In an article from the Associate Press, Lawyers for jailed Texas financier R. Allen Stanford and two of his former executives on Thursday tried to shoot down claims by a fraud examiner that their clients took part in the massive Ponzi scheme that authorities say helped bilk investors out of $7 billion.

Stanford’s financial dealings were being examined during a court hearing in which a federal judge was to decide if Stanford and the two ex-executives of his now defunct companies will continue having their legal bills paid for by an insurance policy as they fight charges connected to the alleged Ponzi scheme.

The insurer, Lloyd’s of London, says the policy doesn’t pay on charges of money laundering, one of the many counts faced in a federal indictment by Stanford and Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller. Stanford and the executives, who say they are not guilty, sued Lloyd’s to force it to honor the policy, which so far has paid more than $15 million in legal fees to them and a third executive in their criminal and civil cases.

Stanford and the former executives are accused of orchestrating a colossal pyramid scheme by advising clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns. Stanford’s businesses were headquartered in Houston.

Berenblut, testifying for Lloyd’s, said Stanford took $1.7 billion in deposits made to his bank and used them for loans to himself. Prosecutors have accused Stanford of using this money to help pay for his lavish lifestyle. Berenblut also said his review of the bank’s records showed another $1.8 billion in loans were secretly made to related Stanford corporations.

Berenblut called the loans “one of the examples of financial manipulation” he found in reviewing Stanford’s records.

Berenblut, a certified fraud examiner and accountant, also said Stanford made a $63.5 million Caribbean land purchase in 2008 and later artificially inflated it to $3.2 billion to boost the bank’s revenues and hide the loans. Stanford has contended the land purchase was legitimate and he had planned to use it to build a super exclusive resort in Antigua.

However, another fraud examiner, Alan Westheimer, found fault with Berenblut’s conclusions.

Berenblut also testified Kuhrt and Lopez were aware that investment reports from the bank were made up and the work of reverse engineering.

“I believe Mr. Berenblut is incorrect in assuming there was any reverse engineering going on here,” Westheimer said.

Stanford’s attorneys on Thursday, while questioning Berenblut, suggested the loans actually went to support other business ventures or investments managed by the financier’s companies. Stanford’s attorneys also said he didn’t have direct involvement in preparing his company’s financial statements but was always open to having his records reviewed by regulatory authorities.

Kuhrt and Lopez have tried to put the blame for what happened at the bank on James Davis, Stanford’s former chief financial officer, who has pleaded guilty in the case and is cooperating with prosecutors.

The hearing before U.S. District Judge Nancy Atlas, which began Tuesday, is providing a preview of the upcoming criminal trials in the case. The hearing was to continue on Friday.

The insurer’s case mirrors the accusations made against Stanford and the two ex-executives by prosecutors in the criminal case in Houston and by the Securities and Exchange Commission in a lawsuit it filed in Dallas.

Stanford and the two executives are not testifying at the hearing. Stanford has been jailed since being indicted in June 2009 while Kuhrt and Lopez are free on bond.

Stanford’s trial, being handled by another Houston federal judge, is set to begin Jan. 24. The others will be tried after that. Besides money laundering, Stanford and his one-time colleagues have also been indicted on charges of wire and mail fraud.