A Texas district court succeeded in restoring 69% of funds placed by investors in a life settlement firm accused of fraud last year, according to a state regulator.
The court was able to secure the return of about $19 million to state employees and others who had put some $30 million into investments sold by National Life Settlements L.L.C., Texas Securities Board president Denise Voigt Crawford said in testimony to the United States Financial Crisis Inquiry Commission.
The case, which had brought by the State Securities Board and the Texas attorney general, charged that the life settlement investments sold by NLS, Houston, were fraudulent and sold by unregistered brokers and agents.
"Many of the 320 investors were teachers and state retirees who turned over retirement funds to the company, which sold promissory notes that were purportedly backed by life insurance policies," Crawford told the commission, a 10-member panel charged by Congress with investigating the causes of the economy's recent breakdown.
"It is very rare to have such a large recovery in a securities receivership case, so I'm pleased to report that investors were able recoup a significant part of their losses," Crawford told the commission.
According to Crawford, the case was uncovered after an investigator for the Texas board read an advertisement by NLS that included a solicitation for employment and an offer of large bonuses. One of the board investigators then applied for a sales position with the firm to get an inside view of how it was structuring the investments, she said.
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