Investors to get $7.7M from insurance firm after shutdown

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More than 900 investor victims in an allegedly fraudulent New Braunfels insurance group might share an initial $7.7 million payment, a court-appointed receiver recommended this week.

The amount accounts for about 10 percent of the money backers paid into Retirement Value LLC. Travis County state District Judge Stephen Yelenosky shut down the company last May after a request from the State Securities Board and Texas Attorney General’s Office. The state accused the firm of securities fraud and deceptive practices in selling life-settlement investments.

The receiver, Dallas-based K&L Gates LLP attorney Eduardo Espinosa, said the distribution is the first of several he expects over time. In addition to underestimating the life expectancy of life insurance policy holders, the company also “failed to maintain meaningful or appropriate financial records,” Espinosa said.

The fund collected more than $77 million from investors in just 10 months in 2009 and 2010.

Espinosa also recommended maintaining life insurance policies acquired by Retirement Value, which in effect means investors will have to wait longer to recover principals. He said, however, that strategy will provide the best possible return.

SOURCE

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  5. Federal securities regulators filed suit Tuesday against a Texas-based provider of so-called “life settlements,” accusing it and three top executives of defrauding shareholders by overvaluing the life insurance policies it buys from its customers.

    In a statement, the Securities and Exchange Commission said Life Partners Holdings Inc. and its top management lowballed life-expectancy estimates used to price the settlements they pay customers.

    With life settlements, policyholders sell their life insurance policies in return for a lump-sum payment. Investors buy the right to collect the policy’s death benefits, but must continue to pay premiums until the original policyholder dies.

    The lawsuit the SEC filed in federal court in Waco, Texas, also names as defendants the company’s founder, chairman and chief executive, Brian Pardo, its president and general counsel, R. Scott Peden, and Chief Financial Officer David Martin.

    In its civil complaint, the SEC alleges that Life Partners and its executives engaged in deceptive disclosures and improper accounting to overvalue its assets and exaggerate its revenue stream from brokering life settlements. The SEC also accused Pardo and Peden of insider trading.

    “Life Partners duped its shareholders by employing an unqualified medical doctor to assign baseless life-expectancy estimates to the underlying insurance policies,” said Robert Khuzami, head of the SEC’s enforcement division. “This deception misled shareholders into thinking that the company’s revenue model was sustainable when in fact it was illusory.”

    Waco-based Life Partners said the lawsuit is “without merit,” and it promised a vigorous defense.

    “It is very disappointing that the SEC has chosen to pursue litigation over issues that we believe have no merit and financial presentation issues that we do not believe are material,” Pardo said in a company statement. “We have always done our best to deliver value to our shareholders and to run an honest and transparent company.”

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