IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXASHOUSTON DIVISIONLAURA PENDERGEST-HOLT,
5
R. ALLEN STANFORD, GILBERT0
8
LOPEZ, JR. and
MARK
KUHRT,
5
Plaintiffis,
8
§
VS.
CIVIL ACTION NO. 4:09-cv-037 12
§
CERTAIN UNDERWRITERS AT
5
LLOYD'S OF LONDON and ARCH
8
SPECIALTY INSURANCE COMPANY,
8
Defendants.
RESPONSE TO LETTER SUBMITTED BY ALLEN STANFORD
On May 2 1,2010, Plaintiff R. Allen Stanford submitted a letter requestingemergency relief from this Court. (Docket No. 106). The Court has ordered CertainUnderwriters at Lloyd's of London and Arch Specialty Insurance Company (collectively"Underwriters") to respond to Stanford's allegations during tomorrow's hearing. (DocketNo. 108). Underwriters file this response, and would show:
Preliminary Statement
Although Allen Stanford protests having to litigate coverage issues in this case-and particularly the issue of whether he engaged in acts of Money Laundering, as definedin the D&O Policy-the Fifth Circuit has held that the terms of the D&O Policy entitleUnderwriters to a hearing on just this point. Specifically, Underwriters are entitled to anexpeditious coverage determination "for their bargain sought to mitigate the risk ofadvancing substantial fees on behalf of policyholders should it be found that the insureds
Case 4:09-cv-03712 Document 113 Filed in TXSD on 05/24/10 Page 1 of 14
 
did in fact commit Money Laundering as defined by the policy. By the bargain,[Underwriters] are not compelled to remain aboard an aircraft that has lost its wings."Stanford's letter is premised on an egregious misrepresentation. He alleges thatUnderwriters have "thwarted his every attempt" to obtain counsel of his choosing andhave controlled his defense by denying payment to his attorneys of choice. Nothingcould be further from the truth. In reality, Stanford has cycled through more than 10different law firms (all of his own choosing and all at Underwriters' expense) in thecourse of the SEC and Criminal Actions. Underwriters have paid these attorneys morethan
$6
million dollars for the services they have rendered on behalf of Stanford-whichis more than Underwriters have paid on behalf of all of the other Plaintiffs in this case
combined.
This includes $4 million dollars that Underwriters have paid to attorneys whoare no longer representing Stanford in the Criminal Action, because Stanford has firedthem without any rational explanation.Underwriters certainly have a right to withhold their consent to an insured'sunreasonable choice of counsel, but they have invoked their right to withhold consentonly with respect to Stanford's current criminal defense team (or teams) and only due toextraordinary and alarming circumstances. Stanford's latest set of criminal attorneys areat odds with each other, and Stanford is attempting to replace (yet again) his lead counselwith an attorney who has not yet appeared on his behalf. As a result, his current leadcounsel, MikeEssmyer, has moved to withdraw from the criminal case only a monthafter entering an unconditional appearance, and after incurring considerable defense costson Stanford's behalf.
Case 4:09-cv-03712 Document 113 Filed in TXSD on 05/24/10 Page 2 of 14
 
Even more disturbing, Stanford's attorney Essmyer alleges in his motion towithdraw that co-counsel, Bob Bennett, is "often times" acting against Stanford's bestinterests. Notwithstanding these allegations, Stanford asks this Court to orderUnderwriters to consent to his representation by Bob Bennett and the latest team ofcriminal attorneys in the Criminal Action, and to pay their fees.' Underwriters, however,have no obligation and in fact cannot in good faith approve counsel that has been fired byan insured, or counsel that is alleged to have acted against an insured's best interest.Stanford also asks this Court to order Underwriters to pay for "coverage counselof his choosing." However, as this Court has correctly recognized, the
D&O
Policy doesnot afford Stanford any such right to "coverage counsel." Stanford's co-defendants in theCriminal Action (and co-plaintiffs here) recognized as much and made separatearrangements with their defense counsel to engage coverage counsel, Lee Shidlofsky.Stanford, for whatever reason, has chosen to terminate Mr. Shidlofsky, who subsequentlywithdrew from representing him.The chaos surrounding Stanford's representation in the Criminal Action (and to alesser extent the SEC Action) highlights the urgent need, recognized by the Fifth Circuit,for this Court to expeditiously resolve this coverage dispute. Until the Court makes thedetermination mandated by the Fifth Circuit, the turmoil surrounding Stanford's counselis likely to continue, threatening serious harm to Underwriters' rights (as well as those of
I
Stanford's latest criminal defense attorneys, the Bennett Nguyen Joint Venture and the Essmyer, Tritico
&
Rainey firm have requested Underwriters pay nearly
$800,000
in defense costs.
See
App. A, Declaration of MaryMcLean Pena
7
6
(hereinafter "Pena Decl.").
Case 4:09-cv-03712 Document 113 Filed in TXSD on 05/24/10 Page 3 of 14
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