Life Partners Holdings, Inc. has won the right to a full evidentiary hearing before a Texas state agency next month as it continues to battle allegations by state and federal regulators that could ultimately result in its takeover.
Life Partners, Waco, Texas, is one the world’s oldest companies engaged in the life settlement business and one of the most active.
In general, the legal actions by state and federal regulators allege that the company and its officials made various misrepresentations in the sale of the life settlements, including misrepresentations about the life expectancies of the insureds.
Under the latest agreement, the Texas attorney general on behalf of the state Securities Board had agreed to defer a state court hearing on the Attorney General’s request for a temporary injunction and appointment of receivership until Sept. 24.
The state was denied a motion in state Court on Aug. 17 seeking a temporary restraining order preventing Life Partners from doing business and the appointment of receiver based generally on allegations that life settlements are securities under state law. The suit was filed a day earlier.
The state alleged Aug. 16 in state court that Life Partners’ sale of life settlements was fraudulent and constituted unlawful sales of unregistered securities. The state suit also alleges misrepresentations about the life expectancies of the insureds.
The deferral permits a full-day evidentiary hearing on the Attorney General’s request for a temporary injunction and appointment of a receiver and Life Partners’ counter-contention that its life settlement transactions are not securities.
The immediate issue involved in the various legal proceedings is whether Life Partners can pay a previously-declared quarterly dividend of 10 cents a share.
The dividend was supposed to be paid Sept. 15, but payment won’t be made until after a temporary restraining order issued by a Texas state court is dissolved.
Life Partners’ officials said the court hearing will likely determine whether and when the dividend can be paid. If Life Partners is unable to pay the dividend before Oct. 23, 2012, it must fix a new record date to pay a dividend, the company said.
The state action followed the filing of a civil action against Life Partners Jan. 3 by the Securities and Exchange Commission.
The SEC suit was filed in federal court in Waco, Texas, but the case has since been moved to federal court in Austin, Tex.