Life Partners promised big returns on their investment strategy. Life Partners was in the viatical settlements business. They would purchase the life insurance policies from individuals who really needed the money. In return, Life Partners would receive the death benefit when the individual passed away. Through the years, investors were courted by Life Partners to invest in these life insurance policies. When people would die, investors would get paid.
Life Partners promised big returns and no risk. Financial Advisors would sell these investments as a sure thing. Well the combination of easy money and big returns typically don’t end well. Mainly because you don’t find big returns and easy money partnering up together unless it is a fraud.
The SEC finally won a lawsuit against Life Partners for a grand total of 42 million. The company filed bankruptcy and founder Brian Pardo lost his company. A trustee now runs what is left of the company.
The trustee recently released a report stating “I have concluded that Life Partners devised and executed a wide-ranging scheme to defraud its investors. He charged massive, undisclosed fees and commissions, the total amount of which in many cases exceeded the purchase price of the policies themselves.” The list of improprieties is a mile long.
The saddest thing is the billions of dollars that investors have poured into this company. Investors are hoping that they get some of their money back. According to the Dallas Morning News, it is highly unlikely that anyone will walk away and be made whole. For years, Brian Pardo made investors continue to pay very high fees as they waited for their policies to pay out. If you didn’t pay the fees, you would automatically lose everything.
The DMN article stated that “the trustee gave the sad news that payouts of death benefits will come to a stop.”
The real question is this one. If this is indeed true, why isn’t Brian Pardo sharing a cell with Bernie Madoff and other individuals who have created these financial schemes and defrauded investors? The SEC has put people away for far less.
The difficult aspect of this case comes down to what a Life Partners investor does next. Investors aren’t necessarily getting good guidance and advice. The information is limited and what is known is complicated to interpret. Do investors hold out that they might get something back or stop paying the high fees and declare the money lost for good? This is a tough situation for so many.