Las víctimas olvidadas de Stanford ahora disponible en español

Las víctimas olvidadas de Stanford, ahora disponible en español en:

Saturday, October 16, 2010

Lloyd's off the hook for Stanford's fees

Lloyd's of London no longer has to pay legal fees for accused swindler R. Allen Stanford and two of his former executives because they likely engaged in activities excluded from coverage under a company insurance policy, a judge ruled Wednesday.

U.S. District Judge Nancy Atlas ruled that Stanford, founder of Houston-based Stanford Financial Group, was personally aware that an offshore bank he owned was selling certificates of deposit using "important misrepresentations" about its investment portfolio and performance.

Atlas also ruled that former Stanford Financial accounting chief Gil Lopez and global controller knew or should have known as trained accountants that the extraordinarily high returns on the bank's investments were not possible.

They also should have known or at least suspected that the funds were not put in low-risk, liquid assets as advertised to investors, Atlas ruled.

Stanford, Lopez and Kuhrt are accused of luring investors into a $7 billion fraud by promising higher-than-average interest rates on certificates of deposit issued by Stanford International Bank on the Caribbean island of Antigua.

The indictment alleges that investors and regulators were told the CDs were invested in liquid assets and easily could be converted to cash, when some of the investors' money actually went to Stanford and his ventures.

Atlas based her ruling on testimony during a four-day hearing in August, after Lloyd's of London sought to end the payment of legal fees to the senior executives it said were involved in money laundering activities.

As broadly defined in the policy, money laundering includes knowing or suspecting that benefits stemmed from criminal conduct.

Lloyd's, which argued that Stanford was at the "epicenter of a massive Ponzi scheme," according to Atlas, pointed to its insurance policies for directors and officers that excluded coverage in the case of money laundering. The insurance company took the unusual step of asking a federal judge to rule that its clients — the clients it was required to defend -had participated in illegal activities and therefore voided the policy.

Lloyd's of London's policy is not to comment, said Barry Chasnoff, a lawyer with Akin Gump Strauss Hauer & Feld in San Antonio who is representing the giant insurer in the Stanford matter.

Lloyd's out $11.2 million
Lloyd's already has spent more than $11.2 million on legal fees for Stanford, Lopez and Kuhrt, according to Atlas.

The $100 million available under the policy is dwindling, Atlas wrote, and at least 30 other Stanford Financial Group officers and directors not excluded under the money laundering provision are eligible to use the insurance funds for their legal fees.

"It is unfair to continue defense costs for plaintiffs at the potential expense of others who are in need and have not yet benefited," according to Atlas's ruling.

Atlas noted that her findings and conclusions are not intended for use in criminal or civil cases against Stanford and others.

Stanford 'very stoic'
The Securities and Exchange Commission filed a civil fraud suit against Stanford Financial Group and its top executives in 2009, and a Dallas judge froze their assets and placed the firm in receivership. Investors also have filed civil suits.

Stanford, who is in federal custody without bail as a flight risk, was disappointed but "very stoic" about the ruling, said his attorney, Robert S. Bennett.

Stanford, who is in federal custody without bail as a flight risk, was disappointed but "very stoic" about the ruling, said his attorney, Robert S. Bennett.

Bennett said his next step is to apply for federal funding to represent indigent clients.

Stanford's criminal trial is scheduled to start Jan. 24. The others will be tried later.

Houston lawyer Jack Zimmermann, who is representing Lopez, said he is still examining the opinion and has not yet decided whether to appeal.

He said it was unusual to have a civil proceeding, like the one involving the insurance, ahead of criminal trial. "It doesn't seem fair because we couldn't put on a case," he said.

The lawyer representing Kuhrt could not be reached.

Lopez and Kuhrt are free on bail.

Stanford financial's chief investment officer, Laura Holt, who also is named in the criminal indictments, was originally a party to the lawsuit but settled with Lloyd's prior to the start of the hearing in August.

Fighting extradition
A fifth defendant, former Antiguan bank regulator Leroy King, is fighting extradition.

Stanford Financial Group's chief financial officer, James M. Davis, was charged separately, pleaded guilty and is cooperating with prosecutors. Statements in his guilty plea were central to the insurer's money laundering allegation.

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