Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 1 of 32

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Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 18 of 32associated allegations must be rejected. See Kurtzman v. Compaq Computer Corp., No. H-99-779, 2002 U.S. Dist. LEXIS 26569, at *10-18, 38-50 (S.D. Tex. Mar. 30, 2002)(rejectingscienter claims based on general references to reports where there were no allegations about theactual contents of the reports, whether defendants read the reports, or whether the information inthe reports had been reported to defendants).One of the Complaint's more puzzling allegations is the contention that LPHI "disclosedin its periodic filings with the Commission that it advanced money to pay premium payments ...when the amounts escrowed for premiums was depleted.,,38 Plaintiff then uses this publicdisclosure to support its allegation that Defendants knew the LEs were short. 39 If, in fact,Plaintiff is correct, and the disclosure of the "steady" increase in premium payments imputedknowledge to Defendants of the LE underestimation, then, because that increase was publiclydisclosed, the public, in tum, was provided with the knowledge of the LE underestimation, andPlaintiffs fraud claim vanishes. See, e.g., In re Sun Microsystems" Inc. Sec. Litig., No. C 8920351 RP A, 1990 U.S. Dist. LEXIS 18740, at * 7 (N.D. Cal. Aug. 20, 1990)("If the materialcontaining the alleged omission actually discloses the facts that plaintiffs claim are absent thereis obviously no omission.").Plaintiff next alleges that a "consultant" retained by a "firm" in 2006 recommended in a"report" that LPI "track, analyze and validate" Dr. Cassidy's LEs.40This allegation fails tosatisfy Rule 9(b) because it fails to specifically identify the "firm," the "report," to whom thereport was provided, and when the report was provided. Further, and more importantly, theallegation fails to support any basis for the imputation of knowledge of the allegedunderestimation of LEs - indeed Plaintiff makes no claim that the report so found. Thus, this38 Compl., ~52.39 Compl., ~52.40 Compl., ~53.DEFENDANTS LIFE PARTNERS HOLDINGS, INC. AND R. SCOTT PEDEN'S MOTION TO DISMISSAND BRIEF IN SUPPORT - Page 12
Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 19 of 32allegation must also be disregarded.Finally, Plaintiff relies on a complaint filed by, and a subsequent settlement LPI madewith, the Colorado Securities Division as apparent support for Defendants' knowledge of theunderestimation of LEs.41Importantly, Plaintiff does not allege that the Colorado action wasbased, in whole or in part, on Dr. Cassidy's LEs. Indeed, the only allegation regarding LEscontained in the Colorado Securities Commission's 17-page complaint is the one quoted byPlaintiff. 42It is impossible to discern from this one statement whether the allegation related inany way to Dr. Cassidy's LEs. Notably, the publicly-available settlement of the Colorado casecontained no findings or admissions regarding the accuracy or inaccuracy of Dr. Cassidy's LEs,as the settlement only related to the claim by Colorado that the life settlements were securitiesunder Colorado law. 43Thus, Plaintiffs reliance on the Colorado case is yet another red herring,having no bearing on this case or on Defendants' alleged knowledge of the assertedunderestimation of LEs.c. Plaintiff's Allegation that LPHI Artificially Inflated its Revenues DefiesCommon Sense.Perhaps the most obvious example of Plaintiff s attempt to bootstrap a business practicescase against a private company not engaged in the sale of securities into a federal securities fraudcase against the public parent company is the following allegation:Using Cassidy's materially short LEs enabled Life Partners to artificially inflateits revenues, as the Company extracted significantly more money frominvestors than it would have had it priced life settlements based on appropriately41 CompI., ~55.42 See CompI., ~55 (quoting from the Colorado complaint the following allegation: "the high frequency rate inwhich viators outlived life expectancies predicted by Life Partners."). See First Amended Complaint for Injunctiveand Other Relief filed in Joseph v. Life Partners, Inc., Case No. 2007 CV 5218, ("Colorado Action"), a true andcorrect copy of which is included in the Appendix as Exhibit E.43 See Stipulation for Permanent Injunction and Other Relief, filed in the Colorado Action, and attached order ofPermanent Injunction and Other Relief, a true and correct copy of which is included in the Appendix as Exhibit F.Conveniently omitted from the Complaint is a reference to the Stipulation that resolved the action, wherein theColorado Securities Commission represented that "no investor has alleged or asserted any impropriety againstDefendants with respect to their investment . . . ."DEFENDANTS LIFE PARTNERS HOLDINGS, INC. AND R. SCOTT PEDEN'S MOTION TO DISMISSAND BRIEF IN SUPPORT - Page 13
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Case 1:12-cv-00033-JRN Document 12 Filed 02/29/12 Page 1 of 32

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