Posted on 01 Dec 2009
R. Allen Stanford, the Texas financier accused in February by the U.S. Securities and Exchange Commission of "orchestrating a fraudulent, multibillion-dollar investment scheme" through three of his companies, is suing Lloyd's and Arch Specialty Insurance Co. for their rejection of claims for defense costs under existing directors and officers policies.
Stanford, along with other accused officers from his banking and investment businesses, filed the lawsuit against the insurers in U.S. District Court in the Southern District of Texas. It claims that the insurers wrongfully denied claims against D&O policies that should have provided for the legal defense of Stanford and the others in the U.S. Department of Justice case against them.
Initially, the claim says, the insurance companies told Stanford and the others "that they would advance 'costs, charges and expenses' to them for the SEC action and the criminal action." Then, in a letter sent Nov. 16, the insurers said they concluded the claims against Stanford and the others "are excluded by, among other things, the D&O policy's 'money laundering' and 'fraud' exclusions" and also by their professional indemnity policy's "government claims" and "intentional corporate or business policy" exclusions.
The lawsuit contends this is a breach of contract and demands payment of damages, attorney fees and an 18% penalty provided under Texas insurance laws. Bart Nash, Lloyd's spokesman, declined comment.
Other defendants in the criminal case who are now plaintiffs in this lawsuit include Laura Pendergest-Holt, former chief investment officer of Stanford Financial Group Co.; Gilbert Lopez Jr., former chief accounting officer of that company; and Mark Kuhrt, former global controller of Stanford Financial Group Global Management.
The SEC alleged that Stanford's companies sold $8 billion in fraudulent certificates of deposit.
Stanford faces 21 counts of conspiracy, fraud, bribery and obstruction of justice. He and four others were indicted in late June in Houston.
Lloyd's insurance companies have current Best's Financial Strength Ratings of A (Excellent). Arch Specialty Insurance Co. also has a current A (Excellent) rating.