[18] In 2011, a securities fraud class action lawsuit was filed on behalf of current and former shareholders Life Partners Holdings, Inc.
The lawsuit alleged that LPHI violated US federal securities laws misleading its investors by issuing false financial statements and reports.
However, this allegation was criticized by the Court as part of its 34-page order denying certification as a class action: Proof only of results does not address these factors.
In the earlier ruling, the jury had found in favor of the SEC's fraud claim under Section 17(a) relating to the company's revenue recognition policies.
The United States District Court for the Western District of Texas, Austin Division agreed with Life Partners that there was no evidence to support the revenue recognition claims for the period of time in question and ordered that judgment be entered in favor of Life Partners, Mr. Pardo and Mr. Peden on that issue.
The Court let stand the jury's findings against Life Partners relating to bookkeeping, reporting and certification by the CEO of the company's financial statements, none of which involve fraud or knowingly or recklessly misleading shareholders.
[22] The lawsuit, filed in Illinois by California attorney Gary Aguirre, whose practice focuses on market manipulation, asks the Court for an order preventing the Schwab subsidiary from creating and selling shares of Life Partners Holdings' stock which were not authorized by the company.
The action also asks the Court for protection from securities fraud, deceptive business practices and civil conspiracy arising from the unlawful issuance of the counterfeit shares.
The lawsuit is based on findings in an administrative proceeding by the U.S. Securities and Exchange Commission against optionsXpress and the other defendants which concluded that optionsXpress, its chief financial officer, and one of its biggest customers committed securities fraud by engaging in the sales of hundreds of millions of dollars in counterfeit-phantom stock passed off as the genuine stock of 25 public companies, including almost $5.5 million of counterfeit-phantom stock of Life Partners Holdings, Inc.[23] The company is continuing to investigate other persons and entities who may have engaged in counterfeiting shares of Life Partners Holdings, Inc.[citation needed] A federal judge ordered Life Partners Holdings Inc and two top executives to pay $46.9 million for misleading investors about the core aspects of its business.
[24] "In ordering this significant monetary relief, the court recognized the egregious nature of their misconduct, noting that the defendants engaged in 'serious violations' of the securities laws, that they 'deprived the investing public of the information it needed to make a fully informed decision about whether to invest in Life Partners," said Andrew Ceresney, SEC's enforcement director.
[25] On December 9, 2016, a Joint Plan of Reorganization sponsored by H. Thomas Moran, II the Chapter 11 trustee, and the Official Unsecured Creditors' Committee became effective.
Going forward, we project that investors will receive roughly 90 percent of their invested capital over time as a result of the plan we were able to put in place—depending on the option they elected.