FORT WORTH (CN) - Life settlement provider Life Partners Holdings has filed for bankruptcy protection as it appeals the SEC's $46 million judgment against it.
The Waco, Texas-based financial services company filed for Chapter 11 protection in bankruptcy court on Tuesday.
The SEC sued the company in Austin Federal Court in January 2012, claiming certain officers made $11.8 million by selling their stock at prices inflated by the company's systematic underestimation of life expectancy "to generate revenues."
Although a federal judge ruled that the SEC failed to prove certain fraud allegations at trial, a federal jury's $46 million judgment against the company and two officers remained.
Citing the SEC's motion to appoint a receiver for the company in the civil case, Life Partners Holdings decided to file for bankruptcy to avoid the receiver's possibly liquidating the company and "preventing the effective prosecution of the appeal." CEO Brian Pardo said the company's board of directors agreed the filing was the "appropriate course of action."
"We continue to believe in life settlements as a valuable and attractive asset class and we remain committed to continuing to serve our clients," Pardo said in a statement Wednesday. "In fact, during 2014, we saw over $71 million paid out to thousands of [subsidiary Life Partners Inc.] clients and over $200 million in payouts since 2001. And, we expect to see additional payouts in the coming years. This was a strategic move intended to protect the value of the company and its shareholders from the damaging litigation which we believe would otherwise have destroyed all shareholder value."
Life Partners Holdings will appoint a chief restructuring officer to run its reorganization. The company will provide more details of its Chapter 11 plan at a later date, which may include "the sale of one or more subsidiaries," with bankruptcy court approval.
Subsidiary LPI engages in the life insurance secondary market, also known as "life settlements." LPI says it has completed more than 162,000 transactions in connection with the purchase of 6,500 policies worth $3.2 billion in face value.
Life Partners Holdings lists more than $20.3 million in assets and more than $7.4 million in debts.
It is represented by J. Robert Forshey with Forshey Prostok in Fort Worth.
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