Life Partners Holdings, which collapsed amid accusations that it defrauded investors, will end its tumultuous bankruptcy by putting a Texas-based investment firm in charge of its so-called life settlement business.
Life Partners sold investors the right to collect on life insurance policies that the sick and elderly exchanged for upfront payments. The business ran into trouble after the Securities and Exchange Commission alleged the Waco-based company made false and misleading regulatory filings.
In January 2015, Life Partners filed for bankruptcy to avoid a $46 million judgment in the SEC suit. But the business of packaging life insurance policies as investment products didn’t fit neatly under bankruptcy law, and a trustee took over the case. He dug into the company’s affairs and said he discovered a wide-ranging scheme to mislead investors about how long policyholders would live.
On Tuesday, U.S. Bankruptcy Judge Russell Nelms in Fort Worth confirmed the Chapter 11 exit plan. Vida Capital has agreed to pay $4 million for the right to service and administer the policies. Austin-based Vida will also provide an exit loan and a line of credit, according to court papers.
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The trustee, H. Thomas Moran II, acting on behalf of the bankrupt estate and its creditors, sued the company’s former chief executive officer Brian Pardo over the alleged wrongdoing.
Pardo said Moran wasn’t legally eligible to make the claims and sought to have the matter put before a jury. The lawsuit is pending in Fort Worth.
Moran said in a statement Tuesday that the bankruptcy plan preserves $2.4 billion worth of insurance policies for more than 22,000 investors and will recover 90 percent of their invested capital, on average, over time.
“Under the plan, investors have selected among various options for the recovery of their investments, including options that enable investors to avoid the financial burden of paying any further insurance premiums,” the trustee said.