Life Partners Trustee Seeks To Recover $91 Million for Creditors

  • Lawsuit filed by Trustee as part of company's bankruptcy case
  • `Death bond' sellers took 35% commissions, trustee claims

Licensees of Life Partners Holdings Inc. were sued for $91 million over their roles in an alleged fraud that earned them “exorbitant”’ commissions on the sale of life settlement investments while concealing when people were expected to die.

The lawsuit filed Wednesday in Fort Worth, Texas comes as part of the bankruptcy of Life Partners, an owner of $2.4 billion in life insurance policies. The company dealt in life settlements, or “death bonds” -- buying life insurance policies from ill or elderly people in need of fast cash and reselling them to retail investors promised high returns when the holder died, and the policy’s benefit was paid out.

The suit was brought by a trustee overseeing the wind-down. He seeks to recover
$91 million in commissions for investors it says were harmed. The licensees, named in the suit, were employed by Life Partners, he said.

“Life Partners marketed the investments as a humanitarian way to provide liquidity to dying people in need, never disclosing that Life Partners made more money off the deal than the insureds selling their own life policies,” the trustee, H. Thomas Moran II, said in the lawsuit. In fact, Life Partners and its network of sales agents, the licensees, pocketed 30 percent to 35 percent of investors’ money, much more than the was the standard in legitimate life settlement transactions, Moran said.

The company told investors that the policyholder was expected to die sooner than their own records indicated, making the investments appear more profitable than they were, Moran has said. All the while, the policies brought in exorbitant commissions, according to his lawsuit.

Moran has also sued the company’s former CEO, Brian Pardo, as part of the bankruptcy.

The case is In re Life Partners Holdings Inc., 15-40289, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth)

Before it's here, it's on the Bloomberg Terminal.