A handful of Texas lawyers gained an overall favorable federal jury verdict late Monday night for Waco-based Life Partners Holdings, Inc. in a case against the U.S. Securities & Exchange Commission.
The eight-person jury decided that Life Partners and its executives did not defraud investors or commit insider trading, however it did find that it violated securities laws related to misstating a record keeping matter and its revenue recognition policy.
But an obstacle arose Thursday with the company’s ongoing litigation against the State of Texas that involves similar claims to the SEC’s case.
A three-judge panel from the 3rd Court of Appeals of Texas affirmed the state’s appeal to try its case, which was dismissed at a hearing in 2012 by an Austin judge who said the State “failed to establish that the transactions at issue are securities” under the Texas Securities Act, the opinion said.
During the 2012 hearing, Travis County Judge Stephen Yelenosky also removed a month-old temporary injunction on Life Partners that prohibited the company from selling its policy interests to investors. The state had originally requested for a receiver to take control of Life Partners’ financial operations.
Life Partners is a life insurance investment company that is in the business of buying life settlements from elderly or ill policyholders and reselling them to investors. The SEC and Texas Attorney General Greg Abbott claimed in their suits that Life Partners intentionally underestimated the life expectancy of the policies and hid the real value from the investing public, which in turn cheated investors out of substantial dollars.
Dallas-based Baker & McKenzie lawyers Elizabeth Yingling, Laura O’Rourke, Will Daugherty and Meghan George are handling the appeal for Life Partners, as well as Austin appellate lawyer Doug Alexander of Alexander Dubose Jefferson & Townsend. Assistant Solicitor General Kristofer Monson is leading the case on the state’s behalf.
Mounds of Texas lawyers defended Life Partners and two executives, Chief Executive Officer Brian D. Pardo and General Counsel R. Scott Peden in its case against the SEC.
Baker & McKenzie’s Yingling, O’Rourke, Daugherty and George represented Life Partners; Austin attorney J. Pete Laney (the son of former Texas House of Representatives Speaker James E. “Pete” Laney) and Dallas Patton Boggs partner Cass Weiland represented Peden; and Dallas attorney Jay Ethington represented Pardo.
SEC attorneys from the Fort Worth Division involved in the case included Jessica Magee, Matthew Gulde and B. David Fraser.
Weiland said in an email that the SEC decided before trial that it was not pursuing the revenue recognition claims, and did not pursue evidence related to these claims. As a result, Life Partners requested that the court dismiss these claims as a matter of law, and the court is expected to rule on this motion before issuing a judgment, according to a written statement on Life Partners’ website.
Both sides claimed the verdict was a big win.
“We are extremely pleased that the jury has exonerated our company, our business practices and the life settlement asset class itself,” Pardo said in a statement.
SEC’s enforcement director Andrew Ceresney said in a written statement the agency is pleased “the jury found Life Partners and its executives liable for knowingly or recklessly defrauding shareholders and filing false SEC filings” and that Pardo was found “responsible for falsely certifying that the company’s public filings were accurate when they were not.”
The trial took place in the U.S. District Court for the Western District of Texas, Austin Division and was presided under Judge James R. Nowlin.