The strange sequence of legal events surrounding R. Allen Stanford has taken yet another bizarre turn. The latest developments began earlier last week when Stanford yet again sought to fire his criminal defense lawyers. Then on May 21, 2010, Stanford, representing himself pro se in coverage litigation arising out of his and fellow criminal defendants’ efforts to secure insurance coverage for their defense expenses, wrote a letter to the court in the coverage action asserting that the insurers "have thwarted my every attempt to obtain counsel of my choosing." He also protests the insurers are controlling his defense and denying payments through a "reasonable and necessary" shield.


In his letter, Stanford requested that the court order the lead insurer to "approve and compensate my criminal attorneys and coverage attorneys of my choice."


In their May 24, 2010 response (here), the lead insurers contend, contrary to Stanford’s assertion  that they have "thwarted" his defense,  "nothing could be further from the truth," noting that he has "cycled through more than 10 different law firms (all of his own choosing and all at Underwriters’ expense) in the course of the SEC and Criminal Actions" adding that they have paid these attorneys "more than $ 6 million dollars."


The lead insurer further argues that it has withheld consent to Stanford’s latest defense counsel "only due to extraordinary and alarming circumstances" – including disagreements among Stanford’s own counsel, leading to Stanford’s latest criminal defense attorney to withdraw "only a month after entering an unconditional appearance" and while publicly asserting that the lawyer with which Stanford seeks to replace him is "often times" acting "against Stanford’s best interests." The lead insurer asserts that has "no obligation" and "in fact cannot in good faith approve counsel that has been fired by an insured or counsel that is alleged to have acted against an insured’s best interest."


The lead insurer bemoaned the "chaos" and "turmoil" surrounding Stanford’s choice of counsel, which threatens "serious harm" to the insurers’ interests as well as those of all other claimants to the policy. The insurer also pointed out that Stanford has no right under the policy to coverage counsel.


As discussed in greater detail here, the insurers have sought to deny coverage under the policy on the grounds that the criminal defendants’ conduct violated the policy’s Money Laundering exclusion. In a March 15, 2010 decision (here), the Fifth Circuit ordered that the question of whether or not the exclusion has "in fact" been triggered must be determined in a separate judicial proceeding, to take place on an expedited basis, so that the fundamental question of coverage for the criminal defendants’ attorneys’ fees can be determine.


In the meanwhile, Stanford remains jailed pursuant to a ruling by Judge David Hittner, denying Stanford bail.


In a May 25, 2010 Am Law Litigation Daily article (here), David Bario describes the May 25 hearing before Judge Nancy Atlas on these issues, at which Stanford apparently appeared shackled and unshaven. Stanford apparently argued that either his choice of criminal defense attorney should be approved or he should be released in order that he can prepare his defense.


According to a May 25, 2010 Bloomberg article (here), Judge Atlas said that she would urge Judge Hittner to "reconsider" his bail ruling. She proposed an arrangement subjecting Stanford to "very, very, very tight house arrest" so he can prepare his defense in the insurance case. "I would not be opposed to that," she said.


Judge Atlas reportedly told the insurers’ attorneys, as a warning that they will have to sustain their coverage defense in court, "You’ve got to prove there was some criminal act that gave rise to criminal property. And then you’ve got to prove what role each of these executives had to do with that."


According to the Am Law Litigation Daily article, Judge Atlas set a hearing date for early June to "sort through the crowded field of former, current and future Stanford lawyers to determine how they managed to rack up the $6 million tab." The Houston Chronicle reports that the hearing will take place on June 3, at which Atlas says, "We are going to get to the bottom of why so much money is being spent in Mr. Stanford’s defense."


Judge Atlas set an August 24, 2010 date for the hearing on the coverage issues, and said that Bob Bennett, Stanford’s current defense counsel, might represent him at that hearing. The criminal trial against Stanford and his co-defendants is set for January 2011.