. Allen Stanford used money they deposited in his Caribbean bank to instead support his lavish billionaire lifestyle, a prosecutor said Tuesday at his fraud trial.
But one of Stanford's attorneys told jurors the financier was a resourceful businessman whose financial empire, which spanned the U.S., the Caribbean and Latin America, was real and paid investors every penny that was promised to them.
Prosecutor Gregg Costa said during his opening statement that Stanford's business empire was built on smoke and mirrors and the financier used lies, theft and bribes to bilk investors out of more than $7 billion over 20 years. He said the scheme was centered on sales of certificates of deposit from a bank Stanford owned on the Caribbean island of Antigua, which promised substantially higher rates of return on the CDs than U.S. banks and promised investors their money was safe.
Stanford is on trial for 14 counts, including wire and mail fraud. He faces up to 20 years in prison if convicted. The 61-year-old is expected to testify during the trial, which will likely last at least six weeks. Testimony is set to begin Wednesday.
"People trusted Mr. Stanford with their entire life savings based on his promise to them he was putting their money in safe, conservative, low-risk investments," Costa said.
But Costa told jurors Stanford instead sank investors' money in a variety of his own businesses, including two airlines, and that many of these businesses failed. Costa also accused Stanford of using up to $2 billion of investors' money as personal loans to buy homes and yachts and fund cricket matches.
"He treated depositors' savings like it was his own personal piggy bank," he told the jury, which was chosen earlier Tuesday and includes a kindergarten teacher, a pawn shop owner and a retired hairdresser.
Once considered one of the U.S.'s wealthiest people, with an estimated net worth of more than $2 billion, Stanford became so prominent in his adopted country of Antigua, where he took on dual citizenship, that he was knighted by the Caribbean island's government and became known as "Sir Allen."
Stanford's business empire was run through the Houston-based Stanford Financial Group, but at its heart was Antiguan-based Stanford International Bank.
Prosecutors say Stanford used money from the sale of the CDs, which were sold to clients from more than 100 countries, to pay off those purchased earlier once they matured and to support his other businesses.
Costa said more than $300 million of depositors' savings was funneled to two airlines Stanford ran in the Caribbean, $20 million to an entity whose purpose was to pay expenses related to Stanford's yacht and $37 million to a company whose purpose was to promote cricket tournaments in which Stanford gave out million-dollar prizes.
The prosecutor said Stanford and three former executives at his companies who also face charges covered up their misdeeds by fabricating the bank's records and bribing Antiguan regulators and auditors with more than $3 million and with perks like Super Bowl tickets.
Costa said Stanford's scheme fell apart in 2008 when his bank was running out of money and investors couldn't be paid back.
But Robert Scardino, one of Stanford's attorneys, told jurors the financier was a clever businessman who for 22 years paid investors every penny that he promised them.
"It wasn't a fraud. It wasn't a pie in the sky. It was an investment he hoped would make a real return," Scardino said.
Scardino told jurors that Stanford didn't need to steal depositors' money and use it as personal loans.
"If he needed money, could go to a bank and borrow up to $1 billion," he said.
Scardino suggested to jurors that the ex-chief financial officer for Stanford's company, James Davis, is the real culprit behind the financial fraud alleged by prosecutors. Davis has pleaded guilty and is expected to testify on behalf of prosecutors during the trial.
Davis "ran the company, he managed the business, he handled the money," Scardino said. "Stanford was kind of an absentee CEO, the visionary, the guy who had the ideas."
Scardino told jurors that Stanford had been paying back all of his investors but that stopped when authorities seized his companies and began selling them off.
"In fact, in 2008, when the economy was in the tank ... he still paid what was promised to be paid. He didn't take the money and run," he said.
Stanford has been in jail since his arrest 2? years ago because he was deemed a flight risk. His trial was delayed after he was declared incompetent due to an addiction he developed in jail to an anti-anxiety drug and he underwent treatment. He was also evaluated for any long-term effects from being injured in a September 2009 jail fight. Stanford was declared fit for trial last month.
Once Antigua's richest citizen, primary banker and its largest private employer, Stanford had his assets seized and now has court-appointed attorneys after an insurance policy that had been paying for his defense was revoked. Stanford is on his fifth set of lawyers since being indicted.
The three other indicted former executives are to be tried in June. A former Antiguan financial regulator was also indicted and he awaits extradition to the U.S.
Stanford and the former executives are also fighting a Securities and Exchange Commission lawsuit filed in Dallas that makes similar allegations.
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