LPHI Shareholders Lose $480 Million
Today, Life Partners Holdings announced that U.S. Senior Federal Judge James Knowlin
ruled in favor of Life Partners and its officers, Brian Pardo & Scott Peden, that NO FRAUD
WHATSOEVER was committed on any of the bogus allegations alleged by the SEC. The
favorable ruling of the issues relating to revenue recognition (which has given the SEC a
HUGE DEFEAT) gave Life Partners a clean sweep win over the SEC in what amounted to an
important case for the SEC. This is the 2nd time in 23 years Life Partners has taken the SEC
all the way to trial, and embarrassed the SEC with unanimous clean sweeps! There are a lot
of reporters, namely the Wall Street Journal and the Communications Director from the SEC
eating a lot of crow this morning after issuing a misleading headline claiming victory back in
early February knowing the SEC had not presented any evidence on these baseless charges.
Now, a year-long investigation reveals shocking evidence that the SEC covered up the truth
related to the real cause of LPHI’s stock plummeting from $30/share to $2/share. This
deception cost shareholders an astounding 480 million dollars.
Rather than protect shareholders, the SEC initiated a phony investigation into LPHI which
lasted over 3 years and cost the company millions in legal fees and loss of credibility for that
length of time.
Brian Pardo and the LPHI Board of Directors had to defend the case all the way to a jury trial
because they knew the company was innocent. At trial the SEC did not produce a single
piece of evidence to substantiate the bogus charges they fabricated. This fabrication was a
diversion from what the SEC knew was the real cause of the shareholder losses. They hid
this for more than 3 years until indisputable evidence finally surfaced that proved the
shareholder loss was caused by illegal short selling by Options Express, a subsidiary of
Charles Schwab, and other major Wall Street firms!
The SEC thought they could drag the investigation out long enough to force LPHI to go out of
business. When that did not happen, the SEC was in the precarious position of being forced
to go to trial with Brian Pardo, knowing they had no evidence! Their only prayer was that by
some miracle they could dupe the jury with complicated lingo and a so-called expert from
New Jersey into believing LPHI and Brian Pardo had committed securities fraud by causing
the company to understate projected life expectancies of senior policy holders.
A jury of eight hard-working citizens from the Austin, Texas, area saw through the smoke and
mirrors of complicated legal drivel the SEC tried to use. Elizabeth Yingling, lead LPHI
attorney with Baker McKenzie, presented the case very simply so the jury understood the life
settlement transaction. They were able to demonstrate that the transaction serves both the
insured and the investor in a WIN-WIN relationship.
The jury found that Life Partners used reasonable medical opinions and the resulting
projected life expectancies were reasonable. These projections are used to establish a
reasonable period of time to escrow prepaid premiums for each individual investor. The
unique LPI transaction was underwritten to be profitable on each insured who lived to their
early 90’s or longer in many cases.
The verdict for LPI was the death blow for the SEC’s fraudulent case. The finger they had in
the dike to plug the hole was suddenly overwhelmed by a roaring river as the floodgates of
deception and cover-up were about to be in the headlines when the jury delivered the
The truth is that the SEC knew about the illegal naked short selling of LPHI stock by multiple
brokerage houses. They concealed this for more than 3 years from Brian Pardo, LPHI, and,
most importantly, the shareholders the agency is sworn to protect!
Now, with this information about to be revealed to the world on the heels of an embarrassing
loss to Mark Cuban and others, the SEC is forced to confront the reality of widespread
corruption within their Agency. This corruption stretches from the Fort Worth office to the
highest management levels in Washington, D.C.
With multiple administration scandals plaguing our government, another Federal Agency
scandal now arises, and the cover-up by the SEC is front and center! This scandal alone has
cost shareholders of LPHI $480 million in losses.
Brian Pardo, chairman of LPHI, knew in 2009 that LPHI’s stock was being illegally
manipulated downward through a practice called naked short selling. This was being done by
greed-driven investors who were betting the stock will go down. They refused to cover their
short positions with actual stock within 3 days as required by law! This created the equivalent
of counterfeit shares and produced the illegal gains they stole from unsuspecting
Brian Pardo, through his market sources, knew this illegal practice occurs through a
deceptive, manipulative maneuver known as “resets” in the industry. If left unchecked, this
illegal practice can eventually drive the stock price to $0. This is exactly what happened to
Bear Sterns & Lehman Brothers in the 2008 crash and put them out of business!
Brian Pardo filed a formal complaint in 2009 (attachment enclosed) with FINRA & the SEC
pleading for their help since this illegal practice was detrimentally affecting LPHI
shareholders. These formal complaints were not only ignored but not even acknowledged by
As it turns out, through documents obtained through the FOIA (Freedom of Information Act)
from the SEC, the SEC in 2010 not only knew about this illegal practice taking place with
LPHI stock, they pursued legal action against some who were practicing it.
The SEC, in administrative court, prosecuted, obtained a conviction, and fined ($2 million)
Options Express, a subsidiary of Charles Schwab, for illegal naked short selling of LPHI stock
through the practice of resets. This shocking revelation was only discovered by Brian Pardo,
through his attorney Gary Aguirre, on Christmas Eve of 2013. This is the mere tip of the
proverbial iceberg since multiple brokerage/clearing houses, such as Wedbush Securities
and others, have also been guilty of the same illegal practice related to LPHI stock only on a
much larger scale.
Background to this incredible story
In September 2010, Mark Maremont& Lisa Scism, writers for the Wall Street Journal,
presented themselves as writing an article about life settlements in general and wanted to
include Life Partners as the architect of this asset class. Like most reporters who have ulterior
motives, they deceived Brian Pardo and Scott Peden after spending almost a full day at LPI
On December 20, 2010, the WSJ ran a front page article with the headline “Odds Skewed
Against Investors.” Four more negative articles followed in the WSJ over the next 5 weeks.
The articles were very negative, full of innuendos and half-truths. The articles were very
carefully crafted with perhaps 10% of the truth. They did this presumably to avoid being sued
for libel. Ninety percent of the articles were lies and deceptions designed to accomplish the
mission of those who are actually responsible who were using pawns like Maremont and
Scism to carry out their nefarious short selling scheme.
It is almost unbelievable that five articles in six weeks appeared in the WSJ about a little
micro-cap company in Waco, Texas. This small company had never had a claim of an
investor losing money on an entire portfolio when the policies were held to maturity.
In the 2008 economic crash, not one of LPI’s 24,000 investors, with over $1.8 billion
invested, lost a single nickel of their investment when the markets crashed. LPI now
publishes a 12 year audited ROI document (Cole & Reed) reporting returns to over
5500 investors on 330 matured policies with an 18.73% average annual compounded ROI.
These last three facts alone should be enough to give one insight as to what the motivation
was for so much negative publicity about this little company in Waco. No one had ever heard
of Maremont (heretofore a respected journalist) authoring five articles in such a short span
about a company where no investor had lost money on their entire portfolio in 23 years!
Maremont’s entire premise revolved around viatical settlements (AIDS patients) living past
their life expectancies (LE) and investors not getting what they expected. Because of
improved medicines in the late 1990’s, many LE’s on viatical settlements did go longer than
expected; however, many did not. Investors still did not lose money! As it turned out, the
audited ROI on the viatical settlements alone to investors was a 15.8% average annual
compounded ROI thru 2012.
Who wouldn’t have liked to have had that kind of return on an IRA and avoided the
2001 & 2008 crashes? This is verified by the independent accounting firm of Cole & Reed
and submitted into evidence as part of the recent SEC trial and is undisputed by the SEC.
Throughout Maremont’s story he very carefully crafted the wording and storyline to make the
misrepresentation of long life expectancies also apply to the senior life settlements. He
implied that investors should beware because there was a disreputable doctor in Reno with
As it turns out, the SEC dropped Dr. Cassidy from its suit. The Texas Department of
Insurance certified Dr. Cassidy as a life expectancy provider expert. This totally repudiated
the claims Maremont made. In fact, Dr. Cassidy graduated from the University of Texas
Medical School and did his internship in Oncology at the prestigious MD Anderson Research
Hospital in Houston, Texas. He has had an Oncology practice at Washoe Medical Center in
Reno, Nevada, for thirty years.
The State of Texas and the SEC accepted Dr. Cassidy as a life expectancy expert. Did
Maremont ever go back and actually write the truth? Did he retract his libelous out- right lies
about the doctor? Of course not. That would be the professionally and morally right thing to
do. If Maremont did something like that, he would presumably have to answer to those who
are actually directing his whole negative publicity campaign. Perhaps he is just as corrupt as
As it turns out, through a jury trial in Federal Court, there was a unanimous verdict in favor of
Life Partners! LPI DID NOT manipulate short LE estimates and “over charge” for policies as
Maremont so convincingly stated through his misleading articles! What’s even worse: the
SEC covered up what they knew to be the truth of illegal naked short selling. The SEC’s
failure to disclose this catastrophe to LPHI and its shareholders and their inability or
unwillingness to protect public shareholders was the direct cause of LPHI shareholders losing
One huge problem for morally corrupt people, who print lies and negatively slanted innuendos
with misleading stories, and federal regulatory authorities, who cover up the truth and actually
defraud the shareholders they are sworn to protect, is that men like Brian Pardo and Mark
Cuban are not afraid to die. They made their fortunes the old fashioned way from nothing.
They are not afraid to work hard, take chances, and put their own money at risk. It is
inconceivable to think they are going to be wrongly accused by the SEC and their pawns in
the media and be extorted for settlement money!
No matter how much it costs and how long it takes, as a matter of principle, Brian and Mark
are going to take it all the way to a jury trial. Why? Because they still believe there are
enough hard working decent Americans, who, if they see the facts, evidence and testimony
will rule on the side of truth. Brian Pardo has done it to the SEC twice. Check the sources and
see how many in a lifetime have taken the SEC to trial twice and won both times.
Because of Brian Pardo’s prior experience, he knew back in 2009 that LPHI stock was being
illegally manipulated. Mr. Pardo had the wherewithal to employ Gary Aguirre, a securities
expert and former SEC Inspector General attorney. Mr. Aguirre began tracking LPHI trading,
and it became obvious that illegal naked short selling was taking place.
In 2009, Mr. Pardo filed a formal complaint (attachment enclosed) with FINRA and the SEC
pleading for help related to the illegal naked shorting of LPHI stock. These complaints were
not even acknowledged by FINRA or the SEC. Over time the illegal naked short selling got
worse and more widespread. Complaints were still ignored by authorities.
Then came the WSJ and SEC’s false allegations designed to cover up the truth. It took three
years, millions in legal fees, and a federal court trial to disprove the lies told by Maremont, the
WSJ and the SEC. All the while irreparable damage ($480 million) was done to LPHI
shareholders as the illegal naked short sellers had a field day playing off the negative articles
repeatedly put out by Maremont and the WSJ.
No one dreamed Life Partners would still be in business in 2012. Again, the adversaries
grossly underestimated the resolve of three crusaders like Brian Pardo, Gary Aguirre &
Gary Aguirre filed a plethora of FOIA requests with the SEC for specific documents related to
LPHI which were ignored for 14 months. Then, in Dec. 2013, Mr. Aguirre received the
document from the SEC which conclusively proved (attachment enclosed) that, going back to
2010, the SEC, in administrative court, had prosecuted, convicted & fined ($2 million) Options
Express for illegally shorting LPHI stock and others through a manipulating technique known
It turns out the SEC knew all along the truth about how and why LPHI shareholders were
actually harmed and tried to cover it up with a bogus charge. They had no evidence and
wasted millions of taxpayers’ dollars in this massive attempt to cover their actions!
When Mr. Pardo was on the witness stand during the trial, he revealed this news about illegal
naked short selling and the leaking of inside information about the investigation to the WSJ
and Maremont. This undisputed testimony is now a part of the court transcript and on the
record in this case.
In the closing argument the SEC attorney mocked Mr. Pardo’s testimony about the
mysterious unnamed short-sellers involved in this illegal activity. While the trial attorney
mocked, the head of the Ft. Worth division of the SEC sat in the audience and watched with
consternation. The finger that had been containing the leak suddenly became an opening of
the flood gates which needed sandbags to contain. The SEC’s only hope of not being
exposed was by a prayer and miracle that the jury, confused by the complicated language in
instructions, would ignore the evidence of the trial and rule in favor of the SEC.
The last hope of the SEC containing a 3-year-long cover-up came crashing down when the
jury ruled unanimously in favor of Life Partners on all of the key issues of the case.
Very foolishly, the person in charge of SEC communication put out a misleading headline
claiming victory in the trial. The SEC knowingly had dropped the technical Section 17(a)
issues (related to revenue recognition) in the pretrial conference and submitted no evidence
and no witnesses regarding these issues during the trial. The SEC did not even object when
Elizabeth Yingling made the motion to dismiss them as a matter of law. The judge nodded
and stated he would rule within 2 weeks.
The powers that be, at the SEC, now know they have a publicity nightmare on their hands
right on the heels of Mark Cuban publically humiliating them. This is in addition to several
other recent trial losses of a significant nature!
Does anyone have any idea what Life Partners is sitting on with the release of these
documents? The SEC has known for years about this illegal activity and covered it up while
they were supposed to be protecting LPHI shareholders. They instead ignored Brian Pardo’s
formal complaints and watched LPHI shareholders lose $480 million which could have been
There are brokerage/clearing houses like Wedbush and others who illegally manipulated
LPHI stock, as well as many others, which make Options Express look like amateurs. LPHI’s
intention is to collect these losses for the shareholders!
How do you think the American public will welcome another cover-up like this on the heels of
all the scandals in the headlines with the current administration? If we don’t take a stand on
corruption and over-zealous, out-of-control agencies like the SEC, shame on us! It is our
children and grandchildren who will suffer. We have to fight to keep America great!
Brian Pardo expects the same publisher who published his first two books (The
Commission just came out in print this month and it is already available on Amazon, Barnes
& Noble and Ebooks!) to publish his first non-fiction work about the SEC’s failed pursuit of
LPI, “Junk Yard Dog”. The book, which is complete, is in the editing phase and is expected to
be published this summer.
For comment, verification, or interview for future stories contact Mike Tolleson,
Communication Project Coordinator for Brian Pardo, at 214-212-6547 or