Los Angeles-based Pacific West Capital Group Inc. and its owner Andrew B. Calhoun IV have been charged by the Securities and Exchange Commission with fraud in the sale of “life settlement” investments.
Life settlements are securities structured around when life insurance policies “mature” after the insured individual dies and benefits are paid. Life settlement investors purchase an interest in a life insurance policy and in exchange receive a share of the death benefit.
The SEC’s complaint alleged that since 2004, Pacific West and Mr. Calhoun, a Beverly Hills-based life insurance agent, raised nearly $100 million from life settlement investors. Since at least 2012, Pacific West and Mr. Calhoun allegedly defrauded investors by using proceeds from the sale of new life settlements to continue funding life settlement investments sold years earlier. According to the SEC, Pacific West and Mr. Calhoun did not disclose this practice to investors and undertook it to make life settlement investments appear successful when, in fact, Pacific West had used up the primary reserves to pay premiums on those policies.