LPHI started the asset class - fractional life settlement.
In 1994, SEC brought its first "fraud" suit against LPI, by 1996, SEC was thoroughly defeated after appeal in the Fifth Circuit. A case law was born with the name of LPI. The SEC was bitter, apparently; and kept a close eye on LPI since. From the Fifth Circuit, I'd like to quote a few things that are still relevant today:
"43 ...... once the transaction closes, the investors do not look to the efforts of others for their profits because the only variable affecting profits is the timing of the insured's death, which is outside of LPI's and Sterling's control."
"48 ... ...Third, LPI is quite specific in warning its clients that viatical transactions are not liquid assets. There is no established market for the resale of such policies. They should be purchased only by persons who are willing and able to hold the policy until it matures.... Life Partners' present practice is to assist in the resale of policies purchased by its clients [but] ... [t]here is no guarantee that any policy can be resold, or that resale, if it occurs, will be at any given price."
"50 LPI's promise of help in arranging for the resale of a policy is not an adequate basis upon which to conclude that the fortunes of the investors are tied to the efforts of the company, much less that their profits derive 'predominantly' from those efforts."
"60 We see here no 'venture' associated with the ownership of an insurance contract from which one's profit depends entirely upon the mortality of the insured--just as the First Circuit saw no "enterprise" associated with holding land for investment in Rodriguez, 990 F.2d at 10. Nor is the combination of LPI's pre-purchase services as a finder-promoter and its largely ministerial post-purchase services enough to establish that the investors' profits flow predominantly from the efforts of others."
"62 In this case it is the length of the insured's life that is of overwhelming importance to the value of the viatical settlements marketed by LPI. As a result, the SEC is unable to show that the promoter's efforts have a predominant influence upon investors' profits; ... ..."
To be cont'd
The funny thing about case law is that it is ever-evolving. 1996 (SEC v. LPI) was only the beginning of the question of whether or not fractionals are securities. In 2005 the federal appeals court for the eleventh circuit directly rejected the findings in SEC v. LPI, and since that time no federal appeals court has ever upheld the findings in SEC v. LPI. Any prudent attorney in the world would advise their client to follow the mst recent case precedent, which in this case is that fractional life settlements are securities as far as federal law is concerned. The case is SEC v. Mutual Benefits, case No. 04-14850.
By the way, the principals of Mutual Benefits are in jail now. They were accused of taking industry standard life expectancies and instead using internally artificially shortened life expectancies to sell fractional interests to retail investors. This may be a good read for you.
Here are some fun excerpts from the civil case”
“MBC contends that the district court erred in its conclusion that MBC’s viatical settlement contracts qualify as “investment contracts” under the Securities Acts.
MBC argues that we should adopt the reasoning of the court in Securities & Exchange Commission v. Life Partners, Inc., 87 F.3d 536 (D.C. Cir. 1996), which concluded that viatical settlement contracts are not “investment contracts” because they depend entirely upon the mortality of the insured, rather than the post-urchase managerial or entrepreneurial efforts of the viatical settlement provider.”
“The Securities Act of 1933 and the Securities Exchange Act of 1934 both define the term “security” as including the catch-all term “investment contracts.””
“The only real dispute concerns whether the investor’s expectation of profits is based “solely on the efforts of the promoter or a third party.” MBC, relying on Securities & Exchange Commission v. Life Partners, Inc., 87 F.3d 536 (D.C. Cir. 1996), argues that this element is “a necessarily forward-looking inquiry.” See Appellants’ Br. at 13. MBC asks that we make a distinction between a promoter’s activities prior to his having use of an investor’s money and his activities after he has use of the money. This distinction was indeed made in Life Partners, a case involving facts similar to those presented here.”
“Because no significant post-purchase activity took place here, MBC argues, the expectation of profits is not based “solely on the efforts of the promoter or a third party.””
“Significant pre-purchase managerial activities undertaken to insure the success of the investment may also satisfy Howey. See id. Indeed, investment schemes may often involve a combination of both pre- and post-purchase managerial activities, both of which should be taken into consideration in determining whether Howey’s test is satisfied. Courts have found investment contracts where significant efforts included the pre-purchase exercise of expertise by promoters in selecting or negotiating the price of an asset in which investors would acquire an interest."
So, none of you rats had anything to say about the Fifth Circuit findings?
I thought so.
All you need was to show those liars some truth and facts, they are shut up. Oh, those pretentious "experts"! They're nothing more than a bunch of liars and pretenders.
SeekingAlpha will let anyone who knows English to write anything as publication for the site. Just b/c you wrote something for that site, it doesn't make you look better; but rather, it only validates that you're really nothing more than an ordinary investor, like everyone in the big crowd.
It's a disgrace to put out that much lies in writing! Especially for those who had the never to use their real names! Shameless.
Yeah, yeah ,yeah. OJ is innocent too!!
Respond to the question about the use of 2 LEs (Cassidy and the those that the rest of the industry accepts) and maybe you will have some credibility.
Which one of you rats would like to counter the findings by the Fifth Circuit?
I pointed out that the TX AG case was very important, b/c it validates those findings of the Fifth Circuit.
The argument of Cassidy LE is nothing more than a trivial element in the "big picture". Yes, one could try to paint a very seemingly "dark" image of LPI by using the seemingly inadequate Cassidy LE. But that argument is so much less important than those bears claimed.
The business has not changed. The pricing of the services provided by LPI may have go up, but that doesn't make LPI's business a fraud in anyway.
Also, these findings buy the Fifth Circuit should serve to remind investors that, even if they formed a class, their main claim against LPI will be futile, b/c LPI doesn't control the mortality of the others, on which is what the investors of life settlements depend. Thus, LPI has had a very strong case from on-set.
Once again, we hear from a pumper. This is what the pumpers, likely paid or working for a distributor, have always done before bad news hits:
1) Deny that the business model consists of taking a policy priced by industry standard LEs and then changing it (poof!) to a new LE up to 50% shorter by the stroke of a pen. There is not disclosure of this purported business model to clients. This is the basis of why the government regulators want to put LPI out of business.
2) Deny that part of the business model is based upon selling people hope, specifically promising double digit returns, and evidenced by the company CEO stating this in two forums that can be linked off the LPHI website.
3) Attack the messenger, in this case the plaintiffs in the civil suits (including the SEC), instead of defending their arguments when they know their argument is worthless. For example, pumpers first said the SEC found nothing in their long investigation. Then the pumpers said the Wells notice meant the SEC found nothing and would never materialize. After the Wells notice came the pumpers said LPHI beat it! When the SEC decided to pursue a case against LPHI, the pumpers said it would be dismissed. When the judge refused to dismiss the case the pumpers continue to attack the SEC. This current pumper uses the faulty logic that the SEC could just shut LPI or LPHI down by the stroke of a pen, when in fact the SEC is involved with civil and not criminal issues. This pumper denies the plaintiffs in the other civil suits have a case even after their class action suits have been certified.
4) The pumpers have no valid reason why there is currently a dividend higher than the most recent revenues. They never mention that the dividend primarily enriches one person.
5) The pumpers misrepresent what has happened in the past. Our current pumper denies LPHI no longer does fractionalized business in CA and CO. He points out that LPI owns policies in CO when they have been (mostly) sold to raise cash.
6) The pumpers deny the true total return fractionalized investors are getting, since they have no valid method to calculate those returns. They deny the premium forwarding and resales are a result of poor returns.
7) The pumpers never, ever, state the number of resales and why the resales are necessary.
8) The pumpers love finding a scapegoat, and in this case it is the shorts. What they fail to mention is that shorts have made money. It is hard not to make money when a stock is down 60% YTD and much, much more from the high. The pumpers also deny that the short positions have dropped to around 830,000 shares.
9) The pumpers always have a price target, in this case $10, but never have any math explaining why the stock belongs there. They conveniently forget this company has red ink and by their own admission will not see it reverse unless the SEC suit is settled favorably.
10) The pumpers always deny there is a need for full disclosre of fees and commissions. They rationalize that full disclosure is not necessary.
11) The pumpers never mention anything that can possibly invoke Howey. For example, the pumpers will not mention the number of resales, why the premium forwarding is necessary, or who is helping and promoting resales (and for what purpose).
12) The pumpers never, ever mention the declining cash position.
13) The pumpers never, ever mention the dismal and embarrassing results of the two Regent portfolios advised by LPI.
15) The pumpers never, even mention that the Life Partners margins are far higher than anyone else reported in the industry, despite having no technological or business advantage that would allow for such higher margins. THEREFORE, THE HIGHER MARGINS MUST RESULT FROM A LOWER LE BEING ATTACHED TO EACH POLICY PURCHASED BEFORE RESELLING THE POLICY TO FRACTIONAL INVESTORS. THERE IS NO OTHER EXPLANATION.
h_grant_h you are so very wrong!!!!!!! There has NEVER BEEN any decision rendered by the Fifth Circuit concerning Life Partners or LPHI or any of its ilk. You should also examine the life insurance policies that are being sold today as compared to those that were sold in the 1990's. The life settlement policies are primarily universal life policies (as discussed in the Texas AG's case against LPHI). These policies have choices that the promoter is making as to how much in premiums to pay. LPHI has also been advancing substantial amounts of premiums when some investors fail to pay their share when the policies go over their LEs. This amounts to managing the investment. You should also look at a decision rendered by the 11th circuit (I think it is, anyone the one that's over Florida). The 11th Circuit took a good look at the prior DC Circuit court decision and roundly discounted the analysis there and found that a company similar to LPI and LPHI was in fact selling a security. These are the facts.
Over two years ago, thanks to the WSJ, the Life Settlement Report, the Colorado Securities Commisioner, and the SEC, everyone caught on the the fact LPHI was buying life settlements on the open market at one life expectancy, then having Dr. Cassidy effectively divide that life expectancy in half to raise the returns to "double digits", then selling the fractional shares to investors without making any disclosure of the longer independent life expectancy, the purchase price of the policy or LPHI fees.
Would you buy a fractional share in a llife insurance policy from someone who does something like this? At a meager one closing a month based upon the last 10K, most people are saying no.
Would you buy the common stock from someone who does something like this? With the share price is down over 85%, most people are also saying no.
It's just that simple. The fraud got exposed and this is the expected aftermath playing itself out.
History of LPI is very important, b/c it showed that LPI had always found a way to defend itself successfully.
Remember the pretentious writer, Harry Becker, of SeekingAlpha once claimed, before the TX AG case was thrown out by the court, that LPI was "done"?
The bears so wished.
But did you read the testimony by Cassdy? Why was that the SEC lawyer tried so hard to establish a case of "fraud" in the pricing of the contracts? The SEC is still trying to establish something they failed to do so in 1996. Kind of funny to me.
Why do you keep posting information already known by the posters on this board or information no one really cares about in order to pump the stock? What is the bad news ahead? It is inevitable after a pumper starts working. How about an answer to my question about the 2 LEs? Ooops, there isn't a credible answer , I forgot.
Also, please continue your meaningless banter somwhere else and quit pretending you know something others don't!!