Friday, August 17, 2012
Texas Attorney General’s Office, State Securities Board Charge Life Partners with Misleading Investors, Committing Securities FraudAUSTIN -- A Travis County district judge today granted the State’s request for a temporary restraining order against Waco-based Life Partners Holdings, Inc. Life Partners, Inc, and two of its senior executives - Brian Pardo and Scott Peden. On Thursday, Texas Attorney General Greg Abbott charged Life Partners with multiple violations of the Texas Securities Act. Abbott issued the following statement about the case:
"In order to protect investors, the State moved swiftly to secure much-needed protections from the court. Given the firm’s precarious financial state, it was extremely important that safeguards be imposed to protect investors."
Today’s temporary restraining order prevents Life Partners Holdings, Inc., Life Partners, Inc., and executives Brian Pardo and Scott Peden, from:
· Destroying, altering or removing corporate records or documents
· Paying dividends
· Authorizing salary increases or bonuses for executives
· Disposing of corporate resources and assets
Court documents filed by the State indicate that Life Partners misled investors by misrepresenting the value of its investment offerings and failing to disclose material facts about its securities products. Life Partners’ business model is based on purchasing life insurance policies and selling a fractional interest in those life insurance policies to investors. Under this scheme, the value of an investment in these life insurance policies depends upon the accuracy and legitimacy of Life Partners’ life expectancy projections. According to court documents, when Life Partners marketed and sold investments in life insurance policies, it failed to provide material information about the insured's life expectancy, including understating the insured's life expectancy. By doing so, Life Partners misrepresented the value of the investments, and as a result, investors that purchased fractional interests in life insurance policies from Life Partners were misled about both the average rate of return and the value of their investments.
Life Partners, Inc. is a wholly-owned subsidiary of Life Partners Holdings, Inc., which is a publicly traded company—though more than 50% of its common shares are owned by Pardo Family Holdings, a Gibraltar-based trust. The State Securities Board, which regulates the sale of securities in the State of Texas, referred the case to the Texas Attorney General’s Office.