Judge schedules September hearing to decide who will pay legal bills in Stanford case

Hearing to determine who pays Stanford legal fees

HOUSTON — Jailed Texas financier R. Allen Stanford and three executives — all facing charges of bilking investors out of $7 billion as part of a massive Ponzi scheme — will have to wait another five months before learning if they will have to foot their own legal bills.

U.S. District Judge Nancy Atlas on Tuesday scheduled a September hearing to determine whether Stanford and the executives or a British insurer will have to pay.

An appeals court last month ruled legal fees for Stanford and the executives, Laura Pendergest-Holt, Gilbert Lopez and Mark Kuhrt, must continue being paid by an insurance policy that takes care of such expenses.

The insurer, Lloyd’s of London, says the policy doesn’t pay on charges of money laundering, which Stanford and others are accused of doing. The appeals court said a lower court must determine if money laundering was committed in order for the policy to be invalid.

Atlas said that during the late summer hearing, which would begin Sept. 1 and could last up to five days, attorneys for Lloyd’s of London would have to prove how Stanford and each of the executives committed money laundering.

“It’s not enough for the carrier to say they are all in it together,” Atlas said. “It’s up to the (insurer) to tell me how and where money laundering occurred.”

The dispute over payment of legal fees is part of a civil lawsuit filed by Stanford and the executives against Lloyd’s of London and is separate from the criminal case, which is being handled by another federal judge.

But the September court hearing could give a preview of the criminal trial in January. Atlas said attorneys for both sides would be able to present evidence at the hearing gathered from access to the thousands of court documents prosecutors have put together and indicated will be the main focus of their case.

Attorneys representing Stanford and the three executives in the civil lawsuit said they planned, in preparing for September’s hearing, to question various individuals who are expected to testify at the criminal trial, including former executive James M. Davis, who has pleaded guilty and is cooperating with prosecutors.

Attorneys for Lloyd’s of London’s said they could possibly question Stanford and the other executives or even ask them to testify.

“The best evidence they have is their own testimony,” said Daniel Lane, one of the insurer’s attorneys. “If they can point to where the $7 billion went, they have a pretty good defense for money laundering.”

But Lee Shidlofsky, one of the attorneys for Stanford and the executives, said if his clients decide not to testify or speak to Lloyd’s of London’s attorneys under their Fifth Amendment right, that shouldn’t be held against them.

“They have protection against self incrimination,” he said. “It’s an awkward position to be in.”

Stanford and executives of the now-defunct Houston-based Stanford Financial Group are accused of orchestrating a Ponzi scheme by advising clients to invest more than $7 billion in certificates of deposit from the Stanford International Bank on the Caribbean island of Antigua.

Investors from 113 countries were promised huge returns on their CDs and that their investments were safe.

But authorities say Stanford and the executives fabricated the bank’s balance sheets, bribed Antiguan regulators and misused investors’ money to pay for his lavish lifestyle.

Stanford and the three executives have pleaded not guilty to various charges, including money laundering, wire and mail fraud, in a 21-count indictment. Stanford has been jailed since being indicted last June while the three executives are free on bond.

Lane said Lloyd’s of London has already paid more than $9 million in legal fees associated with criminal and civil cases against Stanford and other company executives, with Stanford having spent more than $100,000 a week last month on his criminal defense.

Earlier this month, Harvard law professor and celebrity defense lawyer Alan Dershowitz joined Stanford’s legal team as an adviser.