CFO’s statement revealed criminal activity, voiding policy
Lloyd’s has said admissions made by Allen Stanford’s former chief financial officer when he pleaded guilty means Lloyd’s does not have to pay for Standford’s defence, Bloomberg reports.
Lloyd’s lawyers told US District Court Judge David Hittner in Houston that the statements made by James Davis in his 27 August plea agreement revealed criminal activity. These are outside the terms of the directors’ and officers’ insurance.
Stanford, chief investment officer Laura Pendergest-Holt and two other former employees are accused of running a $7bn Ponzi fraud scheme. Each has pleaded not guilty.
Plea bargaining
Davis, who was charged separately, agreed to forfeit $1bn as part of his plea. He is cooperating with investigators.
“We’re in uncharted territory,” Hittner told the lawyers for each side after hearing more than three hours of argument. “I know we’re dealing with a matter of law, but there’s an issue of fairness here.” The judge repeatedly said Lloyd’s decision to deny coverage was based “not on facts but on someone who stated something under oath.”
He ordered both sides to submit proposed orders to him no later than 4 December, one of which he would adopt as his decision.
Don’t owe any more
Lloyd’s lawyer Barry Chasnoff, a partner in the San Antonio office of Washington-based Akin Gump Strauss Hauer & Feld, told the judge. “We’ve paid a total of $4.2m for work done prior to Aug. 27. We believe under the contract we don’t owe any more.”
Pendergest-Holt is suing Lloyd’s in Houston federal court, seeking a judge’s declaration that the insurer honour its policy and pay for her defence.
