By DAN REYNOLDS, senior editor of Risk & Insurance®
A second federal class-action lawsuit this past week named Willis Group Holdings as a defendant, stating that the London-based insurance broker aided and abetted disgraced Texas businessman Sir Robert Allen Stanford in what authorities now allege was a $8 billion Ponzi scheme.
The class action, filed by the Miami-based law firm HomerBonner on July 17 in the U.S. District Court Southern District of Florida's Miami Division, alleges that letters sent on Willis of Colorado Inc. letterhead to potential investors in Stanford's Antigua-based Stanford International Bank Ltd. represented assurances about the bank's risk management practices. The lawsuit claims that Willis played an "instrumental role in enabling Stanford and his companies to perpetrate a massive multibillion dollar fraud" against investors in South America.
The lawsuit lists Venezuelan citizen Reinaldo Ranni as lead plaintiff, who according to the court document had deposits totaling $2.76 million with SBI, the assets of which were frozen by the Securities and Exchange Commission on Feb. 17.
The Miami lawsuit follows a July 3 class-action lawsuit filed along similar lines on behalf of Mexican investors against Willis in the U.S. District Court Northern District of Texas, Dallas Division.
A New York-based spokesman for Willis declined comment.
Mark Hughes, an analyst with Atlanta, Ga.-based investment brokerage SunTrust Robinson Humphrey, had this to say about the Dallas class-action in a July 7 letter to investors:
"As we read the documents, Willis was only commenting on Stanford's ability to qualify for insurance policies that were, in fact, successfully placed through Lloyd's: the company was in no position to evaluate and did not comment on the overall effectiveness of Stanford's internal controls or external oversight (obviously weak, in hindsight). Willis' actual, terse letters to Stanford make this very clear."
Attorneys for Ranni, however, include as Exhibit C in their July 17 filing a letter addressed to their client, dated May 30, 2007, and signed by Amy Baranoucky, then a vice president of executive risks with Willis.
"We are the insurance broker for Stanford International Bank and find them to be first-class business people," the letter states.
The letter goes on to say that Willis had placed coverage on behalf of SBI for directors' and officers' liability insurance and a bankers blanket bond with Lloyd's of London. The letter states that those coverages expired on Aug. 15.
Willis isn't the only financial services firm that has wound up in the crosshairs of plaintiffs' attorneys in connection with the Stanford fraud. Kroll, the risk management consulting division of New York-based Marsh & McLennan Cos., has also been named in a Stanford-related class-action lawsuit in Miami.
According to published reports, that lawsuit, filed May 17, alleges that Kroll's Miami office assured officers of the Bethesda-based Electri International, a foundation for electrical contractors, that their investments in SBI's certificates of deposit were safe.
In both the Bernard Madoff case and the Stanford fraud, plaintiffs' attorneys are going to be looking far and wide for companies with capital that provided any sort of financial service to Madoff or Stanford or their investors, according to numerous experts interviewed by Risk & Insurance® over the past few months.
The sheer complexity of these cases could make them very costly to defend. The Ranni class-action is a prime example: a Venezuelan investor filing a lawsuit in a U.S. District Court in Miami, alleging the culpability of London-based Willis, whose Denver office had a business relationship with an Antigua-based bank.
"These are going to very expensive cases to defend, and that figure alone is going to be very many tens, if not hundreds, of millions of dollars," said Kevin LaCroix, an attorney and partner at Oakbridge Insurance Services, based in Beachwood, Ohio.
July 22, 2009
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