NU Online News Service, March 16, 4:29 p.m. EDT
Lloyd's underwriters and Arch Specialty Insurance must pay legal defense costs for accused Texas Ponzi scheme operator R. Allen Stanford, a federal appeals court has ruled.
The U.S. 5th Circuit Court of Appeals in New Orleans, in upholding a lower court ruling yesterday, sent the case back to U.S. District Court in Houston for more argument on the coverage question.
In its ruling the court said the insurers could recover what they paid out if they could prove that money laundering was involved in the case.
The decision covers Mr. Stanford and other executives with his companies–James Davis, Laura Pendergest-Holt, Mark Kuhrt and Gilberto Lopez. Mr. Stanford and the first two sought defense costs under two directors and officers liability policies–one providing the potential for $10 million in coverage and an excess, follow-form policy adding another $90 million of potential coverage.
They sought the coverage after the SEC sued them charging they had orchestrated a $7 billion Ponzi scheme through the sale to investors of sham certificates of deposit.
Mr. Stanford, who was charged last June with fraud, conspiracy and obstruction, is in jail in Houston awaiting trial.
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