DALLAS (Bloomberg) — R. Allen Stanford, the Stanford Group Co. founder accused of leading a $7 billion investor-fraud scheme, can use corporate insurance policy proceeds to pay his defence lawyers, a judge ruled.

US District Judge David Godbey of Dallas, who is hearing a Securities and Exchange Commission lawsuit against the Texas financier, ruled today that he and other Stanford Group executives can draw from Lloyds of London officers' and directors' coverage said to be worth at least $50 million.

"The court finds it in the interest of fairness to allow directors and officers to access insurance proceeds to which they are entitled for several reasons," Godbey said in a ruling posted to his court's website that he said applies to all Stanford defendants. "The potential harm to them if denied coverage is not speculative but real and immediate; they may be unable to defend themselves in civil actions in which they do not have a right to court-appointed counsel."

Stanford, who faces civil and criminal claims he swindled investors in a scheme involving the sale of certificates of deposit through Antigua-based Stanford International Bank Ltd., was given a federal public defender on September 15 after a US judge hearing his criminal case in Houston found he had no money to pay lawyers.

With a reported net worth of $2.2 billion, Stanford was ranked 205th on Forbes magazine's 2008 list of richest Americans. He is being held without bail pending trial.

Houston lawyer Kent Schaffer agreed to assist the public defenders' office at the government pay rate of $110 an hour on September 17. Stanford, who has denied all allegations of wrongdoing, has struggled to retain defence lawyers after his assets were frozen by the Dallas court on February 17 following the filing of the SEC lawsuit.

The agency alleged that Stanford, two associates and three businesses paid early investors "improbable if not impossible" returns on their investments, using money received from later-arriving clients.

A US grand jury in Houston in June indicted Stanford, his chief investment officer, Laura Pendergest-Holt, and three others for their alleged roles in the scheme. They all pleaded innocent. Stanford's chief financial officer, James Davis, who was charged separately, pleaded guilty on August 27 and is cooperating with the federal investigations.

Several high-priced lawyers have come and gone as Stanford's attorney, including Houston criminal-defense lawyer Dick DeGuerin and Robert Luskin of Washington-based Patton Boggs.

DeGuerin withdrew in July after a dispute involving how he would be paid. Luskin was denied permission in August to represent Stanford for the limited purpose of helping the financier access money for lawyers.

Luskin, who said in an e-mail that he may continue helping Stanford appeal the denial of his bail, praised the ruling although he said he's still digesting it.

"Obviously, we're delighted with the ruling," Luskin said. "It's the right result and, much more important for Allen and for the justice system, helps to guarantee that Allen will have the resources to get a fair trial."

Schaffer said in a phone interview on Friday that while he's pleased with the ruling, he's not sure how it will affect his ability to continue representing Stanford. Schaffer said the financier most likely doesn't qualify for a publicly funded defence after Friday's ruling, as taxpayers shouldn't have to pay if Lloyd's will.

"I'd like to stay on the case whether on an appointed or retained basis," he said. "Now that we've been on the case for three weeks and we've done a ton of work, we think it's a very defensible case. We've been making tremendous progress, and the further we get into it, the better the case is starting to look."

Schaffer said he would meet with Stanford tomorrow at the federal prison in downtown Houston to learn whether the financier wants to keep him or change lawyers.