Plaintiffs Fourth Amended Petition - Texas State Securities Board

86. The James Defendants used the understated life expectancies provided by Midwest
Medical in order to inflate the price of the life insurance policies that it sold to Retirement
Value. This scheme ensured that they were able to generate significant profits. For
example, the James Defendants bought policy number JP5580006 for $39,000 and then
sold it to Retirement Value a few days later for $390,000. They bought policy number
AU0896899 for $80,000 and then sold it to Retirement Value for $900,000 30 days later.
87. The James Defendants and Beste knew that the use of a different firm to provide more
accurate life expectancies of insureds would preclude the James Defendants from earning
300% to 1,000% mark-up on policies sold. As referenced earlier in this petition, other
firms estimated the life expectancies of insureds at or around the same time that Midwest
Medical estimated the life expectancies of the same insureds. The evaluations by other
firms were 2.5 times longer than those estimated by Midwest Medical. Ronald James
ultimately told Gray that “the math won’t work with any other LE provider,” or words to
that effect.
88. Beginning in September 2009 and continuing to March 2010, the James Defendants paid
Beste approximately $600,000, which equaled 1.5% of the face value of each life
insurance policy sold to Retirement Value. Retirement Value also paid an additional
$50,000 in consulting fees to Beste for his work in designing and/or implementing the
business model used by the company.
89. The James Defendants realized at least $13.8 million in profit derived from the sale of
thirty-nine life insurance policies to Retirement Value. Moreover, the James Defendants
may have earned as much as $20 million from the sale of these and other life insurance
policies to Retirement Value.
ADDITIONAL FACTS IN SUPPORT OF CLAIMS AGAINST DEFENDANTS
HILL COUNTRY FUNDING AND WENDY ROGERS
90. After the State filed the Retirement Value Lawsuit on May 5, 2010, the State learned
many of the following facts, which made it necessary to seek injunctive relief against
Defendants Hill Country Funding and Rogers, as well as the disgorgement of economic
benefits from Rogers and the appointment of a Receiver for Defendant Hill Country
Funding to conserve and protect the assets for the benefit of its investors:
A. Defendant HCF-Nevada entered into “Loan Agreements” and “Supplemental
Agreements” with investors wherein it obligated itself to pay investors the
principal amount loaned to HCF-Nevada plus interest upon the maturity thereof.
B. Defendant HCF-Nevada’s “Loan Agreement” provides that an investor may
declare the unpaid principal balance, earned interest, and any other amounts owed
on the agreement immediately due if Defendant HCF-Nevada defaults in the
performance of an obligation in any instrument safeguarding or collateral to the
agreement.
State of Texas v. Retirement Value, LLC, et al.
Plaintiff’s Fourth Amended Verified Petition Page 24 of 57