Founder of Houston software company, accused of fraud, dies while charges pending
Ray C. Davis, the founder of the Houston software company Behavioral Recoginition Systems, died Saturday while still facing federal charges that he embezzled money from his company and defrauded investors in a $32 million scheme.
Davis’ death was confirmed by his laywer, Dick DeGuerin. Davis, who was in his 60s, was preparing to ask for a stay, or a halt in proceedings, because his health had so deteriorated, said DeGuerin. Davis was suffering from several serious medical conditons.
“He just couldn’t make it,” DeGuerin said.
Davis, who founded Behavioral Recognition Systems in 2005, was charged at the end of last year with securities and wire fraud in a 21-count indictment handed up by a federal grand jury .
After his indictment, Davis initially appeared in court in shackles and handcuffs while wearing a white dress shirt and gray business suit. Later that day, he was brought into court in a wheelchair and ankle cuffs because he relied on a feeding tube and suffers from hypoglycemia. He was allowed to post a $250,000 bond.
Dick DeGuerin said his client was not guilty of the charges.
Davis’ indictment followed a civil lawsuit brought by his company, which had changed its name to Giant Gray. Giant Gray accused Davis and his son, Charles, a former executive vice president, of stealing more than $15 million by creating fraudulent invoices and charging personal expenses, according to the lawsuit the company filed in 2017 in state district court in Harris County.
The suit, which alleged fraud, breach of fiduciary duty and unjust enrichment, sought to recover the money allegedly diverted from Behavioral Recognition Systems. Giant Gray alleged that Davis used company funds to pay for medical bills, theater tickets and other personal expenses.
The record of personal expenses was found after he left the company, according to Giant Gray’s lawsuit. Both father and son denied all charges against them in the civil case, according to the responses they filed in court.
In August, Charles Davis filed a counterclaim against Giant Gray, alleging the software company breached his employment contract when he was terminated last year. The Securities and Exchange Commission later filed civil charges in connection with the alleged scheme to defraud investors against both Ray Davis and Giant Gray.
The criminal indictment alleged that Ray Davis opened bank accounts and transferred millions of dollars from Behavioral Recognition Systems to shell companies he owned. Davis used false invoices to conceal the money transfers for an eight-period period beginning in 2008, according to the indictment.