Life Partners' Ch. 11 Reorganization Plan ConfirmedBy Alex Wolf
Law360, New York (November 2, 2016, 2:55 PM EDT) -- A Texas bankruptcy judge on Tuesday confirmed a Chapter 11 reorganization plan for Life Partners Holdings Inc. that was collectively filed by the debtor’s court-appointed trustee and an official committee of unsecured creditors, offering relief to thousands of investors, the trustee announced.
U.S. Bankruptcy Judge Russell F. Nelms confirmed a third amended plan filed by trustee H. Thomas Moran II and the official committee of unsecured creditors after a five-week contested hearing, Moran said.
The approved arrangement, which was opposed by specified interest holders that won’t receive distributions under the plan and others who are not members of a rescission settlement subclass, will create two trusts: one to oversee the liquidation of the policy portfolio and distribute proceeds and another to pursue further litigation on behalf of investors and creditors.
The plan gives life settlement adviser Vida Capital, which previously filed its own competing plan, the right to act as the policy servicer and investor account administrator in exchange for a $4 million cash consideration. Vida has also agreed to provide exit financing to facilitate the process.
Moran’s firm, Thompson & Knight LLP, said that while more than $1.4 billion of investor money remains at risk, the plan offers relief for more than 22,000 investors and preserves a $2.4 billion portfolio of life insurance policies.
"Today's order is a tremendous victory for the investors we have been working so hard to protect," Moran said in a statement. "We are delighted to have joined with the committee in obtaining confirmation of a plan which projects a substantial recovery for our investors — 90 percent of invested capital on average over time."
Life Partners for years sold investments in life insurance settlements that matured when a person dies. However, Life Partners was accused of fraud related to the sale of these so-called “death bonds.”
The company filed for bankruptcy in 2015 in response to a $47 million jury verdict obtained by the U.S. Securities and Exchange Commission. At the time of Life Partners' bankruptcy, $1.4 billion in investor funds were at risk, according to the trustee.
In a report released earlier this year, Moran said Life Partners and its former CEO Brian Pardo engaged in one of the largest frauds in Texas history. Moran said Pardo and Life Partners trumpeted these death bond investments utilizing life expectancy figures that were far shorter than they actually were, deceiving investors, many of them elderly, who were led to believe they would receive double-digit returns.
In the meantime, Life Partners charged fees and premiums that investors had to pay in order to keep their investment active, according to the trustee.
The Texas bankruptcy court in May approved a $1 billion settlement to resolve class action litigation alleging that thousands of investors were duped into purchasing the life insurance investments.
Moran is represented by David M. Bennett, Richard B. Roper and Katharine Battaia Clark of Thompson & Knight LLP.
The case is In re: Life Partners Holdings Inc., case number 4:15-bk-40289, in the U.S. Bankruptcy Court for the Northern District of Texas.
--Editing by Kelly Duncan.
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