Life Partners Holdings, Inc. CEO Files Whistleblower Complaint for Naked
Short Selling and Market Manipulation
WACO, Texas -- June 19, 2013
Brian Pardo, CEO of Life Partners Holdings, Inc. (“Life Partners”) (Nasdaq GS:
LPHI), parent company of Life Partners, Inc., announced today that an
independent investigation has uncovered substantial evidence of coordinated
market manipulation and naked short selling of Life Partners’s stock in and
around September 26, 2012. As a result of this investigation, he has filed a
whistleblower complaint with the U.S. Securities and Exchange Commission
against a number of persons and entities suspected of illegal short-selling
activities. Pardo has filed the complaint on Life Partners’ behalf since SEC
regulations require that only individual, natural persons can file such
The investigation was conducted by former SEC Senior Counsel and noted
whistleblower, Gary Aguirre. Mr. Aguirre, who has testified before the Senate
regarding how politically influential individuals and Wall Street firms taint
the SEC’s enforcement decisions, has been an outspoken critic against abusive
short selling and the lack of SEC enforcement against this illegal activity.
Naked short selling is the practice of short selling a company’s stock without
first borrowing the security as required in a legitimate short sale. Because
shares are not borrowed, naked short selling is similar to counterfeiting as
it can make a company appear to have many more stockholders selling shares
than are actually being sold. In 2008, the SEC banned “abusive naked short
selling” as a method of driving down share prices. This abusive tactic is
used, often in conjunction with the dissemination of negative rumors, to drive
down a company’s stock price for the profit of the short sellers. It can also
result in massive job losses, substantial financial losses to legitimate
shareholders and ultimately the destruction of companies.
In his complaint, Pardo describes Life Partners as a microcap stock with 18.4
million issued shares. Pardo holds more of than half of these shares, which
are unavailable for trading. Accordingly, Life Partners has less than 9.2
million shares available for trading and usually less than one million shares
are available for borrowing. In the 12-month period before September 2012,
Life Partners’s stock had an average daily trading volume of 112,000 shares.
The complaint demonstrates that market participants, identifiable through blue
sheets, manipulated the price of Life Partners’ stock on September 26 and 27,
2012, through massive naked short selling in violation of the SEC’s Regulation
SHO. A public announcement of highly favorable news after the market close on
September 25, 2012 –Life Partners success in a legal action - generated
strong upward pressure on the stock price when the market opened on September
26. Over the next two days, approximately 15.2 million shares traded. The
upside pressure was resisted by aggressive short selling at the bid from the
market’s opening on September 26 and continued unabated until a price reversal
on September 27. Over these two days, at least 2.16 million shares were
shorted at the bid, a type of trade that fits within no exception to the legal
borrow requirements. Altogether, a staggering 6.96 million shares were sold
short over the two days. At the time, there were at most 1 million shares
available for borrowing and perhaps none. Major violations of Reg SHO were a
The complaint further demonstrates other violations, such as the requirement
that short sellers must deliver by the settlement date. If 6.96 million shares
were properly borrowed, they would have resulted in an increase of shares on
loan. But by October 3, 2012, the day after the settlement date for the trades
on September 27, the shares on loan had only increased by 27,600 shares. If
the shorts were not covered by the settlement date, they were naked and in
violation of Reg SHO.
Under the whistleblower provisions of the Dodd-Frank law, a reward may be
issued if the SEC is successful in collecting fines against the violators. Mr.
Pardo has assigned any such reward to the Life Partners Holdings, Inc. and no
officers or directors would receive any part of such an award.
Life Partners Holdings CEO Brian Pardo commented, “It is a tragedy to realize
that there are well-known financial entities that intentionally try to destroy
companies with these abusive tactics, without any regard for the lives of the
workers and the investors they ruin. The original purpose of our financial
markets was to bring capital to companies so they could grow and, in turn,
contribute to the growth of our whole economy. This small group has hijacked
our financial markets for their own gain. I just hope that the SEC will use
the clear evidence we have provided to them to bring those who are working
against our economy to justice. In my view, naked short selling is a form of
Pardo further suggests in the complaint that FINRA settlements with UBS and
Credit Suisse speak to the enormous magnitude of naked short selling. He
points to the recent SEC settlement with the Chicago Board Options Exchange,
which shows how an SRO was compromised by those who engage in naked short
selling. An investigation of the allegations in the whistleblower complaint
filed by Mr. Pardo promises to provide the SEC with an opportunity to contain
naked short selling while affording better insights into how naked shorting is
being used to afflict small public companies.
Life Partners is the world’s oldest and one of the most active companies in
the United States engaged in the secondary market for life insurance, commonly
called “life settlements.” Since its incorporation in 1991, Life Partners has
completed over 149,000 transactions for its worldwide client base of over
29,000 high net worth individuals and institutions in connection with the
purchase of over 6,500 policies totaling over $3 billion in face value.
Visit our website at: www.lphi.com.
Safe Harbor - This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. The statements in
this news release that are not historical statements, including statements
regarding the basis, prosecution or outcome of the claims in the whistleblower
complaint, are forward-looking statements within the meaning of the federal
securities laws. These statements are subject to numerous risks and
uncertainties, many of which are beyond our control, that could cause actual
results to differ materially from such statements. For information concerning
these risks and uncertainties, see our most recent Form 10-K. We disclaim any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
may be required by law.
Life Partners Holdings, Inc.
Andrea Atwell, 254-751-7797
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