HOUSTON (Reuters)—Financier Allen Stanford and other executives who face charges related to an alleged $7 billion fraud may file claims for defense funds under a directors and officers liability insurance policy, a federal judge said on Friday.

Mr. Stanford has had his assets frozen since civil charges were

filed against him in February. He said he has no money to pay

his lawyers, and is currently represented by court-appointed

lawyers.

A number of former Stanford executives, including former

Chief Investment Officer Laura Pendergest-Holt, have filed

claims against a policy issued by Lloyd's of London.

Lloyd's initially agreed to reimburse some legal expenses

for Ms. Pendergest-Holt, but Ralph Janvey, the receiver in the

case, argued proceeds are assets of the Stanford estate and

should be set aside for investors.

Mr. Janvey had threatened to hold Lloyd's in contempt of court

if they made payments to the executives, court records show.

"Today the court holds only that its prior orders do not

bar Lloyd's from disbursing policy proceeds to fund directors'

and officers' defense costs in accordance with the D&O polices'

terms and conditions," U.S. District Judge David Godbey said in

a nine-page order.

Jeffrey Tillotson, a lawyer for Ms. Pendergest-Holt, said he

was very pleased with Judge Godbey's decision.

"Our client is entitled to a defense and now she will have

the resources to pay for one," Mr. Tillotson said, adding that his

client, who also had her assets frozen, has been living off

"kindness, friends and family."

Judge Godbey also said he would have authorized payment of the

defense fees even if the insurance proceeds were part of the

Stanford estate.

A representative for Mr. Janvey, the receiver, declined to comment on the

ruling.

Still, there is no guarantee of coverage. Lloyd's said in a

September court filing that claims resulting from "money

laundering and from dishonest, fraudulent, or criminal acts"

are excluded from coverage.

Mr. Stanford and Ms. Pendergest-Holt have both pleaded not guilty

to the charges related to what prosecutors labeled a massive

Ponzi scheme tied to the firm's offshore bank in Antigua.

The case is SEC vs. Stanford International Bank Ltd., U.S.

District Court for the Southern District of Texas, No.

09-00298.