SEC lawsuit against Life Partners accuses executives of fraudulent accounting practices

by Heygood Orr and Pearson

The Securities and Exchange Commission has filed a lawsuit against Life Partners Holdings and three of its executives over fraudulent accounting practices involving the company’s sale of life settlement policies. Life Partners CEO Brian Pardo, president and general counsel Scott Peden, and chief financial officer David Martin are accused by the SEC of taking part in a scheme to mislead investors about the value of life settlement policies sold by the company.

Life settlements are insurance policies that are sold by the owners of the policy to investors who receive a payment upon the death of the original owner. The value of a life settlement is determined in part by the life expectancy of the insured—the shorter the life expectancy, the more valuable the policy.

According to the SEC’s Life Partners lawsuit, the company and its executives engaged in a scheme to fraudulently misrepresent the life expectancies of the insureds under life settlement policies that were sold to investors, making them appear more valuable than they actually were. By doing so, the SEC alleges, the executives withheld significant information from Life Partners shareholders about the company’s profitability.

In addition to the lawsuit against Life Partners filed by the SEC, the company is also facing lawsuits from investors who purchased life settlement policies from Life Partners. Class action lawsuits have been filed on behalf of investors in Texas, California, and those located nationwide by the law firm of Heygood, Orr & Pearson.