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Life Insurance Group > Life insurance news > Life insurance in your state » Texas Firm Duped Its Customers, says SEC...

Texas Firm Duped Its Customers, says SEC

Saturday, January 14th, 2012

According to regulators a life-settlement firm based out of Texas along with three senior executives underestimated the estimates for life expectancy which literally duped the shareholders. According to US Securities and Exchange Commission or SEC, Life Partner Holdings along with Brian Pardo CEO and Chairman, Scott Peden, general counsel and David Martin, chief financial officer failed to disclose a considerable risk to the business of Life Partners. There are allegations that the estimates of the company on life expectancy were based on the estimates of a Nev. Based doctor. Interestingly, Reno, the doctor neither had prior experience or training to provide estimates for life expectancy.

The estimates on life expectancy are important as the life insurance policy prices are based on these estimates. Life expectancy estimates are critically important for the profit margins as well as revenues of the company. In fact, the estimates can affect the ability of the company to generate profits for its shareholders. The allegations also state that the three executives violated disclosure norms and have also indulged in wrongful accounting which was used by Life Partners to overvalue its assets which would give the impression of steady revenue from life settlement transactions brokerage. Both Peden and Pardo were also charged for insider trading as far as their shares of Life Partners were considered particularly because they held material information regarding the underestimation of life expectancy estimates.

Therefore it has been alleged that shareholders were duped by Life Partners through the employment of an unqualified doctor to provide the life expectancy estimations. The deception was largely the reason behind the impression the shareholders got that the model followed by the company was sustainable while the truth was that it was all just an illusion.

It has also been alleged that the senior most executives didn’t disclose critical risks that the business faced, while also manipulating financial accounts and statements. The executives profited all the while through their misconduct, by performing insider trades based on the non-public information that was available to them. Also, according to the SEC, the net income from the fiscal year 2007 has been wrongly stated by Life Partners. Also, Peden and Pardo have sold around $300,000 and $11.5 million respectively of the stock at high prices based on the information they held. Moreover, it has also been recommended that the company should receive back the money paid out as bonuses to Martin and Pardo and the stock sales profits.

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