Stanford investors' lawsuit heads to federal court
March 12, 2013
By Bill Lodge
Eighty-nine investors defrauded by now-imprisoned Houston financier Robert Allen Stanford want $115 million
from seven insurance companies in addition to claims that could total as much as $1 billion against the
Louisiana Office of Financial Institutions and SEI Investments Co.
But six of the insurers responded Monday by transferring the investors' 4-year-old state court suit to Baton
Rouge federal court, action the investors have fought hard in the past.
"We feel confident that this case should not be removed to federal court, because the state court has already
ruled on it" and granted the investors class-action status, said Phillip W. Preis, Baton Rouge attorney for
the investors.
Telephone and email requests for comment from three New Orleans attorneys for the insurance companies were
not returned.
The investors sued OFI and Pennsylvania-based SEI in 19th Judicial District Court in Baton Rouge in 2009. That
was soon after the Securities and Exchange Commission shut down Stanford's worldwide operations and alleged
his investment program was nothing more than a fraudulent scheme.
But a federal judge in Dallas, where the SEC had filed its complaint, yanked the Louisiana investors' suit into
his Texas court and then dismissed the case.
The Dallas judge ruled in 2011 that the Baton Rouge investors suit violated a Securities Litigation Uniform
Standards Act prohibition against state court litigation that could negatively affect the nation's financial
markets.
Last year, however, a three-judge panel of the U.S. 5th Circuit Court of Appeals overruled the Dallas judge and
concluded that investors could pursue recovery of their losses in Baton Rouge state court.
That returned the investor claims to state District Judge Michael Caldwell, who held hearings on disputed
allegations that OFI knew of Stanford's misdeeds and should have warned investors, as well as a complaint that
SEI ignored a duty to tell investors that Stanford's assets were grossly overvalued. SEI's services were
contracted by Stanford.
Caldwell issued a judgment last year that certified the investors' suit as a class action, meaning that all
people who lost investments at Stanford Trust Co.'s Baton Rouge office could join the suit as plaintiffs
against SEI, OFI and now SEI's seven insurers.
Caldwell has not yet scheduled a trial for the case.
The U.S. Supreme Court has agreed to hear arguments on appeals of related Stanford investor cases in October.
In Baton Rouge, attorneys for both SEI and OFI repeatedly have denied all allegations that their clients failed
any responsibility to alert investors about Stanford's frauds.
"The role of the OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation
will never lose money as a result of criminal behavior," OFI attorney David Latham told Caldwell in one court filing.
"SEI did not make any false statements" to Stanford investors, SEI attorney J. Gordon Cooney Jr. told Caldwell in
September. Cooney later added: "SEI has not violated Louisiana securities law."
Court records show the investors added SEI's insurers to its list of defendants in an amended complaint that was
filed Feb. 13 under seal.
Preis said Monday the amended complaint was filed under a nonpublic seal because it contains information related
to OFI's exam reports on Stanford Trust, which Caldwell ruled earlier must remain confidential.
The six insurers that transferred the dispute Monday to U.S. District Judge James J. Brady are Allied World Assurance
Co. (U.S.) Inc., Continental Casualty Co., Arch Insurance Co., Indian Harbor Insurance Co., Nutmeg Insurance Co. and
certain underwriters at Lloyd's of London.
Those insurers told Brady a seventh firm — Endurance Specialty Insurance Ltd., of Bermuda — did not join their motion
because Endurance officials had not yet been served with a copy of the investors' suit.
Stanford has been in federal custody since June 2009, when he was indicted by a federal grand jury in Houston for
worldwide frauds alleged to exceed $7 billion. He was convicted on fraud charges last year and sentenced to a prison
term of 115 years.
READER DISCUSSION
SIVG reserves the right to delete comments that are off-topic or offensive. Excessively long comments may be moderated as well. SIVG cannot facilitate requests to remove comments or explain individual moderation decisions. The comments posted here, express only the views of their authors and not the administrators/moderators from SIVG; for that reason SIVG won't be held responsible for those contents
Showing 0 comments...