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Life Partners’ bankruptcy trustee announces fraud findings

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(Bloomberg) — The bankruptcy trustee for Life Partners Holdings Inc. is seeking to control the proceeds of life insurance policies held by its customers after his own investigation revealed a number of new ways he said the company committed fraud.

See also: Life Partners files for bankruptcy after $46 million ruling

The firm used a variety of methods to execute a “wide-ranging scheme” to defraud investors in so-called life settlements, trustee H. Thomas Moran said in court papers filed Wednesday in Fort Worth, Texas.

Investors in Life Partners buy shares of insurance contracts from policyholders — seniors age 65 and older who no longer need, want or can afford their policies — and collect the death benefit when the insured person dies. Artificially shortened life-expectancy figures supplied by the company convinced investors that their returns would be greater, Moran said.

Life Partners also misrepresented when policies had lapsed, charged massive undisclosed fees and misrepresented the company’s business practices in order to dodge securities regulations, according to the trustee.

He said he also found “egregious and continuous self- dealing by insiders.”

SEC suit

Life Partners filed for bankruptcy in January seeking to avoid a $46 million Securities and Exchange Commission fraud judgment against it and key officers, including the former chief executive.

The trustee, who was appointed to oversee the bankruptcy, is seeking control of the death benefits of insurance policies that were previously paid to two units of the company, “so that those amounts may be preserved for the benefit of all stakeholders.”

The move to control policy proceeds would affect 3,600 life insurance policies with an aggregate face value over $2.4 billion that the Waco, Texas-based company held as of its bankruptcy filing.

The case is In re Life Partners Holdings Inc., 15-40289, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).

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