One of state’s ‘largest fraud schemes’ comes out of bankruptcy

Life Partners, the Waco-based life settlement company accused of defrauding investors, has emerged from bankuptcy with a plan to repay investors, the company’s bankruptcy trustee announced.

“Within the next two weeks, distributions of more than $100 million collected from matured policies during the bankruptcy proceedings will be distributed to investors,” H. Thomas Moran II, the court-appointed Chapter 11 trustee, said in a news release. “Going forward, we project that investors will receive roughly 90 percent of their invested capital over time as a result of the plan we were able to put in place — depending on the option they elected.”

Life Partners sold investors the right to collect on life insurance policies that the sick and elderly exchanged for upfront payments. In January 2015, the company filed for bankruptcy to avoid a $46 million judgment in a case brought by the Securities and Exchange Commission, which alleged that the company made false and misleading regulatory filings.

Earlier this year, Moran called Life Partners “one of the largest and longest-standing fraud schemes” in Texas history, in an 89-page report. He also sued the company’s former longtime CEO, Brian Pardo, seeking to recover about $41 million in dividends and past compensation.

U.S. Bankruptcy Judge Russell F. Nelms in Fort Worth entered an order last month confirming the reorganization plan.

Moran said the plan created two new entities: the Position Holder Trust, headed by Eduardo S. Espinosa of Dykema Cox Smith in Dallas, which will oversee liquidation of the policy portfolio and distribution of the net proceeds to investors; and the Creditors’ Trust, headed by Alan M. Jacobs of AMJ Advisors, which will pursue litigation arising from Life Partners’ pre-bankruptcy business activities, for the benefit of investors.

This story was originally published December 13, 2016 at 5:22 PM with the headline "One of state’s ‘largest fraud schemes’ comes out of bankruptcy."