The Texas federal judge overseeing the U.S. Securities and Exchange Commission lawsuit against Life Partners Holdings Inc. has issued a pair of rulings as the parties prepare for a jury trial. First, U.S. District Judge James Nowlin denied a request from Life Partners to reconsider an earlier ruling by the court determining that life settlements are securities and the company therefore had to comply with federal securities laws. Life Partners maintains the judge should follow a holding from the D.C. Circuit that life settlements are not securities.
Second, Judge Nowlin ruled that whether Life Partners’ revenue policies related to the sale of its life settlement investments violate securities laws is a question for the jury, not him, to decide. The court ruled it could not conclusively find that Life Partners’ revenue recognition policy failed to comply with generally accepted accounting principles because there are material fact questions—for a jury to decide— about whether the company and its CEO misstated quarterly filings between 2009 and 2011.
The court also held that whether Life Partners committed fraud by misrepresenting its revenue policy was similarly a question for the jury. “Since the propriety (or lack thereof) of Life Partners’ revenue recognition policy is intimately related to the question of whether Life Partners in fact materially misstated its quarterly filings during the same period of time, the job of evaluating both questions belongs to the jury,” Judge Nowlin wrote.
The SEC is arguing that Life Partners used an unacceptable policy that recognized revenue on its books from life settlement sales before the transactions had closed. Life settlements give investors the option to buy a fractional interest in a life insurance payout, collectible at the time of the insured’s passing. The SEC claims Life Partners recognized revenue from the investments before it had closed the life settlement transaction, before the company sold or obtained commitments for the entirety of each insurance policy, before the policy owner could be paid and before legal title to the policy could be transferred to the investors.
At the upcoming jury trial, the SEC will also seek to establish that Life Partners’ failure to disclose its use of understated life expectancies for the life settlements that it sold had “disastrous effects” for its business, shareholders and customers. The jury trial is scheduled to begin at the end of January 2014.
Heygood, Orr & Pearson has filed numerous lawsuits on behalf of investors in life settlements who, according to the suits, were misled about the value of life settlements investments that they purchased. These lawsuits were filed on behalf of investors located nationwide.
If you or someone you know has been the victim of wrongful conduct on the part of a life settlement broker or provider, then you 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.