Managers of Waco-based Life Partners Holdings have been ousted, as a bankruptcy judge called for appointment of a Chapter 11 trustee.
The Securities and Exchange Commission and the U.S. Trustee both sought the move. The SEC said that the bankrupt life-settlement firm’s management “lacks the judgment necessary to guide the company through the Chapter 11 process.”
U.S. Bankruptcy Judge Russell Nelms in Fort Worth held seven hearings beginning in February, culminating in an order on Tuesday directing the Justice Department’s bankruptcy watchdog, the U.S. Trustee, to select a Chapter 11 trustee.
Life Partners buys life-insurance policies for less than the death benefit and collects when the insured person dies. The company filed a Chapter 11 petition on Jan. 20 to stop the SEC from having a receiver appointed in a suit in which the government won a $47 million judgment against the firm and two officers for faulty revenue recognition.
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Ruling in that case, U.S. District Judge James R. Nowlin called Life Partners CEO Brian Pardo a “repeat offender who shows no signs that he has learned his lesson.”
In an unsuccessful bid to block the appointment of a trustee, Life Partners sought to placate the judge by asking for an examiner or a chief restructuring officer.