Life Partners Holdings, Inc. has been cleared of allegations by Texas state securities officials that it did not register life settlement transactions as securities under state law.
The court declined to stop Life Partners Holdings from selling its life insurance settlement policies, as well as rejecting a demand from the State Securities Board to halt payment of any dividends to Life Partner shareholders.
The court also rejected the state demands to appoint a receiver to take charge of Life Partners.
However, the judge didn’t dismiss the state’s lawsuit — and the state immediately said it would appeal the judge’s decision.
The decision by Judge Stephen Yelenosky in Travis County District Court late Tuesday cleared the way for Life Partners to pay a 10-cent dividend it had declared on its common stock. The court made the ruling after a two-day evidentiary hearing.
The state attorney general’s office issued a statement indicating it would appeal the judge’s decision, and the decision did not affect an enforcement action filed in federal court by the Securities and Exchange Commission in early January.
A lawyer in Texas familiar with the cases explained that the SEC action deals with securities fraud allegedly conducted by a public company. The state action alleges that Life Partners committed fraud by not registering the life settlements it sold as securities under Texas law.
The Texas state court judge dismissed the state allegations from the bench. A written decision will be filed later.
In a statement, Brian Pardo, Life Partners CEO, expressed “gratitude” for the integrity of the judicial system.
“The Attorney General brought this case knowing that both a Federal Court of Appeals and a Texas appeals court have ruled specifically that Life Partners’ life settlements are not securities,” Pardo said.
“The Attorney General has issued inflammatory press releases and used this suit as a vehicle to make baseless claims of fraud, insolvency and a lack of regulation,” Pardo insisted in his statement.
“None of that is true. We have been in business for 20 years. We have facilitated over 143,000 purchaser transactions involving over 6,500 policies totaling over $3 billion in face value,” he added.
But Greg Abbott, the state attorney general, issued a statement through his office which said, “Life Partners is charged with defrauding thousands of investors in violation of the Texas Securities Act.”