HOUSTON (CN) — The founder of a Houston company that developed video analysis software that imitates the human brain surrendered to federal agents Thursday to face securities and wire fraud charges that could send him to federal prison for the rest of his life.
Ray Charles Davis, 62, made his initial appearance Thursday in Houston Federal Court.
Looking like a professor, in glasses, a dark blue jacket and black slacks, Davis rubbed his shackled wrists and winced as U.S. Magistrate Judge Dena Palermo read the charges against him.
A sealed Dec. 7 federal indictment charged Davis with mail fraud and 20 counts of wire fraud. It was unsealed Thursday after his hearing. Each count carries a maximum sentence of 20 years in federal prison. He could be fined up to $10 million if he's convicted.
Davis is accused of defrauding investors in Behavioral Recognition Systems Inc., which he founded in 2005, of $32 million and using shell companies and phony invoices to embezzle $11 million from the company.
He is represented by prominent Houston attorney Dick DeGuerin, known for persuading a Texas jury that Robert Durst, the eccentric real estate scion facing first-degree murder charges in California, acted in self-defense when he killed his Galveston neighbor Morris Black in 2001, though Durst admitted in court that he’d dismembered Black's body.
Judge Palermo balked when a prosecutor told her that he agreed with the pretrial services department’s recommendation to release Davis on a $20,000 unsecured bond.
“A $20,000 unsecured bond isn't acceptable in light of the charges,” she said.
DeGuerin asked Palermo to grant the recommended bond, saying Davis has been cooperating with an investigation by the Securities and Exchange Commission, launched in February after Davis and his son were sued by Davis’ former company Giant Gray, in Harris County Court.
Davis got more bad news Thursday, when the SEC filed a securities fraud lawsuit against him, his wife, Behavioral Recognition Systems and two of Davis’ alleged shell companies after his hearing before Palermo.
Nonetheless, DeGuerin argued: “Mr. Davis is neither a flight risk nor a danger to the community. And he has a very serious medical condition. He is unable to eat solid food. He is fed through a feeding tube. He has to take medications every couple hours. He was emergency hospitalized this week for reinsertion of a feeding tube. He’s tethered to his doctors.”
DeGuerin offered to give Palermo two medical reports from Davis’s doctors, but she refused to budge on the bond. She took a 15-minute recess to look into Davis’s finances, during which Davis rocked in a chair in the jury box and smiled as he listened to two marshals and a security guard chat a few feet from him by the jury box railing, seemingly at peace with his surroundings despite the charges he’s facing.
He closed his eyes amid the murmur of five whispered conversations and his wife huddled in a corner of the courtroom with a pretrial services staffer, who took notes with a clipboard in hand.
Palermo returned to the bench and quickly explained why she could not let Davis go free on the recommended bond.