Judge tells Lloyd's of London to pay for Stanford lawyers now

By MARY FLOOD HOUSTON CHRONICLE
Jan. 26, 2010, 2:46PM

A federal judge today ordered Lloyd's of London to pay for the criminal defense lawyers for R. Allen Stanford and other officers of his company indicted for allegedly operating a $7 billion Ponzi scheme.

Senior U.S. District Judge David Hittner issued a preliminary injunction and ordered the Lloyd's insurers to pay the lawyers for Stanford and two codefendants within 10 days for work already billed and to keep paying them under a company policy to pay legal costs for directors and officers.

Lloyd's has refused to pay for criminal defense past August, when the company's former chief financial officer, James M. Davis, pleaded guilty to a role in the scheme. Lloyd's insurers determined that the accused defendants participated in money laundering and thus it need not pay. But Davis did not plead guilty to money laundering, and no court has found that anyone involved in the case laundered money.

Lloyd's lawyers argued that since Stanford and codefendants Laura Holt and Gilbert Lopez refused to testify in their own defense in a hearing about these payments, that it should be taken as proof they are guilty even though they have pleaded not guilty to criminal charges.

“(Lloyd's) position is absurd because these circumstances are precisely why corporations procure D&O insurance on behalf of their directors and officers,” Hittner wrote in his 42-page opionion. “Indeed it would contravene the very purpose of the policies—as well as the language itself—to require (the accused) to prove their innocence before being entitled to fund for their defense.”

In granting the injunction the judge found Stanford and the others 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. He also noted since all Stanford's and Holt's assets are frozen, the alternative is for the taxpayers to pay for lawyers, which is an undesirable outcome.

Stanford, a native Texan, has been in federal detention since he was indicted in July. He has been repeatedly denied bail as a flight risk. The others are free on bond.

The trial of the charges is set for January 2011. Kent Schaffer, Stanford's criminal defense lawyer, has said Stanford is eager to get to trial, but the defense needs time to prepare because the case already includes 7 million pages of documents.

Founder and chairman of Stanford Financial Group, Stanford faces 21 charges of conspiracy, fraud and obstruction of justice. Holt, Lopez and and Mark Kuhrt, who was not covered by the officer and director insurance policy and already has a court-appointed lawyer, face fewer charges each.