Plaintiffs Fourth Amended Petition - Texas State Securities Board

HCF DEFENDANTS’
SALES OF ILLEGAL SECURITIES ISSUED BY
DEFENDANT HILL COUNTRY FUNDING
46. On February 7, 2008 and February 21, 2008, Defendant Gray formed Defendant Hill
Country Funding-Texas, and Defendant Hill Country Funding-Nevada , respectively,
and with the participation of Defendant Rogers, began issuing investments in Defendant
Hill Country Funding’s own bonded life settlement contracts variously referred to as the
“Re-Insured Re-Sale Insurance Policy” Program or the “Re-Sale Insurance Policy”
Program (hereinafter referred to as the “HCF Bonded Program”). Investments in this
program were purportedly secured by a mortality bond issued by various bonding
companies, including Provident Capital Indemnity, Ltd. out of Costa Rica (“Provident
Capital”), Internazionale SpA out of Genoa, Italy (“Internazionale”), Union Credit
Finanziaria SpA out of Torino, Italy (“Union Credit”), and Condor Guaranty, Inc. out of
Freeport, Grand Bahama, Bahamas (“Condor”).
47. The basic structure of the HCF Bonded Program was to use investor funds to purchase resale
life insurance policies by promising investors a guaranteed return payable from
either the proceeds of the re-sale life insurance policies upon the death of the insureds or
from the bond carrier. Basic components and representations of the HCF Bonded
Program include:
A. Investors were told their funds would be used to purchase re-sale life insurance
policies and a mortality bond purportedly guaranteed investors’ return. Investors
would become “irrevocable beneficiaries” on the insurance carrier’s permanent
records.
B. Once enough investor funds were received for a particular re-sale life insurance
policy, Defendant Hill Country Funding would complete the purchase of the
policy, change ownership of the policy to Defendant Hill Country Funding and
assign irrevocable beneficiary interests to the investors and secured the mortality
bond.
C. The re-sale life insurance policies offered in the HCF Bonded Program were
accompanied with life expectancies of the insureds which predicted the date the
insureds would die and further set the date of maturity for the investment.
D. Investors were told investments in the HCF Bonded Program were purportedly
secured with a mortality bond issued by at least one of the aforementioned
bonding companies that guaranteed the promised return to investors should the
insured live past the stated life expectancy.
E. Based on the purported mortality bond, Defendant Hill Country Funding told
investors from the outset the lowest annualized yield for their participation.
However, investors were further told that should the insured pass away before life
expectancy, their net annualized yield would be higher.
State of Texas v. Retirement Value, LLC, et al.
Plaintiff’s Fourth Amended Verified Petition Page 12 of 57