Life Partners, the Waco-based company that lost a Securities and Exchange Commission lawsuit last year alleging it filed false and misleading financial statements for its life settlement investment business, has filed for bankruptcy protection in Fort Worth.
“The company elected to seek protection under Chapter 11 while it pursues an appeal of a $46 million judgment against the company and two of its executive officers,” the company said in a statement.
Life Partners listed assets and liabilities of $10 million to $50 million each in the bankruptcy filing. The company says the SEC is its largest creditor, owed $38.7 million, followed by the Baker & McKenzie law firm in Dallas, owed $1 million. Other debts are related to legal fees, accounting services and trade debt, the filing shows.
The company said the SEC filed a motion with the trial court seeking the appointment of a receiver, which could have led to a liquidation and prevented its appeal from proceeding.
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Life Partners is seeking to have a chief restructuring officer appointed to oversee its court reorganization.
Last month, U.S. District Judge James R. Nowlin ordered the judgment against the company and its two top officers. In his ruling, Nowlin called Life Partners CEO Brian Pardo a “repeat offender who shows no signs that he has learned his lesson,” citing violations dating to 1991.
In February, an Austin jury rejected a major fraud allegation in the case, brought by the SEC’s Fort Worth office, and the judge later dismissed one that jurors had upheld. But the mixed verdict found the company guilty of misstating its revenue.
Pardo contended that he had been “exonerated.” But what the company considered “minor” charges — filing false public reports — Nowlin said in his ruling “are not minor at all.”
The SEC alleged that investors were misled about the life expectancy of elderly people whose death benefits were bought and sold by Life Partners on the secondary insurance market.
Investors were told of life expectancy predictions by a Nevada oncologist, who had no actuarial training. His estimates differed greatly from those of professional consultants whom Life Partners used to select policies, keeping the more conservative reports secret from the stock-buying public. By making the sellers look sicker than they were, the Waco firm artificially burnished its business outlook.
Staff writer Sandra Baker contributed to this report, which includes material from Bloomberg News and the Star-Telegram archives.