Two executives who worked with jailed Texas financier R. Allen Stanford knew he was secretly using money from investors to fund loans to himself, a fraud examiner testified Wednesday.

The examiner, Alan Westheimer, was questioned about Stanford’s financial dealings during a Houston, Texas, court hearing in which a federal judge is to decide if Stanford and the two executives will continue having their legal bills paid by an insurance policy while they fight charges that they bilked investors out in a $7.2 billion Ponzi scheme.

The insurer, Lloyd’s of London, says the policy doesn’t pay on charges of money laundering, one of the many federal counts against Stanford and Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller.

Stanford and the ex-executives say they are not guilty and that Lloyd’s should honor the policy, which so far has paid more than $15 million in legal fees to them in their criminal and civil cases.

The hearing before U.S. District Judge Nancy Atlas, which began Tuesday and might last through the end of the week, provides a preview of the upcoming criminal trials in the case.

A fourth co-defendant, Laura Pendergest-Holt, who grew up in Baldwyn, also faces the criminal charges but apparently reached a settlement with Lloyd’s, Judge Atlas said to the courtroom Tuesday.

Stanford and the former executives are accused of orchestrating a colossal 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.

Stanford had offices in Tupelo and Jackson, and many Mississippians were among investors who lost their life savings and retirement funds when the financial empire collapsed in 2009 under the weight of a U.S. Securities and Exchange Commission investigation.

Among Tuesday’s witnesses were Dr. Richard Conte, a Houston physician, and Dwayne Mark Tidwell of Spring, a former Stanford Financial Group financial adviser.

Conte, who invested about $1 million through SFG, said he bought SIB CDs because his adviser told him they were low risk and very liquid. He also said he would have sold them immediately, if he had known otherwise.

Tidwell said he never learned how SIB invested the CD funds.

Westheimer testified that Kuhrt and Lopez told him they knew money deposited into the bank was being used to fund personal loans to Stanford and that this wasn’t being reported to investors. Prosecutors have accused Stanford of secretly diverting more than $1.6 billion in investor funds as personal loans to himself to pay for his lavish lifestyle.

Westheimer, who interviewed Kuhrt and Lopez after being hired by their attorneys in preparation for the hearing, told attorneys for Lloyd’s the two men also told him Stanford asked them to keep confidential a $63.5 million land purchase in 2008 the financier made in the Caribbean.

Prosecutors in the criminal case contend the value of the land purchase later was artificially inflated to $3.1 billion to boost the bank’s revenues and hide financial losses. Stanford contends the land purchase was legitimate and he had planned to use it to build a super exclusive resort.

Kuhrt and Lopez have tried to put the blame for what happened at the bank on James Davis, another Baldwyn native and Stanford’s former chief financial officer.

The Associated Press, Reuters News Service and various legal and insurance blogs contributed to this report.