HOUSTON (AP) -- Jailed Texas financier R. Allen Stanford and two of his former company executives -- accused of bilking investors out of $7 billion in a massive Ponzi scheme -- lied to investors and falsified financial statements, disqualifying them from having their legal bills paid for by an insurance policy, attorneys representing the insurer told a federal judge on Tuesday.

But Stanford and ex-executives Gilbert Lopez and Mark Kuhrt contend they did nothing wrong, blaming others for the alleged wrongdoing and saying the insurer should honor the policy.

"You will see there wasn't a Ponzi scheme. There was no fraud committed and there wasn't any misrepresentation," said Bob Bennett, Stanford's attorney. "He ran a legitimate business and was seen as a very, very fine businessman."

U.S. District Judge Nancy Atlas is holding a court hearing on whether the insurer, Lloyd's of London, will continue paying their millions of dollars in legal fees. The hearing, which might last up to four days, could also provide a preview of the upcoming criminal trials in the case.

So far, Lloyd's has paid more than $15 million in legal fees to Stanford and the executives in their criminal and civil cases. The policy will pay up to $100 million. Stanford alone has spent more than $6 million by hiring and firing attorneys from at least 10 different law firms. A third executive, Laura Pendergest-Holt, who had also been fighting for payment of her legal bills, settled her case with the insurer on Monday.

Barry Chasnoff, an attorney for Lloyd's, told Atlas the policy doesn't pay on charges of money laundering, one of the many counts Stanford and the ex-executives face in a federal indictment.

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.

Authorities say Stanford, the once flamboyant billionaire whose financial empire stretched across the U.S., the Caribbean and Latin America, and the executives fabricated the bank's records, bribed Antiguan regulators with investors' money from a secret Swiss bank account and misused funds to pay for Stanford's lavish lifestyle.

The insurer's case mirrors the accusations made against Stanford; Lopez, the ex-chief accounting officer; and Kuhrt, the ex-global controller officer, by prosecutors in the criminal case in Houston and by the Securities and Exchange Commission in a lawsuit it filed in Dallas.

Chasnoff said his evidence, including testimony from financial fraud experts and reviews of company records, will show Stanford and the two ex-executives committed money laundering because they falsified financial reports that lured in investors with enticing but fictitious rates of return on the certificates of deposit. Chasnoff said all three men worked to hide from authorities that Stanford secretly diverted more than $1.6 billion in investor funds as personal loans to himself.

"You will hear some interesting excuses about what they did," Chasnoff said. "In the end you will see the evidence is overwhelming."

The first witnesses for Lloyd's were two investors who said they lost hundreds of thousands of dollars in Stanford's alleged Ponzi scheme and a former financial adviser who worked for Stanford's companies. The investors accused Stanford's businesses of misrepresenting the safety of its investing strategy while the adviser, who left before Stanford's businesses were taken over by the federal government in early 2009, said he was unaware there had been a Ponzi scheme. The hearing was to continue on Wednesday.

Stanford and the two ex-executives were not testifying, asserting their Fifth Amendment right against self-incrimination.

But their attorneys told Atlas the men did nothing wrong, instead putting part of the blame on James Davis, Stanford's former chief financial officer. Davis has pleaded guilty and is cooperating with authorities.

Prosecutors attended the hearing, giving them a preview of the defenses Stanford and the other executives might present at their criminal trials.

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.