NEWS RELEASE FROM THE TEXAS STATE SECURITIES BOARD
Securities commissioner sues life partners for resusing to comply with subpoenas in ‘death-benefits’ probe
AUSTIN, Texas – Securities Commissioner Benette L. Zivley sued Waco-based Life Partners Holdings Inc. and its founder and CEO, Brian Pardo, for refusing to comply with subpoenas from the State Securities Board.
The Application to Enforce Subpoenas, filed late Thursday in Travis County state district court, marks the first public disclosure of the State Securities Board’s ongoing investigation of Life Partners, which started in July 2010. Life Partners, a publicly traded company (Nasdaq: LPHI), failed to fully comply with the subpoenas, the most recent of which were issued last month. The suit also names R. Scott Peden, general counsel for Life Partners.
The State Securities Board’s investigation of Life Partners focuses on suspected violations of the Texas Securities Act: fraudulent practices in connection with the offer for sale and sale of investments in life settlement contracts; the sale of unregistered investments; the sale of investments in life settlement contracts by people who are not registered dealers, agents, or investment advisers; and the fraudulent offer and sale of shares of its common stock.
A life settlement contract is an investment where an investor typically acquires an interest in the death benefits of an existing insurance policy. Investors are generally responsible for the payment of premiums to keep the policy in force and expect to receive a profit when the death benefits are paid by the insurance carrier when the insured dies.
The Application asks the court to force Life Partners to comply with the subpoenas, which require the company to provide records related to its marketing and sale of investments in life settlements. Based on Life Partners’ past refusal to comply with the subpoenas, a court order is necessary.
The State Securities Board’s filing notes the various and well-documented investigations and lawsuits faced by Life Partners Holdings and its subsidiary, Life Partners Inc. These include an investigation by the Securities and Exchange Commission, numerous purported class action lawsuits that allege Life Partners committed fraud, and delays in filing required financial reports with the SEC.
Life Partners’ auditor also resigned last month and said the company’s 2010 financial statements “may no longer be relied upon.”