Lloyd's Legal Fees Coverage Suit Begins This Week
The insurance company for indicted financier R. Allen Stanford would like to be released from its responsibility to pay the massive legal fees mounting on Stanford's behalf. Stanford and two of his former company executives stand accused of bilking investors out of $7 billion in a massive pyramid scheme. Insurer Lloyd's of London argued to a federal judge the accused lied to investors and falsified financial statements and therefore should be disqualified from having their legal fess paid under the insurance policy.
U.S. District Judge Nancy Atlas heard the first day of arguments on Tuesday, August 24, according to the Associated Press. At this point, Stanford has received more than $15 million to pay his legal fees and those of his executives, Gilbert Lopez and Mark Kuhrt, in their criminal and civil cases. The policy will pay up to $100 million. Reportedly, Stanford has spent more than $6 million by hiring and firing attorneys from at least 10 different law firms.
The case presented by Lloyd's mirrors that of the prosecutors in the criminal case pending against Stanford, reports the AP. Counsel for Lloyd's, Barry Chasnoff, argued to the court that charges of money laundering against Stanford and his co-defendants cannot be covered under the policy. He has said the evidence will prove Stanford, Lopez and Kuhrt are guilty of money laundering after falsifying the financial reports used to lure investors with enticing but false rates of return on their certificates of deposit.
As is so common with the many major financier fraud cases, allegations that investor money was actually used by Stanford to furnish the obligatory "lavish lifestyle" abound. According to the AP, Lloyd's contends that Stanford secretly diverted more than $1.6 billion in investor funds for personal loans to himself.
The defense argues the men did nothing wrong. They placed much of the blame on James Davis, Stanford's former CFO. Davis has pleaded guilty and is cooperating with authorities.
The AP reports prosecutors attended the hearing, looking for a preview of the defenses Stanford and the other executives might present at trial. In addition to the money laundering charge, Allen Stanford, Gilbert Lopez and Mark Kuhrt have also been indicted on charges of wire and mail fraud.
- Legal bills at issue in Texas financier's hearing (Huffington Post)
- Insurance Policy Ambiguous Under Virginia Law, and Criminal and Insurance Issues (FindLaw's 2nd Circuit Blog)
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