US violating Stanford's rights in fee fight-filing

By Anna Driver

HOUSTON, July 6 (Reuters) - Federal prosecutors, who have accused Allen Stanford of a long-running $7 billion fraud, are trampling the Texas financier's constitutional rights in their fight to cut off his access to funds for a legal defense, Stanford's lawyer said on Monday.

"The government's unfettered, and thus far successful, attempts to prevent Mr. Stanford from being able to mount a defense in his criminal proceedings amount to a deprivation of both his Sixth Amendment right to counsel and his Fifth Amendment privilege against self-incrimination," Dick DeGuerin, Stanford's criminal attorney wrote in a court filing.

The government should take whatever steps necessary to release funds so Stanford can pay for his defense or the government should drop its 21-count indictment, DeGuerin argued in the filing.

A spokesperson from the U.S. Department of Justice could not immediately be reached for comment.

Stanford and others are accused of running a Ponzi scheme that bilked his firm's clients out of billions in funds from certificates of deposits issued by the firm's offshore bank in Antigua.

Last week, U.S. District Judge David Hittner in Houston said Stanford, who has lived in the Caribbean for the last 15 years, was a flight risk and should be detained ahead of his criminal trial.

Stanford's assets have been frozen by court order since February when the U.S. Securities and Exchange Commission filed civil fraud charges against the billionaire, his former chief financial officer, James Davis, and Laura Pendergest-Holt, Stanford's former chief investment officer.

Stanford and Pendergest-Holt have pleaded not guilty to the charges and Davis is cooperating with the government.

The three executives are covered by "directors and officers" insurance policies, but the government has said it has a right to those funds and have threatened underwriters with contempt proceedings, court papers show.

DeGuerin told Judge Hittner last week that Stanford was broke after the government swooped in a seized his bank accounts, jets and luxury homes. (Reporting by Anna Driver in Houston; Editing Bernard Orr)