By DAN REYNOLDS, senior editor of Risk & Insurance®
Joseph Plumeri, the chairman and CEO of London-based Willis Group Holdings Ltd.. defended the brokerage against charges that it aided and abetted the $8 billion Ponzi scheme of Texas businessman Robert Allen Stanford.
Investors in Mexico and Venezuela are seeking more than $1 billion in damages. They allege Willis brokers assured them that investments in Stanford's Antigua-based Stanford International Bank Ltd. were in safe hands when in fact they weren't.
"Disappointed investors like those involved in the Stanford situation frequently, as you know, look for a deep pocket," Plumeri said.
"They look for somebody to sue. I believe that the plaintiffs here see Willis as a deep pocket and therefore have filed these complaints," he said, during the company's second-quarter earnings call July 30.
In February, the SEC charged Stanford with fraud and violations of U.S. securities laws and seized his assets. Stanford was arrested by the FBI on June 18.
Attorneys for the Mexico plaintiffs include as Exhibit C in their 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 SIB for directors' and officers' liability insurance and a banker's blanket bond with Lloyd's of London. The letter also states that those coverages expired on Aug. 15.
Plumeri dismissed the importance of the letter and said Willis will "vigorously defend" the lawsuits.
"From my perspective, it makes no sense to think that investors making the type of investment at issue here would rely on a letter from Stanford's insurance broker," Plumeri said.
Mark Hughes, an analyst with Atlanta-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."
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 SIB were safe.
July 31, 2009
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