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In March 2012, R. Allen Stanford was convicted of running a $7 billion Ponzi scheme. He is currently serving a 110-year jail sentence.

Prior to the criminal trial, the US District Court for the Southern District of Texas was asked to determine whether Certain Underwriters at Lloyd's of London and Arch Specialty Insurance Co. (the “Underwriters”) were entitled to deny coverage for the defense costs of Mr. Stanford and other executives of the Stanford Financial Group (SFG) pursuant to an exclusion clause under the D&O insurance policy. SFG consisted of more than 140 separate legal entities, including Stanford International Bank Limited (SIBL)—an Antiguan-domiciled bank, which was principally in the business of selling various types of certificates of deposit to investors.

NERA was asked by counsel for the Underwriters to examine the financial nature and economic substance of certain activities of, and representations made by, the Plaintiffs and SIBL to determine whether these activities and representations had characteristics that the court might classify as fraudulent and that would therefore trigger the application of the exclusion clause of the D&O policy. The NERA team, led by Senior Vice President Mark Berenblut, conducted a financial investigation and economic and accounting analyses of internal documents, emails, regulatory filings, and other public disclosures of SFG and SIBL.

Mr. Berenblut produced an expert report and provided expert testimony at trial describing the findings of the financial investigation and economic and accounting analyses.

In ruling in favor of the Underwriters and effectively denying insurance coverage for the executives of SIBL, the court, relying in part on the testimony of Mr. Berenblut, found that, on a preponderance of the evidence, Mr. Stanford and his executives knowingly prepared and approved false financial reports and facilitated the concealment and transfer of the bank's funds through related companies without disclosure to investors or regulators. As such, the exclusion clause was found to apply and the Underwriters were entitled to deny coverage and seek reimbursement of payments previously made.