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

More documents

Recommendations

Info

spreadsheet of the 300 “most recent” maturities. Notably, the spreadsheet included both viaticaland life settlement policies dating back to fiscal year 2000, but it excluded 1,230 policies forwhich insureds had outlived Cassidy LEs. Peden and Martin knew that consideration of these1,230 policies by the auditor would have been essential to an accurate assessment of Cassidy’strack record, and they intentionally excluded these policies to mislead the auditor.14. Between February 2007 and January 2009, Pardo and Peden sold approximately$11.5 million and $300,000, respectively, of Life Partners common stock based on material, nonpublicinformation that the Company’s stock price was dependant on its practice ofsystematically using materially short LEs to generate revenues.15. During the same time period that the Defendants were misleading shareholdersabout risks to Life Partners’ business and investor returns, they also engaged in an accountingfraud. From at least fiscal year 2007 through the third quarter of fiscal year 2011, Life Partnersmaterially misstated its net income by prematurely recognizing revenue from life settlementtransactions that had not yet been completed. Additionally, Pardo, Peden and Martin knew orwere reckless in not knowing that it was Life Partners’ practice to conceal improper revenuerecognition practices from it the Company’s auditor by backdating transactional documents forthe life settlements the Company brokered.16. From at least fiscal year 2009, Defendants also misstated net income by failing toappropriately impair life settlement policies owned by Life Partners. Despite their awarenessthat the Company’s LEs were materially short, Defendants continued to use those LEs to valuepolicies that the Company held on its own books, thereby artificially inflating the value of thepolicies in Life Partners’ financial statements.SEC v. Life Partners Holding, Inc., et al. Page 6Complaint
17. As a result of Life Partners’ practice of prematurely recognizing revenue andfailing to appropriately impair its own investments in life settlements, Defendants materiallymisstated net income from at least fiscal year 2007 through the third quarter of fiscal year 2011.On November 22, 2011, Life Partners restated its financial results for fiscal years 2007 through2010, and for the first three quarters of fiscal year 2011, to correct errors related to revenuerecognition, impairment of investments in owned policies, accrued liabilities, and the related taximpact, which the Company admitted had been previously “incorrectly accounted for under[GAAP].”18. The Commission, in the interest of protecting the public from such fraudulentactivities, brings this civil securities law enforcement action seeking a permanent injunctionagainst Life Partners, Pardo, Peden, and Martin, enjoining them from committing or aiding andabetting further violations of the federal securities laws. The Commission also seeks an orderbarring the individual Defendants from serving as officers or directors of a public Company, andimposing disgorgement of ill-gotten gains, plus prejudgment interest, and civil monetarypenalties as allowed by law. The Commission further seeks an order requiring Pardo and Martinto reimburse Life Partners for bonuses and profits realized from sales of Life Partners securitiesduring time periods for which the Company had materially misstated its financial results.JURISDICTION AND VENUE19. This Court has jurisdiction over this action under Sections 20(b), and 22(a) of theSecurities Act of 1933 (“Securities Act”) [15 U.S.C. §77u(a)] and Section 27 of the SecuritiesExchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§78u(e) and 78aa].SEC v. Life Partners Holding, Inc., et al. Page 7Complaint
Page 1: UNITED STATES DISTRICT COURT FOR TH
Page 9 and 10: 24. R. Scott Peden, age 47, has ser
Page 11: 32. Pardo hired Cassidy without con
Page 14 and 15: insurance. In fact, contrary to the
Page 16 and 17: E. Defendants Knew that Cassidy’s
Page 18 and 19: oker life settlement interests were
Page 20 and 21: 57. Contrary to Life Partners’ mi
Page 22 and 23: THE ACCOUNTING FRAUD 64. In fiscal
Page 24 and 25: agreement to sell the policy for an
Page 26 and 27: 76. Under GAAP, revenue can be reco
Page 28 and 29: therefore misleading. Based on the
Page 30 and 31: 88. Pardo, Peden, and Martin were a
Page 32 and 33: E. Life Partners Backdated Certain
Page 34 and 35: though all three of its internal cr
Page 36 and 37: Company made it a practice to keep
Page 38 and 39: 118. In a letter to the Company dat
Page 40 and 41: that affects our assumptions about
Page 42 and 43: ecommended that “[a] formal analy
Page 44 and 45: 136. Life Partners’ 2011 Form 10-
Page 46 and 47: 11/3/2008 $36.67 2,866 $105,096.221
Page 48 and 49: through 145.SECOND CLAIM FOR RELIEF
Page 50 and 51: through 145.THIRD CLAIM FOR RELIEFV
Page 52 and 53: 171. By reason of the foregoing, Pa
Page 54 and 55: through 145.SEVENTH CLAIM FOR RELIE
Page 56 and 57:
e) ordering Defendants to disgorge
show all

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

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?