A lawyer for Texas billionaire R. Allen Stanford, says his client has had a medical procedure that allows doctors to diagnose and treat heart conditions.

Criminal defence attorney Dick DeGuerin told the Houston Chronicle he did not know the results of the heart catheterisation test that was done on Monday.

Judy Rodriguez is a health supervisor at Conroe Regional Medical Center and on Tuesday she declined to release information on Stanford to The Associated Press.

DeGuerin said Stanford was taken to that Houston area hospital last Thursday after he had a high pulse rate.

The illness caused Stanford to miss a court date in the trial that accuses him of orchestrating a US$7-billion pyramid scheme. He has denied the allegations.

New details about how Stanford allegedly bilked investors were made public last Thursday after James M. Davis, Stanford's former chief financial officer, became the first person to plead guilty in the case.

A business empire

The former finance chief said his boss created a business empire where blood oaths were taken to secure loyalty, bribes were paid from a secret Swiss bank account and investor profits were more fiction than financial genius.

Stanford, Davis and other executives of the now defunct Houston-based Stanford Financial Group are accused of orchestrating a massive Ponzi scheme by advising clients to invest more than US$7 billion in certificates of deposit from the Stanford International Bank in the Caribbean island of Antigua.

Davis pleaded guilty in Houston federal court to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation.

The plea is part of a deal Davis, who has been helping prosecutors, made with the Justice Department in exchange for a possible reduced sentence.

Irregular heartbeat

His plea came hours after Stanford was first taken from the privately run prison where he is being held outside Houston to a local hospital with an irregular heartbeat and high pulse.

Stanford had been set to appear in the same courtroom for a hearing on whether he can get a new attorney.

Davis' 23-page plea agreement provided new details of how Stanford's business began; how he, Stanford and others manufactured profits; and how panic set in as they tried to hold off federal investigators who were closing in on their scheme.

Investors were promised their investments were safe and were scrutinised by Antigua's bank regulator and an independent auditor.

Stanford claimed higher rates of return on his CDs than those offered by commercial banks in the US and consistent double-digit returns on his bank's investment portfolio.

But Davis said in the court documents that the bank's balance sheets were made up and the work of "reverse engineering."

"Stanford was insistent that (the bank) appear to show a profit each year. Stanford and Davis would collaborate to select a false revenue number ... Stanford, Davis and other conspirators would then use the 'budgeted' numbers to develop falsely inflated revenue numbers which would be claimed as the 'actual' revenue numbers to generate the desired return on investment," according to the plea agreement.

Asked why Davis defrauded investors for years, David Finn, his attorney, said it was greed.

To protect his scheme, Stanford paid more than US$200,000 in bribes, as well as US$8,000 for two tickets to the Super Bowl in Houston in 2004, to Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission (FSRC).

King has also been indicted with Stanford and is awaiting extradition to the United States.

Davis said Stanford secured King's loyalty in a most unusual way.

"Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC ... This brotherhood oath was undertaken in order to extract an agreement from both King and the other FSRC employee that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of the bank," according to the plea agreement.

Bribes

Stanford had Davis get the bribe money from a secret Swiss bank account that was funded by investors' money. The account was also used to make bribes to the bank's outside auditor.

When the SEC began investigating Stanford's bank and contacted King by letter in 2005 and 2006 about its probe, Stanford and others in his company helped King write false and misleading response letters.

"King appeared very stressed. King related that he had again been contacted by the SEC. King asked Davis if 'we were going to make it?' which meant whether the fraud they had been engaged in was going to be exposed. Davis informed King that he thought they were going to be OK," according to the plea agreement.

By mid-2008, Stanford, Davis and other conspirators were "desperately seeking a fraudulent mechanism whereby they could artificially inflate (the bank's) assets" and hide that Stanford had used US$2 billion of investor money to make loans to himself, said the plea agreement.

They came up with a bogus real estate deal that falsely inflated a US$65 million real estate sale in Antigua into a US$3.2 billion bank asset.

Subpoenas served

By January 2009, the SEC had served subpoenas to Davis, Stanford and other executives about the bank's CD investments.

In February, Davis, Stanford, company lawyers and other executives met in Miami to discuss testimony that Chief Investment Officer, Laura Pendergest-Holt and another executive would give to the SEC.

At that meeting, Davis revealed that 80 per cent of the bank's investment portfolio was made up of grossly overvalued real estate and of US$1.6 billion in loans to Stanford, meaning the bank was insolvent.

Stanford at first said the bank had more assets and liabilities but later in private "acknowledged that (the bank's) assets and financial health had been misrepresented to investors and were overstated in (the bank's) finances," according to the plea agreement.

Davis faces up to 30 years in prison when he is sentenced. While a sentencing date of November 20 was set, Finn said he believes that will be delayed.

As part of his plea agreement, Davis was also ordered to forfeit US$1 billion in proceeds he made from his illegal actions, although there's little hope Davis can ever retrieve the funds.

Finn said authorities have seized all his client's assets and Davis, who had made between US$5 million and US$6 million in the last decade, is broke and now doing manual labour on a relative's farm in Michigan, making US$10 an hour.

Hearing postponed

Hittner postponed a hearing in which he would hear arguments about Stanford's legal representation.

DeGuerin has asked for permission to quit the case because he doesn't have assurances he will be paid.

Stanford was considered one of the richest men in the US with an estimated net worth of more than US$2 billion. But he claims he is now penniless.

Stanford, along with three former company executives, have pleaded not guilty to various charges, including wire and mail fraud, in a 21-count indictment issued June 18.

Stanford has been jailed without bond since then.

- AP

Sometime in 2003, Stanford performed a 'blood oath' brotherhood ceremony with King and another employee of the FSRC to extract an agreement that they, in exchange for regular cash bribe payments, would ensure that the Antiguan bank regulators would not 'kill the business' of the bank - court filings.