Billionaire Stanford & His Lawyers Held in Contempt Over Legal Fees Suit
Granting a motion filed by insurer Lloyd’s of London, a federal judge in Dallas today found billionaire and accused swindler R. Allen Stanford and his counsel in contempt.
They violated a court order, found U.S District Judge David Godbey, by attempting to collect reimbursement for Stanford’s defense costs under a directors and officers insurance policy issued by Lloyd’s, Reuters reports.
No sanctions are shown in the contempt order and the brief breaking news story doesn’t explain the facts underlying the contempt finding.
But CNBC reports that the judge issued the contempt citation because they filed suit against Lloyd’s in federal court in Texas to try and collect on the D&O coverage, violating a prior court order that all related disputes should be handled by Godbey. The judge declined to impose sanctions, in part because the lawsuit was filed openly, and also declined to order Stanford and his lawyers to withdraw the suit.
An earlier Reuters article says a court-appointed receiver has been arguing that any proceeds from the D&O policy should go to the receivership estate rather than Stanford and other executives.
However, as discussed in a previous ABAJournal.com post, the judge decided about two months ago that Stanford and other executives of the company could turn to the D&O carrier for coverage of their legal fees.
Lloyd’s is asserting that a policy provision excluding coverage for claims arising from money laundering and “dishonest, fraudulent or criminal acts” bars coverage, although the company had previously agreed to pay a limited amount of defense costs, the earlier Reuters article explains.
Stanford, who is also facing a related civil suit by the Securities and Exchange Commission and has had his assets frozen, is accused of bilking $7 billion or so from investors in a scheme that allegedly revolved around an offshore bank’s certificates of deposit.
Related prior coverage:
ABAJournal.com: “DeGuerin Out, Patton Boggs In as Stanford’s Defense Counsel in $7B Case”
ABAJournal.com: “Judge Appoints Public Defender for Billionaire R. Allen Stanford”
