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Allen Stanford Attorney Accused of Insurance Fraud

Source: Business Insurance

Posted on 15 Jun 2010

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Insurance fraud allegations have been made against one of accused Ponzi schemer Allen Stanford's attorneys. As a result, U.S. District Judge David Hittner, who is handling the criminal case against Stanford, issued an order allowing parties to review documents related to these allegations.

This development adds a new twist to a case in which Stanford has cycled through many lawyers, prompting three co-defendants to ask that their trials be severed because the case has become a "circus."

Mr. Stanford was arrested in June 2009 and accused of running a $7 billion Ponzi scheme focused on his Stanford Financial Group's fraudulent sale of certificates of deposit issued by his Antigua bank. A January 2011 trial is expected.

Judge Hittner's order relates to a separate insurance coverage dispute that Mr. Stanford and underwriters at Lloyd's of London and Arch Specialty Insurance Co. are litigating in the same court. The order lets the underwriters review documents filed under seal.

According to court papers, the underwriters learned that Michael Essmyer, who is Mr. Stanford's co-counsel in the criminal case, alleged that lead counsel Robert Bennett and his Bennett-Nguyen Joint Venture "may have engaged in insurance fraud" in submitting a fee application.

Mr. Bennett denied engaging in insurance fraud, according to the papers, which were signed by him, Mr. Essmyer and a lawyer for the insurers.

It follows the June 9 request by Laura Pendergest-Holt, a former Stanford Financial chief investment officer, to sever her trial.

She said the "egregious and circus-like conduct" by Mr. Stanford and his lawyers jeopardizes her right to a fair trial.

Former Stanford accounting executives Mark Kuhrt and Gilbert Lopez joined her motion, which uses the word "circus" nine times and said the potential prejudice created by Mr. Stanford could prove "toxic."

Mr. Bennett on Monday declined to comment.

Earlier this month, Judge Hittner rejected Mr. Essmyer's attempt to withdraw from the case after Mr. Stanford had fired him amid "irreconcilable differences" with Mr. Bennett over litigation strategy, but directed that Mr. Bennett serve as lead counsel.

Mr. Bennett is a Houston-based lawyer, not the prominent Washington, D.C., lawyer with the same name.