A bankrupt seller of stakes in life insurance policies didn’t just mislead investors with early death estimates but it also deceived them about how much they would get when the policyholder died, Bloomberg reported yesterday. A trustee found that Life Partners Holdings Inc. employed a “wide-ranging scheme” to cheat investors in so-called life settlements, adding new allegations about the company, which has already been the target of a Securities and Exchange Commission lawsuit. Life settlements are investments in which terminally ill or elderly persons sell their life-insurance policies for cash, and an intermediary (e.g., Life Partners) sells a stake in the policy to investors. When the insured person dies, the investor gets the death benefit as a return on the investment. The trustee requested court approval to control the payout of death benefits, manage premiums and take other measures to unwind the fraud in chapter 11. Life Partners lied about when policies lapsed, charged massive undisclosed fees and deceived investors about its practices in order to dodge securities regulations — all of which came on top of “egregious and continuous self-dealing by insiders,” the trustee said.
