Life Partners, Inc. (Life Partners) is a financial services company located in Waco, Texas that specializes in Life Settlement Contracts and Viaticals. According to numerous reports and governmental agencies, Life Partners may have improperly estimated the life expectancies of life insurance policyholders, thereby misrepresenting the value of Life Partners’ life settlement investments.
How Life Settlement Contracts and Viaticals Operate
A life settlement contract is created when the seller, who is the original policyholder/insured typically at least 65 years of age, sells all or part of his or her life insurance policy for a lump sum payment before death. A “viatical” is a related product where the seller/insured (known in this case as the “viator”) has a terminal illness. The investor, who buys the life settlement contract or viatical, is buying the right to receive all or a portion of the policy’s death benefit. The purchase price takes into account the seller’s life expectancy, the death benefit and the policy’s remaining term.
Often, the buyer/investor must take on the payment of premiums to ensure the policy is kept in force until the insured’s death. Due to the nature of life settlement contracts and viaticals, investors are at risk for additional premiums and will experience a reduced rate of return if the insured person lives longer than expected. The longer the insured person or viator lives beyond his or her life expectancy and the more premiums the buyer pays to keep the policy active, the lower the return will be on the buyer’s investment. In some instances, the insured person or viator can outlive the term of the policy and, because there is no death benefit to distribute before the policy expires, the buyer will lose 100% of his or her investment. An investor in life settlement contracts or viaticals is essentially betting that the insured person will die before the expiration of the term life policy and within the projected life expectancy.
Companies such as Life Partners broker the purchase of viaticals or life settlement contracts between investors and policy owners, who want to receive cash during their lifetimes by selling the rights to the death benefits under their life insurance policies. In exchange for facilitating these transactions, Life Partners collects substantial fees regardless of whether the investors receive a return on their investment.
According to Securities and Exchange Commission (SEC) filings, Life Partners acquired nearly 600 life settlement policies in fiscal year 2008 through 2010, with a collective face value of approximately $1.7 billion dollars.
Life Partners Investigations and Litigation
Securities and Exchange Commission
The SEC filed suit against Life Partners Holding, Inc., Life Partners, Inc., R. Scott Peden (General Counsel and President), Brian Pardo (Chairman and CEO), and David Martin (CFO) in federal court in Waco, Texas, for misrepresenting the value of life insurance policies purchased on behalf of Life Partners’ customers. According to the SEC, Life Partners systematically and materially underestimated life expectancies in order to boost revenues and profit margins. Click here for the full SEC Litigation Release.
Texas State Securities Board
The Texas State Securities Board (TSSB) issued a Press Release outlining Life Partners’ failure to answer several subpoenas of the TSSB. The TSSB has been conducting an ongoing investigation into Life Partners for suspected violations of the Texas Securities Act, including, but not limited to:
[F]raudulent 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.
Due to Life Partners’ failure to cooperate, the TSSB was forced to file an Application to Enforce Subpoenas in the District Court of Travis County. In the Application, TSSB seeks a court order compelling Life Partners to disclose its records related to the marketing and sale of life settlement contracts. Named in the filing are Life Partners Holding, Inc., Life Partners, Inc., R. Scott Peden (General Counsel and President) and Brian Pardo (Chairman and CEO).
Colorado regulators also filed suit against Life Partners making similar accusations. According to the Wall Street Journal, there was no finding of fraud, but the suit resulted in a settlement which required Life Partners to repurchase several policies sold to investors in Colorado.
If you invested in a Life Settlement Contract through Life Partners you may have a Claim.
The investment and securities fraud attorneys at Moulton & Arney, LLP have extensive experience representing individual investors in claims involving life settlement contracts/viaticals.
In a recent case, Moulton & Arney represented approximately 1000 individual investors who invested over $100 million in fraudulent viatical investments.
If you invested in a Viatical or Life Settlement Contract issued through Life Partners, you may have a claim. Call Moulton & Arney today for a free consultation.