Texas Regulator Sues Life Partners

Discussion in 'Life Settlements Forum' started by STIBROKER, Jul 29, 2011.

  1. STIBROKER
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    STIBROKER Super Moderator Moderator

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    Texas Regulator Sues Life Partners - WSJ.com

    The Texas state securities board said it sued Life Partners Holdings Inc. for failure to comply with subpoenas issued as part of an investigation, adding to the woes of a company that has already received a warning that it may be sued by the Securities and Exchange Commission.
    Life Partners, of Waco, Texas, is a major player in the "life settlement" business. It arranges to buy unwanted life-insurance policies, then sells pieces of those policies to retail clients. The clients pay the premiums and collect when the insured people die. The company has arranged for transactions involving life policies with a face value of about $2.8 billion.
    Life Partners has been enmeshed in controversy over whether it has provided inaccurately short estimates of how long the insured people are likely to live, a key part of the investment equation.
    Although the SEC probe into Life Partners has been public since early 2011, the separate Texas state investigation hadn't been publicly known until Friday's court action.
    The Texas investigation could be important, because the SEC generally has jurisdiction only over the company's publicly traded shares, while Texas is investigating possible wrongdoing in the underlying investments in life policies that Life Partners sold to thousands of retail investors.
    In its complaint, the Texas securities board said it has been investigating Life Partners since mid-2010. The agency issued fresh subpoenas in June 2011, seeking a broad array of records from Life Partners. The agency is seeking a court order to compel Life Partners and its officers to comply with the subpoenas.
    R. Scott Peden, Life Partners' general counsel, didn't immediately return a call and email requesting comment. The defendants in the Texas action include Mr. Peden and Brian Pardo, Life Partners' chief executive, along with Life Partners and a subsidiary.
    According to a June 2011 letter from an outside lawyer of Life Partners, attached to the legal complaint, the company declined to respond to the subpoenas, citing a prior Texas court ruling that its insurance products weren't securities. Therefore, the letter said, Life Partners believes the state securities board has "no jurisdiction" over the company's activities.
    The Texas investigation adds to a string of problems for Life Partners, which is being sued in numerous court actions by shareholders and investors in its life-settlement products.
    Last month, Ernst & Young LLP resigned as Life Partners' outside auditor and withdrew its opinion on the prior year's results. Life Partners has since engaged a smaller firm as its outside auditor. Life Partners has yet to file its annual report for fiscal 2011, which ended Feb. 28, 2011.
    The company's controversial life-expectancy estimates were a focus of a December page-one article in The Wall Street Journal. In policies Life Partners brokered in 2002, for example, the Journal found that 95% of the insured people were still living after the life-expectancy period estimated by Life Partners' physician.
    In mid-May, the company said it had received a so-called Wells notice from the SEC, which indicated the agency's staff planned to recommend to the commission civil charges against the company and two top executives related to the life-expectancy estimates.
    Such a notice gives potential targets a chance to dissuade the regulator from filing the charges.
    Life Partners in June said it received an amended Wells notice which said the SEC had expanded its focus to include accounting issues, and also to include another executive.
    The company previously has said it intended to tell the SEC why it believed charges weren't
     
  2. somarco
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    somarco Well-Known Member

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    They should have come up with a different name.
     
  3. arnguy
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    arnguy Well-Known Member

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    Geez, Bob, I thought for certain it was an insurance agency that caters to LGBT clientele.
     
  4. MichaelBurton
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    MichaelBurton Well-Known Member

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    I am going to like it here.:D

    ----------

    Ok. Who else got hit with the pitch to push this stuff? I'm in Austin. I must have gotten hit by three people within the space of a week. I tried to review the memorandum with one of the guys (who sadly had chunked his whole rollover IRA, maybe about $90K into this crap) to try to talk some sense into him. I have had more productive conversations with a pile of chipped bricks.

    The most ironic thing was that the guy hated cash value life insurance with all of the passion of Suze Ormann and Dave Ramsey. Here's a guy selling fractional interests in other people's whole life contracts because "they offer 12% risk free return" after like, a gazillion in transfer/legal fees are netted out from the death benefit. And yet all he can tell me is how bad the returns are on cash value insurance.

    You cannot reason with the unreasonable.

    BTW: what does it say about the life settlement market-place when its distribution system degenerates into network marketing by people without licenses of any kind? Not insurance. Not securities. Nada.

    Seriously. When you stripped it all away, I was being recruited to get into the "downline" of a restaurant manager who would get a piece of the business I wrote and (I think) a piece of the business of anyone I recruited.

    Can you write WTF? on this board?
     
  5. somarco
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    somarco Well-Known Member

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    I got hit up several years ago to push
    - equipment leasing
    - pay phones
    - non-conforming viaticals

    and a bunch of other crap.

    No license required.

    The equip leasing deal was investigated by the AG and shut down before I could decide if I wanted to jump in.

    I almost got in the pay phone deal. A neighbor had invested his lump sum payment from Playtex (about $900k) in pay phones and was collecting 14% on his money.

    But I passed on that. A year later the AG, SEC and FBI got involved. My name showed up in some files as having received their marketing materials. The FBI wanted everything I had.

    If this had happened today I would claim my hard drive crashed and I don't have anything.

    The non-conforming viatical was most interesting. Had some friends trying to get me involved in that as well.

    Passed on that as well.

    No, you can't say WTF without paying royalties to HealthGuy. He owns the rights to WTF.
     
  6. MichaelBurton
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    MichaelBurton Well-Known Member

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    Well, then I am in debt up to my arse.
     
  7. insurance404
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    insurance404 Well-Known Member

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    I'm selling Life Settlements with Conestoga. They have updated more realistic life expectancies.

    Been selling them for about 4 years now and doing pretty well for clients. I have a good contract with them as well so that's nice, as I know the CEO...

    The problem is that they tend to all pay out for certain clients and none yet for others (which sucks for them).
     
  8. somarco
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    somarco Well-Known Member

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  9. STIBROKER
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    STIBROKER Super Moderator Moderator

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  10. MichaelBurton
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    MichaelBurton Well-Known Member

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    Elaborate on that, if you don't mind. Please.
     

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