HOUSTON (Bloomberg) — Former Stanford Financial Group executives shouldn't be forced to testify at an insurance-coverage trial about their roles in an alleged $7 billion fraud run by Allen Stanford before a criminal trial can be held, their lawyer said in a court filing.

Former chief investment officer Laura Pendergest-Holt and two former top accounting officers at Stanford's financial services firm said in a court filing yesterday that Lloyd's of London is trying to "place the civil cart before the criminal horse" in their lawsuit against the underwriters.

The executives sued Lloyd's for denying them access to legal defence funds under Stanford's $100 million directors and officers liability policies.

The attempt by Lloyd's to force the executives to testify and provide written answers to justify their activities forces them into "a constitutional Hobson's choice" over their right against self-incrimination, said their lawyer, Lee Shidlofsky, in the filing in federal court in Houston.

Anything the executives say under oath in the insurance case could be used against them in the criminal case, he said. Yet if they invoke their Fifth Amendment right not to testify, the judge in the insurance case can legally infer that they're guilty and may rule against their insurance claim, which they say is their only source of funds to pay defence lawyers.

Stanford, Pendergest-Holt, former chief accounting officer Gilbert Lopez and former global controller Mark Kuhrt were indicted in June 2009 on charges they swindled investors through a scheme built on allegedly bogus certificates of deposit issued by Antigua-based Stanford International Bank.

The executives have denied any wrongdoing. A separate trial of Stanford is scheduled for January. The other three executives will face a jury after Stanford's trial.

All four defendants sued Lloyd's in November, after the underwriters denied their claims because former chief financial officer James Davis pleaded guilty and Stanford's court-appointed receiver released a forensic accounting report. The insurance-coverage case is set for trial in August before US District Judge Nancy Atlas in Houston. Shidlofsky said the insurance dispute shouldn't be decided until after the criminal trial, when the Lloyd's policies give the underwriters the right to sue for reimbursement of any funds spent defending guilty individuals.

Lloyd's lawyers have said in court filings that the dispute must be resolved before underwriters spend hundreds of millions of dollars defending the executives. They claim the underwriters won't be able to recover those funds after a conviction, when the defendants' assets may be seized in criminal forfeiture.

All personal and corporate assets of Stanford and the other executives were seized and placed under the control of the receiver when they were sued in February 2009 on parallel civil-fraud claims by the US Securities and Exchange Commission.

Akin Gump attorney Neel Lane, who represents Lloyd's of London, didn't immediately an e-mail seeking comment yesterday on the filing.