Life Partners sales agents were sued for $91 million over their roles in an alleged fraud that earned them “exorbitant”’ commissions on the sale of life settlement investments while concealing when people were expected to die.
The lawsuit, filed Wednesday in Fort Worth, comes as part of the bankruptcy of Life Partners Holdings, an owner of $2.4 billion in life insurance policies. The company dealt in so-called life settlements or death bonds — buying life insurance policies from ill or elderly people in need of fast cash and reselling them to retail investors who were promised high returns when the holder died and the policy’s so-called “death benefit” was paid out.
The suit was brought by a trustee overseeing a wind-down that will seek to recover the $91 million in commissions to return to investors it says were harmed. The agents, or licensees, named in the suit were employed by Life Partners, he said.
“Life Partners marketed the investments as a humanitarian way to provide liquidity to dying people in need, never disclosing that Life Partners made more money off the deal than the insureds selling their own life policies,” the trustee, H. Thomas Moran II, said in the lawsuit. In fact, Life Partners and its network of sales agents pocketed 30 percent to 35 percent of investors’ money, much more than the was the standard in legitimate life settlement transactions, Moran said.
The company told investors that the policy holder was expected to die sooner than their own records indicated, making the investments appear more profitable than they were, Moran has said. All the while, the policies brought in exorbitant commissions, according to the lawsuit that seeks to recover damages for investors it says were harmed.
In September, Moran also sued the company’s former CEO, Brian Pardo, seeking to recover about $41 million in dividends and past compensation.
Last December, U.S. District Judge James R. Nowlin in Austin ordered that Pardo pay a $6.1 million civil penalty and that the company pay $37.7 million after a jury found that Life Partners had made false and misleading filings with the Securities and Exchange Commission. The company then filed for bankruptcy in January.