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Thursday, August 12, 2010

Allen Stanford loses bid to leave jail pretrial

Allen Stanford, accused of masterminding a $7 billion Ponzi scheme, has lost a bid to get out of jail to work on a separate trial seeking to hold Lloyd's of London responsible for his defense costs.

Stanford, who has been locked up for 14 months awaiting his criminal trial, sought to be freed into a U.S. marshal's custody so he could be transported to his lawyer's office to prepare for the Aug. 24 Lloyd's trial. [ID:nN15220064]

The disgraced Texas financier argued he needed to spend as much as 12 hours a day, seven days a week working with his lawyer.

He also sought to delay the Lloyd's trial to Oct. 25, complaining that his jail guards ruined most of his case files on Aug. 2. Stanford said they "maliciously dumped" his carefully organized documents into big trash bags on his bunk.

But U.S. District Judge Nancy Atlas in Houston, who is presiding over the insurance trial, rejected both requests.

She said the "unique circumstances" of the Lloyd's case meant there should be no delay and that Stanford should direct complaints about his detention to U.S. District Judge David Hittner, who is handling his criminal case.

Stanford faces a 21-count indictment focused on what prosecutors say is his Stanford Financial Group's fraudulent sale of certificates of deposit issued by his Antigua bank, Stanford International Bank. He also faces civil charges from the U.S. Securities and Exchange Commission.

Lloyd's at first agreed to advance Stanford's criminal and civil defense costs, but changed its mind, relying on a money-laundering policy exclusion, court records show.

Stanford is also appealing his third bail denial to the U.S. Fifth Circuit Court of Appeals, the same court that rejected his two prior bail requests. He argues his jailing has deprived him of his constitutional rights to due process and effective assistance of counsel.

In a court filing on Wednesday, Stanford's lawyers renewed their concern about the detention's effect on their 60-year-old client's health and mental state, saying Stanford is taking psychotropic drugs twice a day that "leave him in a less than fully coherent state of mind."

The criminal trial is scheduled to begin on Jan. 24, 2011.

Separately, U.S. District Judge David Godbey in Dallas has approved the appointment of a committee to represent Stanford victims, a spokeswoman for the clients said.

The committee is made up of six former Stanford clients and John Little, a court-appointed examiner for Stanford International Bank. It will work with Ralph Janvey, the court-appointed receiver for the bank, to recover assets for Stanford investors.

"We look forward to working cooperatively with the court-appointed receiver and examiner to identify and prosecute potential legal claims against third parties who assisted with Stanford's fraud," Peter Morgenstern, a lawyer for Stanford clients, said in a statement.

The Lloyd's case is Pendergest-Holt et al v. Certain Underwriters at Lloyd's of London et al, U.S. District Court, Southern District of Texas, No. 09-03712. The criminal case is U.S. v. Stanford in the same court, No. 09-cr-00342. The SEC case is SEC vs Stanford International Bank Ltd et al, U.S. District Court, Northern District of Texas, No. 09-298. (Reporting by Anna Driver in Houston and Jonathan Stempel in New York; editing by Martha Graybow editing by Andre Grenon)

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