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

underestimated LEs constituted a material trend impacting the Company’s revenues, as requiredby the federal securities laws.11. Pardo, Peden and Martin’s awareness of the LE fraud is evidenced by, amongother things, their efforts to conceal it. During quarterly conference calls with shareholders andinvestors in 2007 and 2008, Pardo lied about Life Partners’ track record as delivering “doubledigit”returns to investors. When Pardo touted these returns, he knew that the purported “doubledigit”returns did not include approximately 2,900 life settlements for which the insured hadalready outlived Life Partners’ LE. In fact, Pardo knew that the double-digit returns wereimpossible to achieve even under a “best case scenario”—i.e., were all the insureds who hadreached their life expectancy estimate to die as of the dates of his statements during theconference calls.12. Peden further concealed Life Partners’ LE fraud by misrepresenting thatCassidy’s methodology was consistent with industry practices. In particular, in October andNovember 2008, Peden misrepresented to an investor, as well as a member of the network ofindependent buyers’ agents that Life Partners uses to identify investors, that Cassidy used the2008 Valuation Basic Table (“VBT”) in rendering LEs for use by Life Partners. When he madethese false statements, Peden knew that Cassidy used a census table, not the VBT. And, unlikethe VBT, the census table that Cassidy used to estimate LEs contains data that was not limited topersons who had been underwritten for life insurance, but rather included the entire U.S.population. Cassidy’s use of the census table deviated from industry practices for life settlementunderwriting.13. Finally, in August 2010, Peden and Martin, in an effort to cover up the LE fraudand convince Life Partners’ auditor that Cassidy’s LEs were reliable, provided the auditor with aSEC v. Life Partners Holding, Inc., et al. Page 5Complaint