In an interesting opinion, the Fifth Circuit has set aside a settlement and related bar order that had been approved by the district court in litigation arising out of the Stanford Financial Ponzi scheme scandal. The appellate court said that the district court lacked authority to approve the settlement in light of several of its features, including its provisions cutting off the claims of several former Stanford Financial employees and managers to the defunct firm’s insurance policies’ proceeds. As discussed below, the circumstances surrounding the settlement raise serious questions about the intended purpose of D&O insurance. The Fifth Circuit’s June 17, 2019 opinion in the case can be found here.
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Stanford Financial Group
Trial on D&O Insurance Coverage for Allen Stanford’s Attorneys’ Fees Begins
The question of insurance coverage for the attorneys’ fees of Allen Stanford and his co-defendants is at issue in a three-day bench trial before Southern District of Texas Judge Nancy Atlas that began on Tuesday, August 23, 2010 in Houston.
Stanford and several other individuals have been criminally charged with financial fraud in…
Two Appellate Courts Consider D&O Insurers’ Obligation to Advance Defense Expenses
Within the space of just a few days, two federal appellate courts – the Fifth and Sixth Circuits – issued separate opinions consider D&O insurers’ obligations to advance defense expenses. The Fifth Circuit entered its March 15, 2010 decision in the high-profile Stanford Financial insurance coverage dispute. The Sixth Circuit’s March 11, 2010 opinion was…
Stanford Financial’s D&O Insurer Can Advance Individuals’ Defense Costs
Stanford Financial Group’s D&O insurer may advance the individual directors’ and officers’ defense expenses without violating the court’s receivership order, according to an October 9, 2009 ruling by Northern District of Texas Judge David Godbey. A copy of Judge Godbey’s ruling can be found here.
As detailed in a prior post (…
More Subprime Lawsuit Dismissals and Other Web Notes
Finacial Downturn, Not Fraud, Caused Plaintiffs’ Losses: In a ruling that is interesting for what it says about the relevance of the overall economic downturn to the wave of subprime lawsuits, on August 20, 2009, Eastern District of Pennsylvania Judge R. Barclay Surrick, Jr. granted the motion to dismiss the securities fraud lawsuit that Luminent…
Stanford Financial Receiver Seeks D&O Insurance Proceeds
In a move that recapitulates a classic dispute that has been brewing in bankruptcy court for years, the Stanford Financial Group receiver has asserted that the proceeds of Stanford’s D&O insurance policies are "receivership assets" and that his right to the proceeds "supersedes" the rights of insureds under the policy. Moreover, he has specifically threatened…
A Week’s Worth of News and Notes
Even though I was not even away a full week for the recent PLUS D&O Symposium, there was a flood of noteworthy developments while I was gone. Here is a roundup of last week’s news and notes.
Subprime-Related Derivative Lawsuit Largely Dismissed: In a detailed and painstaking February 24, 2009 opinion (here)…
The List: Tracking the Stanford Group Litigation
LAST UPDATED ON February 24, 2010. With the arrival today of two more lawsuits against R. Allen Stanford and the Stanford Financial Group of companies, it may now be time to start keeping a table of the Stanford Group-related litigation. Given the magnitude of the losses and the publicity surrounding the Stanford scheme, there could…
Merrill Lynch Subprime-Related Derivative Suit Dismissed and Other Web Notes
Even after Merrill Lynch’s recent $550 million settlement of the subprime-related securities and ERISA lawsuits pending against the company (about which refer here), the consolidated subprime-related derivative lawsuit against the company’s directors and officers remained pending. By contrast to the massive settlements in those other lawsuits, the derivative litigation was recently dismissed, because of…
First Stanford Financial Group Securities Lawsuit Already Filed
In case you were wondering how long it would take, you should know that investors have already filed the first securities class action lawsuit in connection with the fraud allegations surrounding R. Allen Stanford and his Stanford Financial Group.
On February 17, 2009 — the same day as the SEC announced its charges that…