Eighty-nine investors defrauded by imprisoned financier Robert Allen Stanford are seeking $115 million from seven insurance companies in addition to claims that could total as much as $1 billion against the Louisiana Office of Financial Institutions and SEI Investments Co. 

Stanford, who was indicted by a federal grand jury for frauds exceeding $7 billion, is currently serving 115 years behind bars.


According to reports emanating out of the United States, six of the insurers responded earlier in March by transferring the investors’ four-year-old state court suit to Baton Rouge federal court, action the investors have fought hard in the past.


“We feel confident that this case should not be removed to federal court, because the state court has already ruled on it and granted the investors class-action status,” said Phillip W Preis, Baton Rouge attorney for the investors.


The investors sued OFI and Pennsylvania-based SEI in 19th Judicial District Court in Baton Rouge in 2009. That was soon after the Securities and Exchange Commission shut down Stanford’s worldwide operations and alleged his investment programme was nothing more than a fraudulent scheme.


However, a federal judge in Dallas, where the SEC had filed its complaint, yanked the Louisiana investors’ suit into his Texas court and then dismissed the case, a US online news site, The Advocate, reported.


It added that the Dallas judge ruled in 2011 that the Baton Rouge investors’ suit violated a Securities Litigation Uniform Standards Act prohibition against state court litigation that could negatively affect the nation’s financial markets.


Last year, however, a three-judge panel of the US 5th Circuit Court of Appeals overruled the Dallas judge and concluded that investors could pursue recovery of their losses in Baton Rouge state court.


“That returned the investor claims to state District Judge Michael Caldwell, who held hearings on disputed allegations that OFI knew of Stanford’s misdeeds and should have warned investors, as well as a complaint that SEI ignored a duty to tell investors that Stanford’s assets were grossly overvalued,” The Advocate reported.


“Caldwell issued a judgment last year that certified the investors’ suit as a class action, meaning that all people who lost investments at Stanford Trust Co’s Baton Rouge office could join the suit as plaintiffs against SEI, OFI, and now SEI’s seven insurers.”


Caldwell has not yet scheduled a trial for the case, The Advocate said.

The US Supreme Court has agreed to hear arguments on appeals of related Stanford investor cases in October.


The six insurers that transferred the dispute last month to US District Judge James J Brady are: Allied World Assurance Co (US) Inc, Continental Casualty Co, Arch Insurance Co, Indian Harbor Insurance Co, Nutmeg Insurance Co, and certain underwriters at Lloyd’s of London.


Those insurers told Brady a seventh firm - Endurance Specialty Insurance Ltd of Bermuda - did not join their motion because Endurance officials had not yet been served with a copy of the investors’ suit.



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