Stanford lawyers and Lloyd’s of London butt heads in court

By MARY FLOOD
R. Allen Stanford sat in court glumly for three hours Tuesday while a dozen lawyers debated whether insurance should pay for his criminal attorneys and whether those lawyers will have to report to a civil receiver when they find something new in the case.

Lloyd’s of London lawyers announced in court that under a Stanford company policy, they’ve paid out $4.2 million to some criminal defense lawyers for work done before the August guilty plea of the Stanford company’s chief financial officer, James Davis.

The Lloyd’s lawyers said they won’t pay further for the criminal defense of Stanford or those accused with him because Davis said they conspired with him. They said that the insurance contract said Lloyd’s could stop payment if it determined money laundering was committed. Though Davis didn’t plead guilty to money laundering, Lloyd’s contends the terms of the policy were violated.

Dan Cogdell, lawyer for the former Stanford chief investment officer, Laura Holt, disputed that position.

“It’s a bad faith denial of coverage,” he said.

Stanford, Holt and others are accused of cheating investors who bought certificates of deposit issued by Stanford International Bank, on the Caribbean island of Antigua, and sold through companies affiliated with Houston-based Stanford Financial Group.

Stanford, a native Texan who founded Stanford Financial Group and is the only one of the defendants in the case who is behind bars while awaiting trial, faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

Lawyers for Stanford and other defendants asked U.S. District Judge David Hittner to order Lloyd’s to pay on its policy, possibly unprecedented in a criminal case.

“We’re in uncharted water,” Hittner said, asking lawyers on both sides to submit briefs on the issue.

Hittner observed that the insurance lawyers’ position would mean taxpayers have to pay for legal representation of Stanford and his codefendants.

Frozen assets

The payment of the criminal defense lawyers has been an ongoing issue. When the Securities and Exchange Commission filed a civil fraud suit last February in Dallas, it froze all the company assets and the personal assets of Allen Stanford and Holt.

Holt filed a separate lawsuit against Lloyd’s in Houston federal court Tuesday, saying it was denying her coverage in bad faith. It’s unclear whether Hittner will hear that case.

Also discussed Tuesday, but left undecided, is whether a receiver appointed by the Dallas court in the SEC case should be allowed to force criminal defense lawyers to hand over information they obtain while conducting their defense investigations.

Constitutional rights

Kent Schaffer, Stanford’s lawyer, argued that the receiver’s demands could violate defendants’ constitutional rights and interfere with attorney-client privilege.

On that and the insurance issue, prosecutor Gregg Costa asked the judge to consider moving the case along as quickly as possible, especially since Stanford is imprisoned.

Stanford, who has had two surgeries since he went to jail in late June and has dropped more than 35 pounds, was unshaven and gaunt.

Concern on health

He leaned his head down so much at the beginning of the hearing that Hittner asked his lawyers to check on him and admonished that if Stanford is not well enough to attend court, he should stay in the detention center downtown.

Stanford perked up during a break, engaging in animated conversation with two U.S. marshals.

Visit the Stanford International Victims Group – SIVG official forum http://sivg.org/forum/

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