© 2012 The Texas Lawbook.
By Natalie Posgate
Staff Writer for The Texas Lawbook
Texas Attorney General Greg Abbott has sued Life Partners Holdings, Inc., and its subsidiary, Life Partners, Inc. for violating the Texas Securities Act by allegedly selling unregistered securities to investors and has asked an Austin judge to appoint a receiver to oversee the Waco-based company’s financial operations immediately.
An emergency hearing on the matter has been scheduled for 9 a.m. Friday before Travis County District Judge Orlinda Naranjo of the 201st Judicial District.
The lawsuit, filed by the attorney general on behalf of the Texas State Securities Board, alleges that Life Partners buys rights to death benefits from policyholders and sells them to investors. However, the company employs materially short life expectancies to maximize profits without disclosing the inaccuracy to investors, according to the lawsuit.
The state attorney general requests the court to appoint a receiver to oversee Life Partners’ financial operations and permanently bar Life Partners Chief Executive Officer Brian D. Pardo and President R. Scott Peden from selling the allegedly fraudulent securities.
It also requests a temporary restraining order, temporary and permanent injunction, restitution and disgorgement of economic benefits, civil fines and penalties, and the recovery of reasonable costs and fees.
If the court determines to appoint a receiver for Life Partners, Dallas attorney Richard B. Roper of Thompson & Knight has agreed to fill the position.
According to the attorney general’s complaint, “The Companies have structured their life settlement investments so that the investors have virtually no rights.”
The lawsuit compares Life Partners’ actions to “a used car salesman purchasing a high mileage car, ‘rolling back’ the odometer, then overcharging the subsequent purchaser and pocketing the difference.”
In the court filing, the state also expressed concern with Life Partners’ alleged actions because the company’s filings “reflect a company in dire financial condition.” It had a net loss from operations of over $5 million and a 78.8 percent decline in revenues during the 2012 fiscal year. The State believes Life Partners will be out of cash in as early as two months.
Life Partners is also under investigation by the Securities and Exchange Commission from earlier this year for a fraudulent disclosure of similar allegations.
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