Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
Feb. 05--A federal jury found Life Partners Holdings, a Waco firm that sells insurance death benefits to investors, guilty of misstating revenue but determined that it did not commit fraud and its top officers did not engage in insider trading as the Fort Worth office of the Securities and Exchange Commission had alleged.
CEO Brian Pardo contended that the mixed verdict "exonerated" his company, but the SEC claimed victory, too.
Life Partners' stock (ticker: LPHI) jumped 16 percent to $2.98 on Tuesday after the Austin jury's verdict was announced, the company said in a news release. Jurors began deliberating Friday and reached their conclusions Monday evening, the Waco Tribune-Herald reported.
The Waco company requested that the U.S. District Court set aside the judgment on misstatement of revenue, claiming that the SEC at one point indicated it wasn't pursuing such claims. But on Tuesday, an SEC attorney described the revenue recognition issue as a "lead" claim, The Wall Street Journal reported.
"We're very pleased the jury found Life Partners and its executives liable for knowingly or recklessly defrauding shareholders, filing false SEC filings, and keeping inaccurate books and records," Andrew Ceresney, director of the SEC's division of enforcement, said in a statement Tuesday.
"We're also pleased the jury found Pardo ... responsible for falsely certifying that the company's public filings were accurate when they were not," Ceresney went on.
None of this seemed to faze Pardo, a feisty septuagenarian who served in the Vietnam War as a helicopter gunner.
"We are extremely pleased that the jury has exonerated our company, our business practices and the life settlement asset class itself," he said in a statement released by Life Partners. "We provide a win-win transaction for everyone involved and, when put to the test, the jury could see the SEC's allegations were not true."
The SEC suit alleged that Life Partners, Pardo and general counsel Scott Peden illegally benefited by providing investors with misleading life-expectancy estimates received from a Nevada oncologist with no actuarial training. The Nevada doctor's estimates often predicted a much shorter life span for the insured, boosting the value of the life insurance policies in investors' eyes.
But Life Partners asserted, "The life expectancies were not underestimated when taken as a whole."
It was the second go-round for the SEC, which lost a 2007 case when it alleged that Life Partners was selling securities. The court upheld the firm's contention that it was trading in insurance policies, not securities.
At a 2012 investors meeting in Fort Worth, Pardo claimed that Life Partners consistently prevailed in court, adding that such lawsuits actually help the company.
"Every time they put out a press release," Pardo said of the SEC, "we get $2 million, $3 million in new business."
Barry Shlachter, 817-390-7718 Twitter: @bshlachter
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