Stanford Found in Contempt of Court Over Legal Fees
By: A federal judge has found accused Ponzi schemer Allen Stanford and three co-defendants in contempt of court in a dispute over their legal fees.
Stanford, along with his former Chief Investment Officer Laura Pendergest-Holt and former accounting executives Gilbert Lopez and Mark Kuhrt, have been trying to force Lloyd's of London to pay for their legal defense under a Directors and Officers liability policy.
The four sued Lloyd's underwriters in federal court in Houston, despite a court order from a federal judge in Dallas that all disputes about the Lloyd's policy should go through him.
That judge, David Godbey, wrote in a six-page decision that Stanford and the others "acted in contempt of this court's direct order."
Godbey declined to impose sanctions on the defendants, however, in part because they did not try to hide their action. Godbey also denied a motion by Lloyd's that would have required the defendants to withdraw their suit in Houston.
As a result, a hearing in that suit will go forward as scheduled Thursday before U.S. District Judge David Hittner, who is also presiding over Stanford's criminal case.
Because of that, Stanford defense attorney considers the ruling a victory.
"We are very happy that Judge Godbey has recognized that it is proper for Judge Hittner to hear the case," Kent Schaffer told CNBC in an interview. "We are confident we are right on the law. Hopefully now, the case can move forward."
Stanford, who has been in federal custody without bail for nearly six months, is expected to attend Thursday. Attorneys for Lloyd's have demanded Stanford be forced to testify at the hearing, but that is highly unlikely because of the pending criminal charges.
Schaffer estimates Stanford's defense will cost around $24 million, of which Lloyd's has already paid about $4 million. But Lloyd's announced last month it is refusing to pay anything more, because of evidence Stanford and the others engaged in money laundering—a violation of the terms of the insurance policy.
Stanford, who once claimed a net worth of more than $2 billion, faces 21 criminal counts in an alleged $7 billion Ponzi scheme.