A three-judge panel of the 5th U.S. Circuit Court of Appeals held March 15 that a court -- not insurance companies -- will determine whether two insurance companies have to pay defense costs for R. Allen Stanford and three other former Stanford Financial Group (SFG) executives who face criminal charges and civil litigation.
The civil litigation filed by the U.S. Securities and Exchange Commission and the federal criminal charges stem from allegations that the former SFG executives conspired to defraud investors who bought about $7 million in certificates of deposit sold through Stanford International Bank Ltd. The criminal case, United States v. Robert Allen Stanford, et al. is pending in U.S. District Judge David Hittner's court in the Southern District of Texas in Houston. The civil case, Securities and Exchange Commission v. Stanford International Bank Ltd., et al., is pending before U.S. District Judge David Godbey of the Northern District of Texas in Dallas. Stanford and the other three executives, Laura Pendergest-Holt, Gilberto Lopez Jr. and Mark Kuhrt, have pleaded not guilty to the criminal charges against them and deny the allegations in the civil suit.
The insurance companies had appealed a Jan. 25 preliminary injunction Hittner issued in Laura Pendergest-Holt, et al. v. Certain Underwriters at Lloyds of London, et al. Hittner ordered Certain Underwriters at Lloyds of London and Arch Specialty Insurance Co. to advance defense costs to the four former SFG executives. The two insurance companies contended that they should not have to pay under the SFG directors-and-officers policy because they determined in November 2009 that the former executives engaged in "money laundering."
According to the 5th Circuit's opinion, written by Senior Judge Patrick Higginbotham, the liability policy limit is $100 million. But, as noted in the opinion, a money-laundering exclusion in the policy bars coverage for loss from any claim "arising directly or indirectly as a result of or in connection with any act or acts (or alleged act or acts) of Money Laundering."
The policy also provides that the insurance companies must pay the costs in the event that money laundering is alleged "until such time that it is determined that the alleged act or acts did in fact occur." As the 5th Circuit reads the policy, "the determination is a judicial act" and that act must occur in a separate coverage proceeding.
The 5th Circuit modified Hittner's injunction, affirming the order "only insofar as it provides for coverage until a court determines otherwise." But to avoid any "awkwardness" for Hittner, who presides over the criminal case against the SFG executives, the 5th Circuit remanded the case to the Southern District so that the chief judge might assign it to another judge. Higginbotham wrote that the 5th Circuit cannot "ignore the awkwardness -- readily recognized by Judge Hittner -- in putting the civil 'cart' before the criminal 'horse,' especially when the judge who decides the question of coverage, with its demand for assessing the strength of the government's criminal case, is set to later preside over the criminal trial."
Lee Shidlofsky, attorney for the executives and a partner in Austin's Visser Shidlofsky, writes in an e-mail, "We are pleased that the 5th Circuit concluded that Underwriters does not have the unilateral right to act as the judge and jury. Under the court's holding, Underwriters are obligated to pay defense costs until a court determines that money laundering has in fact occurred."
Neel Lane and Rex Heinke, attorneys representing the insurance companies and partners in Akin Gump Strauss Hauer & Feld in San Antonio and Los Angeles, respectively, each did not return a telephone call seeking comment before press time on Thursday.
Showing posts with label pay. Show all posts
Showing posts with label pay. Show all posts
Saturday, 20 March 2010
Wednesday, 17 February 2010
Politicians Slow To Repay Tainted Donations
Financier Allen Stanford steps off a prison transport bus at the federal courthouse for a hearing Sept. 15
Billionaire investor Allen Stanford was one of the biggest players in the financial meltdown.
His empire collapsed a year ago this week, and he's now awaiting trial on fraud charges.
Meanwhile, a court-appointed lawyer is trying to recover $1.8 million in campaign contributions that Stanford and his executives made with clients' money.
If the name Allen Stanford jogs your memory at all, it might be because he got the government of Antigua to dub him Sir Allen Stanford.
Or because he threw millions of dollars into his passion for the game of cricket.
Or because of an interview he did in June 2008 on CNBC, in which he responded to the question: Is it fun being a billionaire?
"Well, ah — yes, yes. I have to say it's fun being a billionaire. But it's hard work. But it's hard work," Stanford said.
Whether Stanford would call making campaign contributions hard work or fun, he made a lot of them.
Stanford and his two top executives dropped nearly $2 million in Washington, D.C. The money went to five party committees, three presidential campaigns and 82 members of Congress.
A judge has appointed what's called a "receiver" to recover whatever he can for investors — including that campaign money.
Kevin Sadler, a lawyer representing the receiver, says the Stanford operation used political money as a tool. It was "a business organization that from the outside appeared to be a legitimate business and was doing many things to give an appearance of legitimacy, one of which was to provide political contributions."
The fact is politicians don't like to let go of money they've raised. The receiver sent letters last March asking for refunds.
Out of the $1.8 million, a bit less than $89,000 came back.
Top 10 Unreturned Political Contributions (Ranked By Size of Contribution)
Amount Source
$950,000 Democratic Senatorial Campaign Committee
$238,500 National Republican Congressional Committee
$202,000 Democratic Congressional Campaign Committee
$128,500 Republican National Committee
$83,345 National Republican Senatorial Committee
$25,000 Rangel Victory Fund
$10,000 New Jersey Democratic State Committee
$10,000 Rep. Pete Sessions (R-TX)
$6,600 Rep. Gregory Meeks (D-NY)
$6,100 Sen. Bill Nelson (D-FL)
Complete List
Source: Stanford Financial Group Receivership
Now a second round of letters has gone out. It tells the politicians that the money was "diverted from the thousands of innocent investors that have been defrauded by the Stanford Ponzi scheme."
There's no threat to file suit, but Sadler says that's not off the table.
"The money needs to be returned, and where it's cost-justified to do so, then certainly going to court is very much an option," he says.
That leaves one question: Who's holding all of this Stanford money?
In first place is the Democratic Senatorial Campaign Committee with $950,000 — almost half the total. Nobody at the committee responded to NPR's request for comment.
The National Republican Congressional Committee ranks No. 2 with $238,500. Its spokesman said they had no comment.
Rep. Charlie Rangel (D-NY), chairman of the Ways and Means Committee, has the most Stanford money of any lawmaker: $35,800. His office didn't respond to NPR's request for comment.
Rep. Pete Sessions (R-TX), with $10,000, is in second place for individual lawmakers who didn't return their cash.
There is precedent for politicians giving back tainted contributions. Deciding to do so can be as much political as legal.
"I think what ultimately will happen will depend on whether the story has legs or not," says Larry Noble, a campaign finance lawyer and former general counsel to the Federal Election Commission.
Noble says politicians look at the pain threshold where the money is no longer worth the fight.
"The larger the amount of money, the higher the pain threshold," he says.
But it seems when it comes to holding onto Allen Stanford's money, the pain hasn't come anywhere near the threshold. At least, not yet.
Tuesday, 27 October 2009
Stanford Can Use Lloyd’s Insurance to Pay Lawyers, Judge Rules
Allen Stanford the Stanford Group Co. founder accused of leading a $7 billion investor-fraud scheme, can use corporate insurance policy proceeds to pay his defense lawyers, a judge ruled.
U.S. District Judge David Godbey of Dallas, who is hearing a Securities and Exchange Commission lawsuit against the Texas financier, ruled yesterday that he and other Stanford Group executives can draw from Lloyds of London officers’ and directors’ coverage said to be worth at least $50 million.
“The court finds it in the interest of fairness to allow directors and officers to access insurance proceeds to which they are entitled for several reasons,” Godbey said in a ruling posted to his court’s Web site that he said applies to all Stanford defendants. “The potential harm to them if denied coverage is not speculative but real and immediate; they may be unable to defend themselves in civil actions in which they do not have a right to court-appointed counsel.”
Stanford, who faces civil and criminal claims he swindled investors in a scheme involving the sale of certificates of deposit through Antigua-based Stanford International Bank Ltd., was given a federal public defender on Sept. 15 after a U.S. judge hearing his criminal case in Houston found he had no money to pay lawyers.
With a reported net worth of $2.2 billion, Stanford was ranked 205th on Forbes magazine’s 2008 list of richest Americans. He is being held without bail pending trial.
Kent Schaffer
Houston lawyer Kent Schaffer agreed to assist the public defenders’ office at the government pay rate of $110 an hour on Sept. 17. Stanford, who has denied all allegations of wrongdoing, has struggled to retain defense lawyers after his assets were frozen by the Dallas court on Feb. 17 following the filing of the SEC lawsuit.
The agency alleged that Stanford, two associates and three businesses paid early investors “improbable if not impossible” returns on their investments, using money received from later- arriving clients.
A U.S. grand jury in Houston in June indicted Stanford, his chief investment officer, Laura Pendergest-Holt, and three others for their alleged roles in the scheme. They all pleaded innocent. Stanford’s chief financial officer, James Davis, who was charged separately, pleaded guilty on Aug. 27 and is cooperating with the federal investigations.
DeGuerin, Luskin
Several high-priced lawyers have come and gone as Stanford’s attorney, including Houston criminal-defense lawyer Dick DeGuerin and Robert Luskin of Washington-based Patton Boggs.
DeGuerin withdrew in July after a dispute involving how he would be paid. Luskin was denied permission in August to represent Stanford for the limited purpose of helping the financier access money for lawyers.
Luskin, who said in an e-mail that he may continue helping Stanford appeal the denial of his bail, praised the ruling although he said he’s still digesting it.
“Obviously, we’re delighted with the ruling,” Luskin said. “It’s the right result and, much more important for Allen and for the justice system, helps to guarantee that Allen will have the resources to get a fair trial.”
Schaffer said in a phone interview yesterday that while he’s pleased with the ruling, he’s not sure how it will affect his ability to continue representing Stanford. Schaffer said the financier most likely doesn’t qualify for a publicly funded defense after the ruling, as taxpayers shouldn’t have to pay if Lloyd’s will.
‘Tremendous Progress’
“I’d like to stay on the case whether on an appointed or retained basis,” he said. “Now that we’ve been on the case for three weeks and we’ve done a ton of work, we think it’s a very defensible case. We’ve been making tremendous progress, and the further we get into it, the better the case is starting to look.”
Schaffer said he would meet with Stanford tomorrow at the federal prison in downtown Houston to learn whether the financier wants to keep him or change lawyers.
Ralph Janvey, the court-appointed receiver for Stanford’s businesses, had asked Godbey to reserve the Lloyd’s of London proceeds for his use in defending the Stanford companies against claims by investors and creditors.
Receivership Estate
The judge didn’t directly address Janvey’s request to reserve the policies for his use or declare the proceeds part of the receivership estate. Godbey called the receiver’s claim on the coverage “hypothetical” as Janvey hasn’t yet filed any invoices with the insurance carrier and Lloyd’s has filed a separate petition saying it plans to exclude Janvey as the receiver has repeatedly said the Stanford companies were involved in fraud.
“Those are questions for another day,” Godbey said in the ruling.
Kristie Blumenschein, Janvey’s spokeswoman, declined to comment on yesterday’s decision.
As many as 60 Stanford executives and employees are seeking to use the directors’ and officers’ coverage to defray their legal bills, according to Janvey. The receiver has said the coverage may be worth as much as $90 million.
Lawyers for Pendergest-Holt had asked the criminal case judge, David Hittner, to order Lloyd’s underwriters to pay the Stanford defendants’ legal bills.
Judge Hittner
While Hittner hasn’t ruled on Pendergest-Holt’s request, court filings indicate he made direct inquiries to both Janvey and Lloyd’s about whether anything prevented the insurer from paying the defendants’ legal bills. Both the receiver and Lloyds urged Hittner to defer to Godbey on the issue.
Pendergest-Holt’s lawyers said in e-mails yesterday that they are pleased with Godbey’s decision to let them access Stanford’s insurance coverage, a decision one said was “a long time coming.”
“We can now continue to concentrate our efforts on properly defending Ms. Holt without fear of financial ruin,” Dan Cogdell, Pendergest-Holt’s lead lawyer, wrote. “I have already re-submitted my prior bills to Lloyd’s. While I won’t say what the amount I am owed is, I will say it is a lot more than I am comfortable being owed.”
“There are many things to be done in connection with Ms. Holt’s defense that we as her lawyers have deferred due to lack of funds,” Jeffrey Tillotson, the Dallas lawyer assisting in Pendergest-Holt’s civil and criminal defense, said in a separate e-mail. “Ms. Holt hasn’t done anything wrong and has always intended on aggressively fighting the government’s charges. Now she will have some resources available to fight back.”
Cooperating Witness
David Finn, a lawyer for Davis, said the ruling will allow him to continue representing the government’s key cooperating witness.
“It means I will not have to file a motion to withdraw,” Finn said in an e-mail. “I am relieved because I will not have to keep digging into my pocket for expenses not knowing if I’d ever get paid.”
U.S. District Judge David Godbey of Dallas, who is hearing a Securities and Exchange Commission lawsuit against the Texas financier, ruled yesterday that he and other Stanford Group executives can draw from Lloyds of London officers’ and directors’ coverage said to be worth at least $50 million.
“The court finds it in the interest of fairness to allow directors and officers to access insurance proceeds to which they are entitled for several reasons,” Godbey said in a ruling posted to his court’s Web site that he said applies to all Stanford defendants. “The potential harm to them if denied coverage is not speculative but real and immediate; they may be unable to defend themselves in civil actions in which they do not have a right to court-appointed counsel.”
Stanford, who faces civil and criminal claims he swindled investors in a scheme involving the sale of certificates of deposit through Antigua-based Stanford International Bank Ltd., was given a federal public defender on Sept. 15 after a U.S. judge hearing his criminal case in Houston found he had no money to pay lawyers.
With a reported net worth of $2.2 billion, Stanford was ranked 205th on Forbes magazine’s 2008 list of richest Americans. He is being held without bail pending trial.
Kent Schaffer
Houston lawyer Kent Schaffer agreed to assist the public defenders’ office at the government pay rate of $110 an hour on Sept. 17. Stanford, who has denied all allegations of wrongdoing, has struggled to retain defense lawyers after his assets were frozen by the Dallas court on Feb. 17 following the filing of the SEC lawsuit.
The agency alleged that Stanford, two associates and three businesses paid early investors “improbable if not impossible” returns on their investments, using money received from later- arriving clients.
A U.S. grand jury in Houston in June indicted Stanford, his chief investment officer, Laura Pendergest-Holt, and three others for their alleged roles in the scheme. They all pleaded innocent. Stanford’s chief financial officer, James Davis, who was charged separately, pleaded guilty on Aug. 27 and is cooperating with the federal investigations.
DeGuerin, Luskin
Several high-priced lawyers have come and gone as Stanford’s attorney, including Houston criminal-defense lawyer Dick DeGuerin and Robert Luskin of Washington-based Patton Boggs.
DeGuerin withdrew in July after a dispute involving how he would be paid. Luskin was denied permission in August to represent Stanford for the limited purpose of helping the financier access money for lawyers.
Luskin, who said in an e-mail that he may continue helping Stanford appeal the denial of his bail, praised the ruling although he said he’s still digesting it.
“Obviously, we’re delighted with the ruling,” Luskin said. “It’s the right result and, much more important for Allen and for the justice system, helps to guarantee that Allen will have the resources to get a fair trial.”
Schaffer said in a phone interview yesterday that while he’s pleased with the ruling, he’s not sure how it will affect his ability to continue representing Stanford. Schaffer said the financier most likely doesn’t qualify for a publicly funded defense after the ruling, as taxpayers shouldn’t have to pay if Lloyd’s will.
‘Tremendous Progress’
“I’d like to stay on the case whether on an appointed or retained basis,” he said. “Now that we’ve been on the case for three weeks and we’ve done a ton of work, we think it’s a very defensible case. We’ve been making tremendous progress, and the further we get into it, the better the case is starting to look.”
Schaffer said he would meet with Stanford tomorrow at the federal prison in downtown Houston to learn whether the financier wants to keep him or change lawyers.
Ralph Janvey, the court-appointed receiver for Stanford’s businesses, had asked Godbey to reserve the Lloyd’s of London proceeds for his use in defending the Stanford companies against claims by investors and creditors.
Receivership Estate
The judge didn’t directly address Janvey’s request to reserve the policies for his use or declare the proceeds part of the receivership estate. Godbey called the receiver’s claim on the coverage “hypothetical” as Janvey hasn’t yet filed any invoices with the insurance carrier and Lloyd’s has filed a separate petition saying it plans to exclude Janvey as the receiver has repeatedly said the Stanford companies were involved in fraud.
“Those are questions for another day,” Godbey said in the ruling.
Kristie Blumenschein, Janvey’s spokeswoman, declined to comment on yesterday’s decision.
As many as 60 Stanford executives and employees are seeking to use the directors’ and officers’ coverage to defray their legal bills, according to Janvey. The receiver has said the coverage may be worth as much as $90 million.
Lawyers for Pendergest-Holt had asked the criminal case judge, David Hittner, to order Lloyd’s underwriters to pay the Stanford defendants’ legal bills.
Judge Hittner
While Hittner hasn’t ruled on Pendergest-Holt’s request, court filings indicate he made direct inquiries to both Janvey and Lloyd’s about whether anything prevented the insurer from paying the defendants’ legal bills. Both the receiver and Lloyds urged Hittner to defer to Godbey on the issue.
Pendergest-Holt’s lawyers said in e-mails yesterday that they are pleased with Godbey’s decision to let them access Stanford’s insurance coverage, a decision one said was “a long time coming.”
“We can now continue to concentrate our efforts on properly defending Ms. Holt without fear of financial ruin,” Dan Cogdell, Pendergest-Holt’s lead lawyer, wrote. “I have already re-submitted my prior bills to Lloyd’s. While I won’t say what the amount I am owed is, I will say it is a lot more than I am comfortable being owed.”
“There are many things to be done in connection with Ms. Holt’s defense that we as her lawyers have deferred due to lack of funds,” Jeffrey Tillotson, the Dallas lawyer assisting in Pendergest-Holt’s civil and criminal defense, said in a separate e-mail. “Ms. Holt hasn’t done anything wrong and has always intended on aggressively fighting the government’s charges. Now she will have some resources available to fight back.”
Cooperating Witness
David Finn, a lawyer for Davis, said the ruling will allow him to continue representing the government’s key cooperating witness.
“It means I will not have to file a motion to withdraw,” Finn said in an e-mail. “I am relieved because I will not have to keep digging into my pocket for expenses not knowing if I’d ever get paid.”