Whether Lloyd's must continue to pay the accused's legal fees will be resolved in a hearing at the U.S. District Court with Judge Nancy Atlas.
Lloyd’s says the policy doesn’t pay on charges of money laundering, one of the many counts Stanford and ex-executives, Laura Pendergest-Holt, Gilbert Lopez and Mark Kuhrt, face in a federal indictment.
But the financier and his ex-employees say they are not guilty and that Lloyd’s should honor the policy, which will pay up to $100 million. So far, Stanford alone has spent more than $6 million on legal fees by hiring and firing attorneys from at least 10 different law firms.
Judge Atlas said that Pendergest-Holt has settled with Lloyd’s.
At the hearing, attorneys for Lloyd's will have to prove Stanford and the executives committed money laundering. Besides money laundering, Stanford and his one-time colleagues have also been indicted on charges of wire and mail fraud.
Those expected to testify include former investors who allegedly lost money through investments in Stanford's businesses and financial experts, some who will say Stanford's financial empire was a sham and others who will say it was a legitimate enterprise.
Stanford and the three other defendants, however, were not going to testify, asserting their Fifth Amendment right against self-incrimination, said Bob Bennett, Stanford's attorney.
"None of the parties will testify ... because of the pending criminal case," Bennett said. "They don't want to give a road map to the prosecution."
Stanford and the former executives are accused of orchestrating a colossal pyramid scheme by advising clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns. Stanford's businesses were headquartered in Houston.
Authorities say Stanford and the executives fabricated the bank's records, bribed Antiguan regulators with investors' money from a secret Swiss bank account and misused funds to pay for Stanford's lavish lifestyle.
Court documents filed last week said Stanford treated the bank in Antigua as "his personal piggy bank, secretly sucking out investor funds to use and lose as he pleased."
Lloyd's attorneys called Pendergest-Holt, the chief investment officer, the "face of Stanford's criminal enterprise" who knew Stanford promised unrealistic returns on investments and said Lopez, the chief accounting officer, and Kuhrt, the global controller, helped create false annual reports for Stanford that helped "dupe regulators and keep the fraud going."
Stanford and the three former executives are also fighting a Securities and Exchange Commission lawsuit filed in Dallas that makes similar allegations.
Bennett said he is confident Atlas will rule in favor of Stanford and the other executives.
"I think it's going to be real close," he said. "But win or lose, we will go (to trial) in January."