According to the Houston Chronicle, U.S. District Judge David Hittner, who is presiding over R. Allen Stanford’s criminal proceeding, has ordered Lloyd’s of London to pay for the criminal defense attorneys defending Mr. Stanford and two other officers of his company who were recently indicted for allegedly running a $7 billion Ponzi scheme. Stanford, the founder and chairman of Stanford Financial Group, faces 21 criminal charges for conspiracy, fraud and obstruction of justice. His two co-defendants, former officers of the Stanford Financial Group, face lesser charges.
Judge Hittner issued a preliminary injunction and ordered the insurer to pay defense counsel for work already billed and to continue paying them pursuant to their D&O policy. The Houston Chronicle further reported that the insurer had denied payment for defense costs since August, when the company CFO pleaded guilty to a role in the Ponzi scheme, reportedly taking the position that the accused defendants participated in money laundering, even though there was no court finding yet that any of the defendants were involved with money laundering. According to the Houston Chronicle, the insurer argued that “the refusals of Stanford and co-defendants…to testify in a hearing about these payments should be taken as proof they are guilty, even though they have pleaded not guilty to criminal charges….The insurance company has argued that its contract with Houston-based Stanford Financial Group allowed the insurer to determine if its definition of money laundering was met and did not require a criminal standard of proof.”
In addition, the Houston Chronicle reported that in granting the injunction Judge Hittner held that the insureds “were likely to prevail in the future on this demand for insurance coverage and would be irreparably harmed if they did not receive money to pay their lawyers now.” The article further reports that defendants’ counsel estimate that “with all the accountants, investigators and experts needed to cull through the 7 million pages of documents in the case, it will cost $30 million to defend Stanford, [and his two co-defendants] in the trial set for January 2011. The insurance policy’s limit is $95 million.”
