Why is SEC Investigating Life Partners Holdings?

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Life Partners Holdings Inc. recently admitted that the Securities and Exchange Commission (SEC) is investigating its company’s policy or firm’s approach to how it estimates life expectancies of policyholders (which determines the amount an investor must pay to purchase the policy or product) who are insured by Life Partners’ policies and sold to investors. The Texas company that does business as Life Partners sells investments known as a “Life Settlement” or a “Viatical Settlement” and it is the sale of an existing life insurance policy to an investor who pays required premiums on an individual’s policy, then collects its proceeds once the insured person dies.

According to a report in The New York Times, the SEC Life Partners probe focuses on Life Partners’ method of determining an individual’s life expectancy. The SEC is concerned with the company’s way of estimating the life expectancy of a policyholder because this estimate ultimately determines the value of such an investment, which is then sold to an unrelated or outside investor. The shorter an insured’s life span is expected to be, Life Partners can generally charge higher prices to investors for that person’s policy. If the insured lives longer than is estimated, then the payout is delayed and, as a result, investors must continue paying premiums as the person lives on in order to obtain the payout.

The SEC allegedly initiated its investigation or probe of Life Partners and its investment product, Life Settlement or Viatical Settlement, based on an investigative report conducted by the Wall Street Journal, which reported that a significant number or portion of insured individuals were outliving Life Partners’ life expectancy estimates, a factor that would cut investors’ returns. According to reports, Life Partners marketed to potential investors that its expected returns were approximately 10% to 15% on Life Settlements. The article also reported that Life Partners Holdings receives life expectancy estimates “from a doctor in Reno, Nev., who has testified for a court case that he never checks the accuracy of his prior predictions.” Coincidentally, it seemed that estimates of life expectancy provided to investors of Life Partners’ Life Settlements are frequently inaccurate.

Based on the extensive research and data collected, also included in the published article, by the Wall Street Journal, Life Partners put a life expectancy of two years or less on the insured individual in one-third (1/3) of the 297 policies it sold in 2002, and four years or less on nearly all policyholders. If the life expectancy estimates or projections were accurate, then almost all policies would have “matured” with the insured dead by the end of 2009, however, this was not the case and the projections were inacurrate. Instead, the insured person outlived the life expectancy estimate in 283 of the 297 policies.

The sale of Life Settlements is legal, however, the North American Securities Administrators Association (NASAA) reportedly stated that investment products, such as Life Settlements, are vulnerable to fraud. Other products prone to fraudulent practices include, but are not limited to, Ponzi schemes, phony life expectancy evaluations, inadequate premium reserves that increase investor costs, and false promises of large profits with minimal risk. In fact, Life Settlements made it to the NASAA’s list of Top 10 Investor Traps in 2009.

Life Partners incorporated in 1991 and, since incorporation, has completed more than 127,000 transactions for its client base of over 27,000 high net worth individuals and institutions worldwide in connection with the purchase of greater than 6,400 policies – totaling approximately $2.8 billion in face value. Unfortunately, unbeknownst to most of us, there are many large corporations and individuals that use unfair business practices or fraudulent schemes to mislead and lie to customers, clients and investors in order to make money and maximize profits based on our trust and at our expense. If you invested in a Life Partners investment product, such as Life Settlements, and believe you were taken advantage of or was the victim of unfair and fraudulent business practices, then you should contact our team of experienced and knowledgable class action lawyers to discuss your case at 1-888-450-4456.

Gray and White Law is currently offering free consultations to any investor who believes he/she may be a victim of Life Partners Holdings Inc., an investment company that arranged for investors to buy several billion dollars worth of life-insurance policies or Life Settlements from their original owners. Based on recent media reports that indicate Life Partners’ methodology or valuation may be faulty or improper, and because investors trusted Life Partners to be credible and honest, you may be entitled to compensation for your investment in their policy. If you think you overpaid for a Life Partners Holdings investment, then you should contact our securities fraud lawyers who specialize in class action lawsuits immediately to protect your legal rights.

Gray and White Law has helped many Kentucky families whose loved ones were victims of securities fraud, consumer fraud, deceiving investment schemes, and fraudulent business practices. For decades, our class action attorneys have successfully obtained millions of dollars on behalf of clients and members of class action lawsuits, locally in Louisville and across the nation. We are ready to learn about your situation and how a sales representative of Life Partners deceived you into investing in life insurance policyholder(s) based on crucial information relating to the estimated life expectancy of the insured individual(s). Simply take a moment to contact us for your free legal consultation (24/7) either by confidential e-mail or toll-free call at 1-888-450-4456.