NU Online News Service, March 21, 1:43 p.m.EDT

A federal appeals court reinstated a securities lawsuitinvolving the Ponzi scheme of R. Allen Stanford that names WillisGroup Holdings as a defendant in the multi-billion-dollarfraud.

On Monday, the U.S. Court of Appeals for the 5^thCircuit reinstated a class-action lawsuit involving a group ofdefendants that includes insurance-broker Willis and six Lloyd's ofLondon Syndicates.

The defendants sought to have the cases dismissed under theSecurities Litigation Uniform Standards Act, arguing that the actprotects them from being sued by the plaintiffs.

The three-judge panel reversed a lower-court ruling andreinstated the lawsuit, saying that “purchase or sale of securities(or representations about the purchase or sale of securities) isonly tangentially related to the fraudulent schemes.”

In a filing with the Securities and ExchangeCommission, Willis says it is a party to six actions related toStanford, most of which have been rolled into a class action.

Willis says that it was the insurance broker for Stanford “oncertain lines of insurance.”

In court papers, the plaintiffs allege that Willis and otherdefendants “made misrepresentations to the appellants about theliquidity, soundness, and safety of investing in” Stanfordfinancial products.

Willis says in the filing that while it is difficult to place adollar amount on its ultimate liability at this time, it isdiverting “management and personnel resources away from operatingour business.”

Willis adds in the filing, “Even if we do not experiencesignificant monetary costs, there may also be adverse publicityassociated with these matters that could result in reputationalharm to the insurance-brokerage industry in general or to us inparticular that may adversely affect our business, client oremployee relationships.”

In 2009, Stanford, the head of Stanford Group Companies, and atleast two others were charged with running a Ponzi scheme whereinthey sold approximately $8 billion “of self-style 'certificates ofdeposit' by promising high-return rates that exceed those availablethrough true certificates of deposits offered by traditionalbanks.”

Stanford was convicted of fraud earlier this month and isawaiting sentencing.