Life Partners Holdings court-appointed bankruptcy trustee, H. Thomas Moran II, has agreed to resolve for more than $1 billion class action litigation brought on behalf of thousands of investors who claim they were duped into purchasing bad life insurance settlements with promises of big returns. The settlement, which must be approved by the court, covers legal claims brought on behalf of more than 20,000 investors and resolves a major hurdle in Life Partners’ quest to restructure after filing for bankruptcy early last year. The settlement papers, filed last month in Texas bankruptcy court, come weeks after Chapter 11 trustee Moran said in a report that Life Partners and its former CEO Brian Pardo engaged in one of the largest frauds in Texas history.
The trustee claims that under Pardo’s direction, Life Partners solicited investors to purchase a stake in life insurance policies the company acquired. Life Partners, according to the trustee, acquired the policies for less than the total value of the policies, which mature when a person dies. It will take decades for all of the policies in Life Partners’ portfolio to mature.
According to Moran, Pardo and Life Partners trumpeted these investments utilizing life expectancy figures that were far shorter than they actually were, deceiving investors, many of them elderly, who were led to believe they would receive double-digit returns. The agreement submitted to the court would provide for the certification of a settlement class in Life Partners’ bankruptcy cases for purposes of voting on a Chapter 11 plan. The settlements would be broken into various subclasses, the largest of which includes 11,322 investors.
The total value of the settlement for class members is currently estimated at $1,078,582,000. The settlement would also cap fees for Plaintiffs’ lawyers at $33 million. The present value of the fees, which would be paid out over time, is $5,219,043 and must be approved by the bankruptcy court.
Life Partners filed for bankruptcy in 2015, after a $47 million jury verdict obtained by the SEC. At the time of Life Partners’ bankruptcy, $1.4 billion in investor funds were at risk, according to the trustee. In September, Moran sued Pardo for more than $40 million in damages over money he transferred to himself and his family. Pardo served as Life Partners’ CEO and chairman until early 2015.
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