R. Allen Stanford’s court-appointed receiver persuaded a U.S. judge to block the accused Ponzi scheme mastermind’s bid to access insurance funds to pay his lawyers at a hearing today in London Chancery court.
Ralph Janvey, who was placed in charge of Stanford’s financial empire, told a Dallas judge the Texas financier is trying “a blatant attempt to end run this court” by asking the U.K. court to order the insurer to pay over Janvey’s objections. U.S. District Judge David Godbey yesterday ordered Stanford to withdraw his petition from the London court.
“It appears that Stanford is purporting to seek relief before another tribunal relating to the policies,” Godbey wrote in an order posted on his court’s Web site. “Such actions by Stanford both violate the terms of this court’s prior orders, as well as threaten to interfere with this court’s jurisdiction over the policies.”
Janvey has been fighting Stanford’s efforts to unlock frozen assets or access his Lloyd’s of London liability insurance to hire lawyers to defend against civil and criminal allegations he swindled investors of more than $7 billion through bogus certificates of deposit at Antigua-based Stanford International Bank Ltd.
‘Very Unfortunate’
“The court’s order is entirely appropriate,” Janvey said yesterday in a statement issued by his spokeswoman, Kristie Blumenschein. “It is very unfortunate that Mr. Stanford and his attorneys continue to engage in conduct which needlessly increases the costs of litigation to the receivership.”
Stanford, 59, who denies any wrongdoing, is in jail in Texas awaiting trial on 21 felony charges that mirror civil fraud claims filed by the U.S. Securities and Exchange Commission. He is recovering from a Sept. 24 fight with another inmate that left him with a concussion, two black eyes and a broken nose, said Kent Schaffer, Stanford’s criminal-defense lawyer.
“He was beaten up,” Schaffer said. “I don’t know what the circumstances are that led to the fight or why they kept him in the hospital until Sunday morning.”
Yesterday, U.S. District Judge David Hittner, who is presiding over Stanford’s criminal case in Houston, granted the defendant’s request for a transfer from a private Texas jail to a federal facility closer to his lawyers in downtown Houston.
Sworn Statements
Janvey filed copies of sworn statements that Stanford’s lawyers submitted last week to the British court, seeking an emergency hearing in London to force the receiver to stop interfering with payment by Lloyd’s of some fees to Stanford’s lawyers under the liability policy. Janvey claims the bulk of the policy coverage should be reserved for his use to defend Stanford’s companies against claims.
British lawyer Simon Peter Kamstra, in a statement dated Sept. 23, told the British court that the SEC and the U.K.’s Serious Fraud Office have no objection to Stanford obtaining legal defense funds through the Lloyd’s policy. The SEC, which has opposed letting Stanford access frozen funds to hire attorneys, hasn’t taken a position on Stanford’s access to insurance proceeds in papers filed with the Dallas judge.
Stanford faces “at least 49 separate United States proceedings,” as well as lawsuits in Switzerland, Israel, Panama, Venezuela, Mexico, Canada, Malaysia and Singapore, Kamstra said in his statement to the British court. Because Stanford hasn’t been represented by lawyers at most of these proceedings, judgments are being entered against him in several cases, Kamstra said.
Stanford was assigned to the federal public defender’s office in Houston two weeks ago by the judge overseeing his criminal case when the financier couldn’t say he had access to any funds for his defense. Kamstra mentioned that to the U.K. court, too.
Frozen Funds
Godbey has rejected Stanford’s requests for at least $10 million in frozen funds unless he can prove the money isn’t tainted by fraud. Godbey hasn’t ruled on requests over who can access Lloyds’ coverage that could be worth $90 million. More than 60 former employees of Stanford Financial Group, including its founder, have asked to draw on the policy.
Stanford’s British lawyers asked the U.K. court to order Janvey to drop his objections to Lloyd’s paying Stanford’s attorneys and to stop interfering with the payments.
Some Lloyd’s of London underwriters joined Janvey’s request to block Stanford’s attempt to obtain insurance coverage through the U.K. court proceeding today, according to documents filed yesterday in federal court in Dallas.
‘Threatening’ Letter
The underwriters said Stanford’s civil lawyers had sent them a Sept. 22 letter “threatening” legal action if they didn’t begin to pay Stanford’s legal bills immediately. Their lawyer, Daniel Lane of Akin, Gump, Strauss, Hauer & Feld LLP asked Godbey to rule on the issue “so the underwriters will not risk entry of competing and inconsistent orders” from the British court.
Hittner signed an unrelated order yesterday regarding Stanford’s legal team. He blocked Schaffer and the federal public defender’s Houston office from representing the financier on any appellate issue that arose before they were appointed as Stanford’s taxpayer-funded defense counsel on Sept. 16.
Schaffer said in a phone interview that the order will keep him from asking a full panel of judges at the U.S. Court of Appeals in New Orleans to review Hittner’s June 30 order denying Stanford bail on the grounds he might flee. A three-judge appellate panel already denied Stanford’s request to have the bail denial overturned, and his request for en-banc review must be filed at the New Orleans court by Oct. 8, Schaffer said.
Robert Luskin and Christina Sarchio, attorneys with Washington-based Patton Boggs LLP who filed an earlier appeal for Stanford on the bail issue, didn’t immediately return calls or e-mails seeking comment on whether they will continue working for the jailed financier.
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