Life Partners, Inc.

Lawsuits filed against the life settlements company Life Partners, Inc. have accused the company of fraudulently misrepresenting the value of the investment products that it sold to consumers. Numerous lawsuits have been filed by investors who allege that they were misled about the value of the life settlement policies that they purchased through Life Partners because they were provided with inaccurate life expectancy estimates.  The U.S. Securities and Exchange Commission has also filed a Life Partners lawsuit accusing the company and three of its executives of securities violations in connection with their use of life expectancy estimates that, according to the SEC, Life Partners knew were materially short.

What are ‘life settlements’?

A “life settlement” is a life insurance policy that is purchased from the original insured for an amount less than the face amount of the policy (i.e., less than the death benefit). When the insured subsequently dies (called a maturity), the policy proceeds are paid to the purchaser of the policy (the investor) as opposed to the family of the insured. Once a life settlement is acquired, the purchaser is obligated to pay the premiums on the policy to keep it in force until maturity.

Life Partners gathers investment funds from would-be investors for the purpose of purchasing life settlement policies. Life Partners arranges to purchase the policies from insureds on behalf of investors for a certain price but then charges its customers/investors a substantially higher price to acquire an interest in the policies. The difference between the amount paid to the insured by Life Partners and the amount paid by the investor to Life Partners to acquire an interest in the policy is retained by Life Partners as their “fee.”

Typically, investors each purchase a small percentage of numerous policies which is called fractional ownership. In addition to paying an amount to acquire an interest in each policy, investors must also provide to Life Partners an amount to cover premiums during the life expectancy of the insured. These funds are deposited in an account to be used at the direction of Life Partners to pay premiums to keep the policy in force.

Key to how much an investor should be willing to pay for an interest in a policy is the life expectancy of the insured. The longer the insured lives, then the longer the investor’s money (and associated opportunity cost) is tied up in the investment and the more premiums the investor will have to pay to maintain the policy. This reduces or eliminates the return on investment. As a result, a prudent investor should be willing to pay much more for a given percentage of a policy if the life expectancy is short than if the life expectancy is long.

Lawsuits Against Life Partners

In the various lawsuits against Life Partners, it is alleged that the company used a physician by the name of Dr. Cassidy to obtain life expectancy assessments on insureds that were far shorter than their true life expectancy. Thus, the lawsuits claim, Life Partners was able to acquire the polices for a low price based on the true life expectancy and then sell them to their customers/investors for much higher amounts based on the Cassidy life expectancy, keeping the difference as their profit.

Heygood, Orr & Pearson has brought numerous lawsuits on behalf of investors against Life Partners over the Dr. Cassidy life expectancies. One of Heygood, Orr & Pearson’s clients invested in 51 different policies over 4 years ago. Dr. Cassidy’s life expectancy evaluations were all in the 2 to 4 year range. If Dr. Cassidy’s life expectancy evaluations were accurate, then approximately half of the policies should have already matured. In reality, not one of the 51 policies has matured! By using the bogus Dr. Cassidy life expectancy assessments to sell their customers/investors life settlements at greatly inflated prices, Heygood, Orr & Pearson asserts on behalf of its clients in various lawsuits that Life Partners was guilty of fraud, breach of fiduciary duty, violations of consumer protection laws and breach of contract.

Life Partners Under Investigation by SEC

Life Partners Inc. is also under investigation by the U.S. Securities and Exchange Commission (SEC) due to its accounting practices and alleged bogus life expectancy estimations. In January of 2012, the SEC filed a lawsuit against Life Partners in federal court in Waco, Texas. In this lawsuit, the SEC alleges that Life Partners and their officers Brian Pardo and Scott Peden engaged in a disclosure and accounting fraud that misled the Company’s shareholders about the sustainability of Life Partners’ revenues and profit margins and consumer demand for the life settlement investments.

The lawsuit further alleged that Pardo and Peden profited from the fraud by trading on inside information that Life Partners systematically uses life expectancy estimates that the Company knows to be materially short in brokering life settlements. The SEC asserts that Life Partners engaged in this practice to artificially inflate the Company’s revenues and profit margins. Read more about the SEC lawsuit against Life Partners.

In January 2014, the SEC’s case against Life Partners Holdings, Inc. and its executives Pardo and Peden went to trial. After almost two days of deliberations, the jury found in favor of the SEC on Section 13(a) of the Securities Exchange Act of 1934, Rules 12b-20, 13a-1 and 13a-13, as well as Section 17(a)(1) of the Securities Act of 1933. The jury also found that Pardo falsely certified reports filed with the SEC that contained untrue statements of material fact or omitted material facts necessary to make the reports not misleading. The jury found in favor of Life Partners Holdings, Inc. on the SEC’s claims under Section 10(b) and Rule 10b-5. And the jury found in favor of Pardo and Peden on the SEC’s claims of insider trading.

Heygood, Orr & Pearson Takes Action

The lawyers at Heygood, Orr & Pearson have filed two class action lawsuits against Life Partners.  Heygood, Orr & Pearson has also filed numerous individual lawsuits against Life Partners on behalf of investors who, according to the suits, were misled about the value of the life settlements investments that they purchased through the company. These lawsuits were filed on behalf of investors located nationwide.

If you or someone you know has been aggrieved by wrongful conduct on the part of Life Partners or are owed additional sums of money after investing with Life Partners, then you may need a sophisticated and knowledgeable law firm such as Heygood, Orr & Pearson to represent you. For more information and a case evaluation that will help determine your legal rights, please contact us by calling toll-free at 1-877-446-9001, or by filling out the free case evaluation form located on this page.