Move over, John Grisham. Once again, the real news from a small town in Mississippi is better than fiction.
First there was Bernie Ebbers of Brookhaven, the builder of WorldCom, the telecom bomb, who is now serving 25 years in federal prison for financial fraud. Then there was Richard "Dickie" Scruggs of Pascagoula and Oxford, the lawyer who successfully sued Big Tobacco and was sent to federal prison last year for conspiring to bribe a judge.
Now comes James M. Davis of Dry Creek, the chief financial officer of Stanford Financial Group, who, along with Allen Stanford, was accused by the Securities and Exchange Commission of executing "a massive Ponzi scheme" valued at $8 billion. The SEC says Davis' 35-year-old protégée, Laura Pendergest-Holt of Baldwyn, facilitated the fraudulent scheme.
In The Bonfire of the Vanities, Tom Wolfe popularized the phrase Masters of the Universe. As he wrote in a column in The New York Times last year, "The Masters of the Universe is a phrase from that book referring to ambitious young men (there were no women) who, starting with the 1980s, began racking up millions every year — millions! — in performance bonuses at investment banks."
Pendergest-Holt worked part of the time in Memphis, gave financial advice on local radio stations, and earned $1 million in both 2007 and 2008. At Stanford Financial, she was a Mistress of the Universe. No glass ceiling for her; she was named to the investment committee when she was 31 and given the title chief investment officer. There was a corporate jet to take her and Davis from Baldwyn to Houston, Antigua, and Memphis — only 120 miles as the jet flies.
Baldwyn residents described Pendergest-Holt as one of the smartest young women ever to come out of the town. Davis is fifth-generation Dry Creek. He started a church in nearby Guntown. He was an angel investor for Baldwyn's struggling downtown, giving it a touch of Oxford's square, with stores such as Patina Décor, the Status Thimble, Kaffe at the Old Post Office, and Galerie d'Art. The marketing slogan: "Expect the Unexpected in Downtown Baldwyn."
The names, the slogan, the Old English airs ... as the FBI said about Stanford's accounting: Somebody has to be making this up. But the names are real, as was Davis' devotion to Baldwyn, say those who know him well.
"Jim Davis had a deep love and passion for small municipalities and realized that the heart is the downtown area," said Baldwyn mayor Danny Horton. "Everybody in town is kind of shocked. Any news travels fast, but most people, like me, didn't know about it. They probably would know more about the Friday night football games than about the dealings of Stanford."
Business owners and bankers, however, are usually as familiar with finance as they are with football. There are two banks in Baldwyn: Regions and Farmers and Merchants. Stanford's certificates of deposit (CDs) paid twice as much interest as their products. Managers at both banks declined to be interviewed last week.
Downtown Baldwyn would be a sorry sight without Davis' investments — a vacant hardware store, an old movie theater now housing school offices, a vacant Whirlpool electronics store, a vacant drug store with sheets covering the windows. Davis also sank over $2 million into his home on a country road, where there isn't a comparable property within 20 miles.
The FBI and SEC are not buying small-town innocence. They have Pendergest-Holt pegged as a liar with unusual gall. Early in February, at a meeting in Miami, Davis and Allen Stanford admitted to senior employees, including Pendergest-Holt, that they misused investor funds and faked financial statements.
"Incredibly, four days after the Miami meetings, Pendergest-Holt made a two-hour presentation to the [SEC] staff — and subsequently testified under oath — regarding the whereabouts of Stanford's multi-billion dollar investment portfolio," the SEC claims. During those presentations, she denied knowing anything about the status of the bank's assets and said nothing about misappropriated funds.
Davis said this week that he will not cooperate with investigators, lest he say something self-incriminating. Considering what has happened to Pendergest-Holt recently, that was not unexpected.