Investors Sue Insurance Company That Vouched for Stanford Ponzi Scam

By John Pacenti All Articles

Daily Business Review

July 12, 2013


The letters circulated by Stanford International Bank among would-be investors claimed deposits were insured by Lloyds of London and that the bank's employees were "first class business people."

The letters proclaimed the bank had undergone "stringent risk management review by an outside audit firm."

Stanford International Bank is now known as one of the world's largest Ponzi schemes, a $7 billion scam that is second only to the con pulled off by the former New York investment adviser and financier Bernard Madoff. The Stanford bank, which was based in Antigua and maintained a sizable footprint in Miami, went under in 2009.

So while the bank's founder and one-time billionaire, R. Allen Stanford, is serving a 110-year prison sentence for fraud, investors are looking for deep pockets to make them whole.

They hope they found it in Willis Group Holdings, the U.K.-based insurance company that provided Stanford with written endorsements. The investors are also suing Willis Group's American subsidiary based in Colorado.

Getting the litigation to stick in one jurisdiction, though, hasn't been easy. Filed in Miami-Dade Circuit Court in February, the plaintiffs' suit was transferred to U.S. District Court in Miami on June 3.

U.S. District Judge Jose E. Martinez stayed the case on June 14 after the Willis Group argued the U.S. Supreme Court is looking at the liability of insurance letters to investors in a related case against Willis Group.

Other lawsuits against Willis Group by similarly situated plaintiffs have ended up in multidistrict litigation in Dallas. One has also been stayed by a Miami federal judge.

A telephone call placed to attorney Edward Soto, a partner at Weil Gotshal & Manges in Miami who represents Willis Group, was not returned by deadline.

But in his motion to Martinez for a stay, Soto said the defendant expects the case and four others filed against Willis Group to be transferred to the U.S. Bankruptcy Court in Texas that oversees the estate of Stanford International Bank.

The plaintiffs attorney, Ervin Gonzalez, said businesses that vouch for criminal enterprises like Stanford need to be held accountable.

"If someone is going to give an endorsement ... they'd better be careful because people rely on those endorsements," said Gonzalez, a partner at Colson Hicks Eidson in Coral Gables, Fla. "They have an obligation and a duty to be accurate."

Also representing the plaintiffs is attorney Luis Delgado, a partner at Miami's Homer & Bonner.

"From in or around August 2004 through 2008, Willis provided 'safety and soundness' letters to Stanford Financial's agents on Willis letterhead and signed by a Willis executive," the lawsuit claims.

The letters misled clients into believing their deposits were safe and insured, the lawsuit states.

The 29 plaintiffs are from Uruguay, Bolivia, Colombia and Venezuela and had a combined loss of $30 million when SIB collapsed. The lawsuit states they received identical Willis Group letters with the only difference being the date and address.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=86

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/