By Jonathan Stempel

TORONTO (Reuters) - On the first anniversary of the indictment of Texas financier Allen Stanford, prosecutors urged a federal judge not to sever the trial of a co-defendant who complained the case against the accused mastermind of a $7 billion Ponzi scheme had become a "circus."

Prosecutors told U.S. District Judge David Hittner in Houston that it would be a waste of judicial resources to allow Laura Pendergest-Holt, a former chief investment officer at Stanford Financial Group, to get her own trial.

Holt made the request last week, saying the "egregious and circus-like conduct" by Stanford and his latest set of lawyers, who have been accused of insurance fraud and whom she accused of having "faked health issues in court," could jeopardize her right to a fair trial.

Former Stanford accounting executives Mark Kuhrt and Gilbert Lopez joined her motion. A fifth defendant is Leroy King, a former head of Antigua's Financial Services Regulatory Commission.

But federal prosecutors, appealing to Hittner's "more than 30 years as a trial court judge," said in a court filing on Friday that any potential prejudice from Stanford's activities can be overcome.

"One of the most experienced federal trial judges in this country is presiding and can readily prevent any such potential courtroom antics," prosecutor Gregg Costa wrote. "To the extent that Stanford or his current lead counsel do engage in improper behavior before the jury, the usual cautionary instructions would provide a sufficient remedy."

A jury trial is scheduled to begin on January 24, 2011.

Stanford was accused in a 21-count indictment of running a Ponzi scheme focused on Stanford Financial Group's fraudulent sale of certificates of deposit issued by his Antigua bank.

Prosecutors said the five defendants face the same fraud and money laundering charges, while Stanford, Holt and King face charges of obstruction and conspiracy to obstruct justice. A severance, they said, would result in "two or more multimonth trials with massive overlap in the presentation of evidence."

Earlier this month, Hittner rejected an attempt by one of Stanford's lawyers to withdraw after Stanford had fired him, and amid "irreconcilable differences" with current lead counsel Robert Bennett over strategy. Bennett is not the prominent Washington, D.C. lawyer with the same name.

The case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No. 09-cr-00342.

(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)