NU Online News Service, March 21, 1:43 p.m. EDT
A federal appeals court reinstated a securities lawsuit involving the Ponzi scheme of R. Allen Stanford that names Willis Group Holdings as a defendant in the multi-billion-dollar fraud.
On Monday, the U.S. Court of Appeals for the 5th Circuit reinstated a class-action lawsuit involving a group of defendants that includes insurance-broker Willis and six Lloyd’s of London Syndicates.
The defendants sought to have the cases dismissed under the Securities Litigation Uniform Standards Act, arguing that the act protects them from being sued by the plaintiffs.
The three-judge panel reversed a lower-court ruling and reinstated the lawsuit, saying that “purchase or sale of securities (or representations about the purchase or sale of securities) is only tangentially related to the fraudulent schemes.”
In a filing with the Securities and Exchange Commission, Willis says it is a party to six actions related to Stanford, most of which have been rolled into a class action.
Willis says that it was the insurance broker for Stanford “on certain lines of insurance.”
In court papers, the plaintiffs allege that Willis and other defendants “made misrepresentations to the appellants about the liquidity, soundness, and safety of investing in” Stanford financial products.
Willis says in the filing that while it is difficult to place a dollar amount on its ultimate liability at this time, it is diverting “management and personnel resources away from operating our business.”
Willis adds in the filing, “Even if we do not experience significant monetary costs, there may also be adverse publicity associated with these matters that could result in reputational harm to the insurance-brokerage industry in general or to us in particular that may adversely affect our business, client or employee relationships.”
In 2009, Stanford, the head of Stanford Group Companies, and at least two others were charged with running a Ponzi scheme wherein they sold approximately $8 billion “of self-style ‘certificates of deposit’ by promising high-return rates that exceed those available through true certificates of deposits offered by traditional banks.”
Stanford was convicted of fraud earlier this month and is awaiting sentencing.