Life Partners Holdings, Inc., Brian D. Pardo, R. Scott Peden, and ...

32. Pardo hired Cassidy without conducting any meaningful due diligence onCassidy’s qualifications to serve as a life expectancy underwriter. At the time Pardo hired him,Cassidy had no experience rendering LEs. Cassidy has never had any actuarial training, and, asof February 8, 2011, had never taken any courses or received any professional guidance orinstruction on life expectancy analysis. He had never attended a life settlement conference orresearched the methodology used by other underwriters in the life settlement industry.33. Initially, Life Partners paid Cassidy $500 for each policy Life Partnerssuccessfully brokered using Cassidy’s LE. In or around February 2008, Life Partners beganpaying Cassidy a $15,000 per month retainer on top of the $500 fee he received for every policyLife Partners brokered using his LE. Since Kelly’s funeral in 1999, Life Partners has sent all ofits retail life expectancy work to Cassidy. In the ten-plus years he has worked for Life Partners,Cassidy has never evaluated his track record on LEs or the reliability of his methodology, whichhe has never modified.C. Cassidy’s Methodology Results in Short Life Expectancy Estimates34. Cassidy described his methodology in letters to the Company dated March 2002(“2002 Letter”) and May 2009 (“2009 Letter”) (collectively, the “Letters”). The purpose of theLetters was to provide information to Life Partners’ auditor about Cassidy’s methodology.35. According to the 2009 letter, Cassidy was rendering LEs using a census tablepublished by the U.S. Department of Health and Human Services (“HHS”). The HHS table is acensus table that addresses life expectancies for the entire U.S. population. In contrast, mortalitytables used by actuaries in the life settlement industry address mortality rates for a select portionof the population who have been underwritten for insurance. LE estimates based on dataprovided in the HHS table are typically shorter than LE estimates based on data in tables tailoredSEC v. Life Partners Holding, Inc., et al. Page 11Complaint