© 2014 The Texas Lawbook.
By Natalie Posgate – (December 3) – An Austin federal judge has ordered Waco-based Life Partners Holdings, Inc. and two top executives to pay $46.9 million for violating securities laws by filing misleading financial statements and permanently enjoined them from doing so again in the future.
Tuesday’s order follows a jury trial earlier this year between Life Partners and the U.S. Securities and Exchange Commission that dismissed the SEC’s claims that the company defrauded investors and committed insider trading. But the jury still found that Life Partners misled investors through the help of its CEO and general counsel by submitting false or misleading company filings, such as their quarterly and annual reports.
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 alleged that Life Partners intentionally underestimated the life expectancy of the policies and hid the real value from the investing public, which cheated investors out of substantial dollars as a result.
Because the SEC was not able to prove its “core claims” against Life Partners at trial, Life Partners had argued that no sanctions were necessary for the “minor charges” the jury did find, but in his scathing final judgment, U.S. District Judge James Nowlin disagreed.
“These ‘minor’ charges are not minor at all,” he wrote in Monday’s 22-page order. “The jury judged that LPHI, Pardo and Peden deprived the investing public of the information it needed to make a fully informed decision about whether to invest in Life Partners. Given that disclosure is the basis of American securities law, these are serious violations.”
Judge Nowlin ordered Life Partners to disgorge $15 million and pay a $23.7 million civil penalty in the next two weeks. In the next 30 days, Life Partners CEO Brian Pardo must pay $6 million and General Counsel Scott Peden must pay $2 million.
In a call this morning, David Woodcock, the SEC’s Fort Worth regional office director, called Judge Nowlin’s decision an “outstanding order.”
Lawyers from Baker & McKenzie, who led Life Partners’ defense in the February trial, could not immediately be reached for comment.
In an email, Squire Patton Boggs partner Cass Weiland, who represented Peden, said he thought the penalties seemed “a bit harsh” for “a case where there was no fraud.”
“The SEC seems to be aiming to put the company out of business and destroy the shareholder’s investments,” he said.
The Texas Lawbook will have more details on the story. Check back for updates.
© 2014 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.