U.S. District Judge David Godbey said he will not bar Lloyd's of London from disbursing funds from a directors' and officers' policy covering legal fees of former Stanford Financial Group officials.
A Dallas judge paved the way Friday for an insurance policy to pay lawyers representing R. Allen Stanford and some others charged with him in an alleged $7 billion fraud.
Godbey is overseeing the Securities and Exchange Commission civil lawsuit that froze all of Stanford's personal assets and put his companies in receivership. Besides the civil case, Stanford and others face criminal charges in the alleged fraud.
The judge said his ruling does not mean that any particular defendant is entitled to fees under the policy and that it's up to Lloyd's to determine how the policy will be paid.
Since the SEC filed its lawsuit in February, lawyers have been seeking payment under the insurance but Lloyd's held off after receiver Ralph Janvey claimed parts of the policy might be assets of the estate. Godbey said that even if the policy is an estate asset, he would allow Lloyd's to pay defense lawyers.
To obtain representation in the criminal case, Stanford had to declare himself indigent and then was appointed lawyers by Senior U.S. District Judge David Hittner. Stanford, a native Texan who has lived mostly in the Caribbean for years, is being held without bond as a possible flight risk.
“The way I read it, the lawyers can now get paid,” said Kent Schaffer, who was appointed to work on Stanford's defense with Mike Sokolow, the first assistant federal public defender for the Southern District of Texas. Both are being paid by taxpayers.
Schaffer said he doesn't know when Lloyd's will pay and how much will go to Stanford, since the coverage has a limit — though disputes are likely about what the limit is — and several defendants will ask that it cover their legal bills.
Stanford faces 21 counts of conspiracy, fraud, bribery and obstruction of justice. He and co-defendants are accused of bilking investors who bought certificates of deposit issued by Stanford International Bank on the Caribbean island of Antigua.
Stanford previously said he wanted to hire a Washington, D.C., firm if allowed the insurance funds.
“It's certainly my understanding that Allen hopes that we will be able to represent him and we would look forward to being able to enter the case with both feet on the ground,” said Robert Luskin, a Washington lawyer who has not yet fully entered the case on Stanford's behalf. Luskin did try unsuccessfully to get Hittner tossed off the case.
Godbey's decision was in response to a motion filed by Houston lawyer Dan Cogdell on behalf of former Stanford Chief Investment Officer Laura Pendergest-Holt, who faces criminal charges and whose personal assets were frozen by the Dallas court.
“This is a green light as far as I'm concerned,” Cogdell said. “I don't know who's happier — my client, my creditors or my wife. It has been a long time coming. We can continue to concentrate our efforts on properly defending Ms. Holt without fear of financial ruin.”
Only Stanford's and Pendergest-Holt's assets were frozen in the civil case, but other former Stanford officials likely will ask that the insurance policy cover their legal bills too.
Dick DeGuerin, Stanford's lawyer for months until the court appointed Schaffer and the public defenders, said he has high hopes of being paid for his work.
“Just ask me again when the check clears,” DeGuerin said.