An investor in Life Partners Holdings securities claims in a federal lawsuit that the Waco-based company misled its customers about its financial well-being and deceived them into buying life insurance policies at artificially inflated prices.
Gerald A. Taylor, of Clark County, Nev., is seeking class-action status for his lawsuit, filed last week in Waco’s U.S. District Court.
The lawsuit cites Life Partners Holdings Inc.; Brian Pardo, its CEO and board chairman; Nina Piper, its former chief financial officer; David M. Martin, its CFO; and Scott Peden, company president and legal counsel.
Taylor’s lawsuit was filed less than two weeks after Life Partners confirmed the Securities and Exchange Commission is investigating the way the company determines life expectancies of people who sell their life insurance policies.
Pardo, Martin and Peden did not return phone calls to Life Partners’ offices Tuesday.
Life Partners spokeswoman Andrea Atwell said company officials are aware that a “group of lawyers is trying to get a class-action lawsuit together.”
But she declined comment on the lawsuit, saying the company had not been served and it is unfamiliar with the allegations.
Life Partners, 204 Woodhew Drive, deals in the secondary market for life insurance known as life settlements or viatical settlements. It buys policies from old or terminally ill people and markets them to investors.
Investors make payments on the policies and receive the insurance proceeds. If a person lives longer than expected, investors pay more in premiums and see delays in getting a return on their investments.
The suit was filed on Taylor’s behalf by Waco attorney Bill Johnston; attorneys from the Nix, Patterson & Roach firm, of Irving; attorneys with Barroway, Topaz, Kessler, Meltzer and Check, of Radnor, Penn.; and Hamilton Lindley of the Goldfarb, Branham firm, of Dallas.
“We think it is a strong case and we are talking to people who have lost money,” said former Waco attorney Derek Gilliland of the Nix law firm.
The Journal investigated how Life Partners sells life insurance policies to investors, saying that Life Partners “has made large fees from its life insurance transactions while often significantly underestimating the life expectancies of people whose policies its customers invest in.”
The suit also mentions a Jan. 20, 2010, story in the Journal about the SEC investigation.
The story said that “as part of its probe, the SEC’s enforcement division has been seeking experts to analyze the way Life Partners has estimated the life expectancies of the insured individuals.”
The Journal said data Life Partners filed with the Texas Department of Insurance showed that, for policies sold from 2002-05, insured people outlived Life Partners’ projections about 90 percent of the time.
Taylor claims in his lawsuit that Life Partners “failed to disclose material adverse facts about the company’s financial well-being, business relationships and prospects.”
Life Partners did not disclose “that it routinely had used unrealistic life-expectancy data that produced inaccurately short life-expectancy reports, which were subsequently used to sell life settlement policies to investors.”
The suit also contends Life Partners “purposely concealed the historical rate in which individuals insured by life settlement policies sold by Life Partners had lived past the life-expectancy rates previously provided to investors, such that the company’s investors were unable to assess the accuracy or reliability of such data.”
By underestimating the life-expectancy data to investors, Life Partners was able to charge “substantially larger fees” to broker the policies, according to the lawsuit.
The suit also claims the company’s financial statements “were false and misleading.”
The lawsuit seeks class-action status, which would mean, pending approval from U.S. District Judge Walter S. Smith Jr., that other investors “similarly situated” could join as plaintiffs.
Life Partners said it has sold 6,400 policies with a face value of $2.8 billion to 27,000 clients since it was founded in 1991. The company is publicly traded, but it won a federal appeals court ruling 15 years ago that said its life settlements were not subject to federal securities laws.
Customers sue Twin Peaks over deadly shootout
Two patrons who were eating lunch at the Twin Peaks restaurant when the deadly May 17 shootout broke out have filed a lawsuit against Twin Peaks, its subsidiaries and a former franchise holder.
The plaintiffs are identified only as M.K.H. and C.R.H. in the lawsuit, which says only that they are Texas residents.
The suit, filed last week in Waco’s 170th State District Court, names Peaktastic Beverage, Front Burner Restaurants, Twin Restaurant Investment Co. and Chalik Mitra Group as defendants.
A message from the Tribune-Herald to Twin Peaks corporate offices in Dallas was not returned Monday.
The suit, filed on the plaintiffs’ behalf by Waco attorney Hamilton Lindley, seeks unspecified damages for medical care for injuries suffered during the incident, physical pain and suffering, loss of earnings and mental anguish.
“In defiance of repeated law enforcement warnings, Twin Peaks invited rival biker gangs to its Waco restaurant on May 17, 2015,” the lawsuit says. “Predictably, these rival gangs — fueled by Twin Peaks alcohol — began fighting.”
The plaintiffs, who are not affiliated with a biker group, according to the lawsuit, were having lunch there when the shooting started.
“When the bullets began flying, plaintiffs were trapped inside defendants’ property and forced to find cover to avoid being shot,” the suit alleges. “Plaintiffs suffered personal injuries, including cuts, bruises and abrasions. Plaintiffs also suffered damage to their personal property and significant emotional trauma.”
The lawsuit said the shootout was “the crescendo to a symphony of violence at Twin Peaks.”
Waco police reported disturbances there between biker groups on Feb. 2 and Feb. 15, the suit claims.
“On May 1, 2015, the Texas Department of Public Safety issued a warning of conflict between rival motorcycle gangs — the same gangs that Twin Peaks reserved space for at its Waco location,” according to the lawsuit.
Police warned Twin Peaks officials in Waco and Dallas about the May 17 biker gathering, the suit says.
“Twin Peaks ignored law enforcement’s concern. On the morning of May 17, concerned Waco police arrived at Twin Peaks to protect patrons. But they were asked to leave the Waco location by management,” the suit alleges. “Despite being awash in violent events and direct warnings by law enforcement, Twin Peaks proceeded to have this biker gathering, with reservation for 300 people.”
The suit alleges Twin Peaks is negligent for failing to hire adequate security, for failing to heed law enforcement warnings and failing to stop serving alcohol while allowing weapons in the restaurant.