U.S. regulators sued Pacific West Capital Group Inc. over claims it made false promises to clients that its life settlement investments would pay annual returns of as much as 150 percent.
Pacific West and its owner Andrew Calhoun used proceeds from the sale of new life settlements to continue funding previous investments sold years earlier, the Securities and Exchange Commission said in a complaint filed Tuesday. The firm raised almost $100 million selling the securities.
“Investors are entitled to fair disclosures about the risks associated with their investments,” Michele Wein Layne, director of SEC’s regional office in Los Angeles, said in a statement. “Pacific West and Calhoun did the opposite here by hiding and minimizing those risks in order to sell more life settlements.”
Life settlement securities are created by buying an interest in life insurance policies from owners in exchange for upfront cash. When the policyholder dies, investors receive a share of the death benefit. Calhoun and Pacific West said their investments mature in four to seven years and pay a total return of at least 100 percent, according to the complaint filed in Los Angeles.
“Pacific West Capital Group is obviously disappointed that the SEC has decided to initiate an action, and vehemently denies that it has done anything wrong,” the company said in an e-mailed statement. “Pacific West Capital Group intends to vigorously defend itself against the SEC’s allegations.”