Judge Axes Part Of SEC Win Against Life Partners
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Law360, Los Angeles (March 12, 2014, 10:12 PM ET) -- A Texas federal judge on Wednesday reversed a jury's finding that Life Partners Holdings Inc. and two of its executives are liable for fraud in a U.S. Securities and Exchange Commission lawsuit alleging the company artificially inflated stock prices, ruling that there was insufficient evidence presented at trial to support that conclusion.
U.S. District Judge James R. Nowlin granted the defendants' motion for judgment as a matter of law on the SEC's fraud claim under Section 17 of the Securities Act of 1933 but denied the motion as to the jury's finding of liability on three other counts.
"Life Partners is very pleased with the court's ruling," said Life Partners' attorney, Elizabeth L. Yingling. "While the SEC had touted the jury's verdict on the very narrow Section 17 claim as a finding of fraud, the court's ruling confirmed that there was no evidence to support such a finding."
A federal jury on Feb. 4 returned a mixed verdict in the case, exonerating the company, CEO Brian Pardo and general counsel and Secretary R. Scott Peden on eight of the 12 counts the SEC alleged they violated as part of a scheme to entice investors by understating the life expectancies of policyholders whose insurance policies it sold, including insider trading and misleading authorities.
The defendants subsequently moved to dismiss as a matter of law the counts on which the jury found in favor of the SEC, citing a lack of evidence presented by the SEC at trial.
With respect to the Section 17 claim, Life Partners said the SEC failed to provide any evidence that the company or its executives had made misleading omissions regarding its revenue recognition accounting policies in public filings. Judge Nowlin agreed, writing in Wednesday's order that he couldn't locate a single piece of evidence in the trial record to support the jury's conclusion that the defendants violated Section 17 by misleading investors in January or February 2007.
"That is simply too little to go on to support a finding against defendants on plaintiff's very narrow Section 17 allegation," Judge Nowlin said.
However, the judge found there was sufficient evidence to support the jury's findings that the defendants filed false or misleading reports with the SEC between January 2007 and November 2011 and that Pardo falsely certified regulatory reports.
Based in Waco, Texas, Life Partners is among the largest companies on the secondary life insurance market, which allows investors to purchase policies from their original holders in exchange for a lump-sum payment. The investors then continue to pay the policy's premium in order to collect the payment when the person it covers dies.
An SEC representative was not immediately available for comment late Wednesday.
The Life Partners parties were represented by Elizabeth L. Yingling, Laura J. O’Rourke, Will R. Daugherty and Meghan E. George of Baker & McKenzie LLP, J. Pete Laney of the Law Offices of J. Pete Laney, S. Cass Weiland and Robert A. Hawkins of Patton Boggs LLP and Jay Ethington of the Law Firm of Jay Ethington.
The case is SEC v. Life Partners Holdings Inc. et al., case number 1:12-cv-00033, in the U.S. District Court for the Western District of Texas.
--Additional reporting by Dan Ivers and Jess Davis. Editing by Christine Chun
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