Texas Attorney General files Life Partners lawsuit over alleged securities violations

by Heygood Orr and Pearson

The attorney general for the state of Texas has filed a lawsuit against Life Partners Holdings that accuses the company of misleading its investors on how soon life settlement policies purchased from the company would pay off. Attorney General Greg Abbott is seeking a court order to end practices that he alleges violate the Texas Securities Act.

The investment product sold by Life Partners—known as “life settlements”—allows investors to purchase an interest in a life insurance policy and receive a payment in the form of the death benefit when the owner of that policy dies. The value of these life settlements is determined in large part by the life expectancy of the insured: the shorter the life expectancy, the more valuable the policy.

Lawsuits filed against Life Partners have accused the company of misrepresenting the life expectancies of these policies, making them appear to be more valuable than they actually are. Attorney General Abbott compared this practice to a used car dealer who rolls back the odometer of a vehicle in order to raise its price. Out of the 3,879 life settlement policies held by Life Partners as of December 2010, 3,152 were beyond the life expectancy given to investors, according to a lawsuit filed against the company.

In addition to the lawsuit filed against Life Partners by the state of Texas, many investors have also taken legal action against the company. The law firm of Heygood, Orr & Pearson has filed class action lawsuits against Life Partners on behalf of investors in the states of Texas and California. The firm has also filed individual cases against the company on behalf of investors across the United States.