In brief: The Securities and Exchange Commission has issued suit against Life Partners Holdings and three of its top executives alleging account fraud.
The full story
The suit alleges years of disclosure and accounting fraud that involved misleading financial statements and backdated documents shown to auditors.
Chief Executive Brian D. Pardo and General Counsel R. Scott Peden were also charged with insider trading, alleging that they sold shares at artificially inflated prices while knowing the company's profits were unsustainable. Pardo is said to have sold $11.5 million in stock from 2007 to 2009.
Life Partners is based in Waco, Texas and is a major player in the secondary market for life insurance. It's model is simple: investors buy the rights to receive death benefits, paying a lump sum up front to the original policyholder. When the insurance cashes out, it's hoped to be worth more than was paid.
"It is very disappointing that the SEC has chosen to pursue litigation over issues that we believe have no merit and financial presentation issues that we do not believe are material," said Pardo in a statement. The company intends to "vigorously defend ourselves against these meritless claims" he said.
Summing up
The third executive charged is David M. Martin, CIO.
Photo credits: Life Partners Holdings
