DALLAS (CN) — People with $135 million in claims from R. Allen Stanford's $7 billion Ponzi scheme sued British insurance broker Willis Ltd., claiming it aided and abetted the fraud by issuing false "safety and security" letters.
Lead plaintiff Edna Abel and 274 other individuals or couples hold more than $135 million in claims approved by court-appointed receiver Ralph Janvey. Stanford, 65, was sentenced in 2012 to 110 years in federal prison for 13 of 14 counts of conspiracy, wire fraud and mail fraud.
Abel et al. sued Willis of Colorado Inc., WGH Holdings Ltd., and Willis Ltd. on Monday in Dallas Federal Court.
They claim they and their financial advisers were "all influenced" by Willis's conspiring in the scheme, in which they bought Stanford's phony certificates of deposit.
"For many of these plaintiffs, their Stanford investments represented significant portions of their life savings," the complaint states. "These letters provide assurances to potential purchasers of CDs that, among other things, Stanford Financial had passed stringent risk management review by outside auditors."
The plaintiffs say Stanford Investment Bank bought insurance policies from Willis, then obtained the "comfort" letters to market the CDs.
"Willis' comfort letters intentionally created the false perception that SIB carried multiple insurance policies designed to ensure that investments in SIB CDs were as safe and secure as investments in CDs issued by banks insured by the FDIC," the complaint states. "They also claimed that Stanford Financial had undergone a stringent risk management review when, in fact, it had not. The letters were delivered to unwitting SGC [Stanford Group Company] financial advisors to use as marketing tools."
The said Willis was the insurance broker for SIB and that the insurer found "them to be first class business people," according to the complaint.
"The defendants had no reasonable basis to make the statements contained in the letters because they knew, or should have known, that SIB did not undergo 'stringent' annual Risk Management reviews, and that any reviews were not conducted by an outside audit firm, but rather were conducted by 'one man' audit shop in Antigua that was dominated by Allen Stanford and Stanford Financial," the complaint states.
"In the context of these letters, there is no conceivable reason that Willis and Stanford Financial would supply financial advisors and investors with information about run-of-the-mill insurance policies that provided no benefit to investors."
The plaintiffs are opting out of a proposed federal class action filed in July 2009 against Willis.
Willis did not immediately respond to an email message requesting comment Monday evening.
The plaintiffs seek actual and punitive damages for fraud, negligent misrepresentation, negligence, aiding, abetting, conspiracy and violations of the Texas Securities Act and Texas Insurance Code.
They are represented by Michael J. Stanley with Stanley Frank in Houston.
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