Life Partners Holdings Inc. and three executives, including Chief Executive Officer Brian Pardo, were accused by the U.S. Securities and Exchange Commission of misleading shareholders.
Pardo, General Counsel Scott Peden and Chief Financial Officer David Martin failed to disclose a “significant” risk to the company’s business as it was “systematically and materially underestimating the life expectancy estimates it used to price transactions,” the SEC said in a statement.
Pardo and Peden were also accused of insider trading.
Life Partners makes money from brokering transactions between investors and owners of life insurance policies who want to sell their policies for a lump-sum payment, according to the complaint filed today in federal court in Waco, Texas, where the company is based. The company systematically underestimated the life expectancy of policy holders to inflate its revenue, the SEC said.
“It is very disappointing that the SEC has chosen to pursue litigation over issues that we believe have no merit,” Pardo said in a statement. “We intend to vigorously defend ourselves against these meritless claims.”
The case is SEC v. Life Partners, 12-2, U.S. District Court, Western District of Texas (Waco).