NU Online News Service, Oct. 15, 10:23 a.m. EDT

Lloyd's and Arch Specialty Insurance Co. do not have to coverthe legal expenses of Texas financier R. Allen Stanford, a federaljudge has ruled.

According to court documents from the U.S. District Court inHouston, Judge Nancy F. Atlas has ruled the insurers "have mettheir burden to show a substantial likelihood that thepreponderance of the evidence would demonstrate that the moneylaundering exclusion applies," and the insurers do not have toprovide coverage for defense costs.

Mr. Stanford is accused of bilking investors of $7 billion in analleged Ponzi scheme. He and several executives of his StanfordFinancial Group Co. were indicted last year in Houston on chargesof fraud, conspiracy, bribery and other charges.

Mr. Stanford was seeking coverage under his company's directors& officers policy. According to court records, the insurers didprovide litigation defense costs at first, but retroactively deniedcoverage and sought reimbursement in Aug. 2009--when James M.Davis, the financial group's chief financial officer, reached aplea agreement in which he admitted to knowing about a scheme todefraud investors. The scheme included the use of wire facilitiesand mail, court records show.

In March the U.S. 5^th Circuit Court of Appeals in NewOrleans upheld a lower court ruling that the insurers had to pay thelegal expenses, but sent the case to the district court for furtherconsideration.

Mr. Stanford is being held without bail while awaitingtrial.