Witness says IRS didn't oppose Stanford loans

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.
The IRS did change its position, however, about the correct way to characterize payments from Stanford to his Houston-based Stanford Financial Group, the parent company of Stanford’s scores of business operations. He was sole owner of Stanford Financial and its subsidiaries.
Although the tax agency ruled that 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 Stanford’s 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 life.
Two other defense witnesses testified Monday. However, U.S. District Judge David Hittner decided Stanford’s coughing from an apparent cold needed medical attention and stopped the trial early.
Osvaldo Pi, an accountant who went to work in 2001 for Stanford Venture Capital, spent much of his time on the stand explaining venture capital, private equity and other financial terms to jurors.
Private equity firms often seek investments, on their own behalf or for well-heeled clients, in ventures that aren’t publicly traded and seek to raise capital by selling ownership shares. Private equity firms also may arrange buyout deals that take public companies private.
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.
Pi testified that the receiver who took over the assets of Stanford Financial Group and its subsidiaries didn’t seem interested in pursuing investments that remained viable, but in liquidating the companies’ assets. He said he stayed with the firm for seven months after it went into receivership.
Karen Pittman, a librarian for Andrew College, a private junior college in Georgia, testified that 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 that Leland Stanford and Allen Stanford were related.
Defense witnesses have portrayed Stanford as the company visionary who left details to others – notably Chief Financial Officer James Davis. Davis pleaded guilty to three felony charges and testified that he and Stanford knowingly misled investors and misused their money.
Stanford and others were indicted in June 2009. He has been held without bail as a possible flight risk since his arrest that month.
Three other Stanford executives indicted separately and scheduled for trial later are free on bail, and an Antiguan regulator accused of taking bribes is fighting extradition from that Caribbean nation. Davis was charged separately in connection with his guilty plea and is cooperating with the government.
terri.langford@chron.com
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Scott's Real Estate Investment Trust announces January distribution and provides an update on Priszm

TORONTO , Jan. 18, 2012 /CNW/ – Scott’s Real Estate Investment Trust (TSX: SRQ-UN.TO – News) (“Scott’s REIT”) today announced a cash distribution for of $0.0708 per unit for the month of January 2012 . The distribution will be payable on February 15, 2012 to Unitholders of record on January 31, 2012 .
Scott’s REIT reviews the amount of its distributions on an ongoing basis and considers a number of factors including expected cash flows based on occupancy rates, operating expenses, capital expenditures and debt service requirements. Although Scott’s REIT has maintained the same distribution amount for 74 consecutive months in accordance with its distribution policy, there can be no assurance that any future distributions will be at the current level.
Update on Priszm
On January 16, 2012 , the Receiver (Duff & Phelps Canada Restructuring Inc., formerly Richter Inc.) for Priszm Income Fund (“Priszm”) gave notice to the REIT that it intends to disclaim an additional eleven leases effective January 27, 2012 . All eleven leases are located in the province of Quebec .
The REIT plans to market the eleven sites immediately and will either re-lease or potentially dispose of the properties.
“We believe we are getting close to understanding what restaurants KFC will be operating after Priszm completes the sales of its restaurants to new operators, and this will help us stabilize our portfolio going forward,” said Teresa Neto , CFO of Scott’s REIT.  “While it has taken a year to get through this process, Scott’s REIT will come out of the Priszm situation stronger, with more tenant diversity and upgraded assets.”
In total, Priszm has turned back 43 sites thus far (including the 11 disclaimed Quebec sites) of which 14 have been re-leased.
“It will take the balance of 2012 to re-lease the bulk of these sites, but so far Scott’s REIT has received strong interest in most of the vacant locations,” said Ms. Neto . “We finished the year with an occupancy rate of approximately 95.1 per cent which is a strong number. Including committed occupancy and these eleven disclaimed sites our occupancy drops only modestly to 93.6 per cent.”
Scott’s REIT continues to pursue its claim on the proceeds from the sales of Priszm’s operations, and the Receiver continues to set aside $13.4 million from those proceeds until such claim is determined. There can be no assurance as to the outcome of any litigation involving this claim.
About Scott’s Real Estate Investment Trust
Scott’s REIT (TSX: SRQ-UN.TO – News) is Canada’s premier small-box retail property owner with 229 properties in eight provinces across Canada . Scott’s REIT’s properties are well located and geographically diverse across Canada with the majority of all properties containing long-term quadruple net leases. To find out more about Scott’s Real Estate Investment Trust (TSX: SRQ-UN.TO – News), visit our website at www.scottsreit.com.
Forward-Looking Statements
This document contains certain information that may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management’s future outlook and anticipated events or results, and may include statements or information regarding future growth opportunities and potential and expected cash distributions or cash distribution levels. In particular, information regarding the REIT’s monthly cash distributions and information relating to the impact of the REIT’s recent acquisitions on annual revenues and interest expense is forward-looking information. Forward-looking information is based on certain factors and assumptions regarding, among other things, occupancy rates, property expense and capital expenditures. While the REIT considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward looking-information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what is currently expected. Such factors include risks relating to the REIT’s reliance on Priszm LP, the REIT’s largest tenant in terms of rental revenue, risks associated with investment in real property, competition, reliance on key personnel, financing and refinancing risks, environmental matters, tenant risks, risks related to current economic conditions and other risk factors more particularly described in the REIT’s Annual Information Form for the year ended December 31, 2010 . You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Other than as required by applicable Canadian securities law, the REIT does not undertake to update this information at any particular time. Additional information identifying risks and uncertainties is contained in Scott’s REIT filings with the Canadian securities regulators, available at http://www.sedar.com/.
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