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I believe the days of growth and profitability for Life Partners Holdings, Inc. (LPHI) are forever gone. My target price is $1.50 per share by August 2011 and $0.25 per share by July 2012.

Overview

Serial con man Charles Ponzi was forever immortalized for his version of a scheme that was based upon using the money from new investors to pay for the unobtainable returns expected by prior investors. I believe it is probable that Life Partners Holding, Inc. engages in a scheme where the money from new investors is used to pay off old investors. This scheme to date is off the books and has allowed LPHI to give the appearance of a stronger balance sheet. Although it may be a big stretch to consider their scheme a “Ponzi,” it must eventually come to an end.

“Catch-22” is the phrase popularized by Joseph Heller’s novel. Webster’s Dictionary defines Catch-22 as a dilemma from which there is no escape because of mutually conflicting or dependent conditions. I believe the best stocks to short are involved with accounting fraud, stock fraud and/or Catch-22 dilemmas. LPI’s guilt or innocence of fraud is something the courts will decide. Given their numerous law suits, the legal proceeding could take years to complete. Whether LPI does or does not have many Catch-22 dilemmas is a matter for investors to decide.

During the past two weeks, the stock price of LPHI has plummeted since the company announced in a May 9, 2011 8-K filing that they received a Wells notice from the SEC. The 8-K states:

On May 9, 2011, we received a “Wells notice” from the staff of the SEC stating that the staff will recommend that the SEC bring a civil injunctive action against us and two of our directors and executive officers, Brian D. Pardo and R.Scott Peden, for possible violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(a) of the Securities Exchange Act of 1934, and certain rules thereunder. We understand at present that the primary basis for the proposed civil action relates to our knowledge of and disclosures about the accuracy of the estimates of the life expectancies of settlors.

Making matters worse is LPHI’s inability to file their 10-K on time. LPHI did file a 12b-25 on May 16, 2011 displaying annual—not quarterly—figures for revenue and net income. LPHI has a good reason for hiding their 4th quarter numbers. Disturbing 4th quarter numbers emerge when subtracting the previous nine month numbers found in the 10-Q filed on November 11, 2011. 4Q revenues are off by 60% and net income is only $83,730, less than a penny per share before an expected $8 million impairment. As stated in the LPHI 5/16.2011 12b-25 filing:

…we estimate that we will incur a total impairment charge to investments in policies of approximately $8.0 million. A portion of this charge may be applicable to prior years and we are completing calculations and analysis to determine any amount that may be applicable to previous reporting periods. Until we complete the impairment analysis, we cannot determine the amount allocable to the current fiscal year and the amounts, if any, allocable to prior fiscal years.

I believe the recent Wells notice and horrible 4th quarter numbers are a precursor to a SEC injunctive action and even worse future earnings that will eventually bankrupt the company . I believe the many recent lawsuits filed against the company claiming stock fraud, RICO violations, fiduciary misconduct (effectively keeping two sets of books) and lack of registration will all gain traction in the coming months.1 The stock, despite its recent drop, is trading significantly above its fair market value. I recommend investors stay clear of LPHI, which is a train wreck in progress.

Background

Life Partners Holding, Inc. (LPHI) is the publicly traded holding company for Life Partners, Inc. (LPI). LPI’s main business is buying life insurance policies in the secondary market, and reselling fractional pieces of those policies to “accredited investors” through a MLM-styled network of licensees. Life Partners believes their fractional investments are not subject to registration by the Securities and Exchange Commission based upon the landmark court case SECURITIES AND EXCHANGE COMMISSION, APPELLEE v LIFE PARTNERS INC, AND BRIAN D PARDO, APPELLANTS. Therefore, many licensees selling the LPI fractional products are not registered.

The fractional investors typically invest a lump sum of money in one or more policies. They are led to expect (but not guaranteed) the amount they place in escrow for each policy is generally sufficient to carry the policy until it matures (when the insured dies). I believe most investors expect double digit returns on their investments based upon the graphic sales presentations used by the licensees and the president’s and CEO’s interviews with the press. In Taking Stock interviews with Bloomberg’s Pimm Fox and during the May 14, 2009 NASDAQ Opening Bell (see here), the CEO, Brian Pardo, can be seen and heard discussing “well above market” and “double digit” returns. During the Bloomberg interview, Pardo also says the investor’s initial lump sum investment is designed to carry the policies through maturity.

If the fractional investor’s life insurance policies do not mature when expected, a “premium call” is usually required to keep the policies in force. Therefore, investors may have to pay additional annual premiums on their share of the life insurance above and beyond their initial lump sum investment until the policy matures. In recent years, many LPI policies have not matured when expected. Investors in these policies have had premium calls, placing a financial burden upon them. LPI attempted to resolve this issue by forwarding the premiums for some investors on a discretionary basis. LPI also helped these fractional investors by reselling currently owned fractional interests to new investors, creating another 12% in commissions for the licensee (sales) enterprise.

LPI insists their premium forwarding scheme is discretionary. If the scheme were not discretionary (i.e., promoted to every client), some believe it would violate the Third Prong of Howey (Howey v. SEC), which would require registration. The percentage of clients involved in this premium forwarding program has not been disclosed.

There are several factors used in determining the worth of a life insurance contract in the secondary market. Actuarial experts in life settlements believe the most important factor is the mortality or life expectancy (LE) of the insured. If the LE is correct, the policy will mature when expected. If the LE is too short, it is possible for the investor to lose money. The other factors (premium payments necessary to keep the policy in force, cash value, loans, etc.) are easier to calculate and far more precise than calculating most LEs.

The large multi-million dollar insurance policies LPI purchases are typically marketed with several LEs ordered by the seller’s broker or agent. Sellers (or their representatives) order LEs because they want to estimate the worth of their policies before negotiating with buyers. The most popular LE providers include Fasano & Associates, EMSI, ISC Services and 21st Services. LPI has access to these LEs when bargaining for the policies they purchase. Fractional investors are not shown the LEs from the firms listed above. Instead LPI is accused of putting a new price on the policies using a Reno oncologist as its exclusive LE provider.

Dr. Donald Cassidy was hired by Brian Pardo (the founder and CEO of Life Partners) after they met at the funeral of Cassidy’s former partner who had accidently fallen, injured his head and died of a failed hemorrhage. Dr. Cassidy was deposed during a lawsuit where the State of Colorado accused LPHI of fraudulently selling their investments (Fred J. Joseph, Securities Commissioner for the State of Colorado, Plaintiff, vs. Life Partners Inc.).

In the deposition, Dr. Donald Cassidy claims he does not monitor his results for accuracy and determines life expectancies for LPI on a part time basis. Dr. Cassidy also mentioned that he does not have an actuarial background.

Statistics obtained from the Texas Department of Insurance (TDI) and under the Freedom of Information Act show Dr. Cassidy’s LEs on average are not reflecting the true life expectancy of the insured. The Life Settlements Report and Wall Street Journal published the TDI statistics which show 2/3 of the policy owners are living twice as long as the Cassidy LEs estimated and many are living three times as long.

To date, the statistics show his LEs may be as much as 50% shorter than LEs calculated by the most popular industry providers. In other words, an average LE from Fasano & Associates may be twice as long as the average LE Dr. Cassidy generates. Obviously, LPI can sell their policies to fractional investors for more money and with higher expected returns using LEs that are shorter than the LEs used to acquire the policies. This makes their revenues higher and potentially places their clients unknowingly in a premium call situation.

If the fractional investors are expecting double digit returns, they are likely to be disappointed. LPI takes approximately a 12% fee when they sell pieces of each insurance policy they purchase to their fractional investors. This is before a sales force of independent licensees, through an organized multi-tiered marketing system, takes another 12% in commissions. Combined with LEs from Dr. Cassidy that are so far removed from reality, it is easy to see why so many fractional investors are going into a premium call situation.

This requires LPI to do one of three things: (1) They can forward premiums for disgruntled investors whose lump sum investment did not generate enough cash flow to cover premiums beyond the Dr. Cassidy life expectancy; or (2) They can buy back better performing policies from unhappy investors and sell them to new investors generating new commissions for the licensees; or (3) They can leave the policies alone and let the investors potentially suffer losses.

What does LPI do with the fractional shares of the policies they repurchase from investors who are in a premium call with other policies? They resell them to new investors allowing the licensee enterprise to earn another 12% in total commissions. Therefore, a constant supply of new investors is needed to keep the old policies in force before they mature. LPI needs cash to pay for increasing premium forwarding costs, and they need a stream of new investors to resell the policies that they repurchased.

LPHI is a “one trick pony” stock with CFFO that comes from one product. All one trick pony stocks are customer dependent. Therefore, LPI must have new investors to provide enough cash flow to keep current investors content. Why can’t LPI/LPHI just use their current cash of over $31 million to cover premium forwarding costs? The answer lies in their sales. The bulk of their $2.9 billion of policies--over 80%-- was purchased and flipped during in the last 4 years. These policies have just started to reach their Dr. Cassidy estimated LEs which we know may be 50% too short. The following numbers were extrapolated from LPHI’s 10-K filings:

Percent of Total Business Assuming $1.85 Billion Sold Between 2007 and 2010:

  • FY 2007 $151mm 7%
  • FY 2008 $415mm 18%
  • FY 2009 $694mm 30%
  • FY 2010 $590mm 26%

These policies will start hitting premium calls within the next year assuming the Dr. Cassidy LEs do not improve (and there is nothing to suggest that they will improve). When the bulk of the premium calls begin, will LPI have enough cash to keep forwarding premiums and reselling policies to new investors? I think not!

LPI has recently seen legal and accounting challenges. On Friday, May 13, 2011, LPHI disclosed in an 8-K dated May 9, 2011 that they were served by a Wells notice from the SEC:

On May 9, 2011, we received a "Wells notice" from the staff of the SEC stating that the staff will recommend that the SEC bring a civil injunctive action against us and two of our directors and executive officers, Brian D. Pardo and R. Scott Peden, for possible violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(a) of the Securities Exchange Act of 1934, and certain rules thereunder. We understand at present that the primary basis for the proposed civil action relates to our knowledge of and disclosures about the accuracy of the estimates of the life expectancies of settlors.

The Wells Notice is a very serious matter, since it indicates the SEC staff has already determined that it may recommend the Commission bring civil actions against Life Partners, Scott Peden and Brian Pardo. LPHI will respond to the Wells notice, but we don’t yet know their arguments. Life Partner’s long-time Washington, DC lawyer, Ida Draim of Schulte Roth & Zabel LLP, recently stopped representing them.

On May 16, 2011, LPHI filed a Form 12b-25 (Notification of Late Filing) with the SEC. Form 12(b)-25:

Revenues decreased by $19,410,445, or 17.1%, from $112,996,283 to $93,585,838, primarily due to the decreased number of settlements from 201 to 158, a decrease in the total face value of policies from $590,189,000 to $492,323,743, and a $2.3 million decrease due to increased deferred monitoring costs.

The above discussion of revenues hides the poor 4th quarter results. Annual revenue of $93,585,838 less $83,282,026 (previous nine months) leaves $10,303,812 for the 4th quarter. Operating and administrative costs remained similar to previous periods. This equates to a 60% decline in revenue for the 4th quarter and a severe decline in net income before any impairment charge (the reason for the Form 12b-25 filing). Net income for the year per the Form 12b-25 is $22,862,091. Subtracting $22,778,361 (the nine month net income figure from the last 10-Q), and LPHI netted only $83,720 for the 4th quarter! The numbers should only get worse over time.

Did the entire revenue decline happen evenly throughout the quarter? I believe December was probably a good month until the publication of a negative Wall Street Journal investigative report. Sales likely imploded after the article was published. Monthly numbers are not published and the company is giving no current guidance. I estimate that current monthly revenues are $1,000,000 or less based upon the current negative perception of the Life Partner’s product.

The Form 12b-25 indicates Life Partner’s need for additional time to revalue life settlements they hold for investment purposes (they are from the settlement of a fraud suit with the State of Colorado). Based upon Life Partners 12b-25 filing, Life Partners estimates these policies will be written down by $8 million, representing half their current value. I am not certain the impairment of $8,000,000 is enough. Regardless, this suggests that policies sold to fractional investors may also be improperly valued by a similar percentage.

Is Life Partners Operating a Ponzi Fraud?

There are several similarities to LPI’s scheme and a classic Ponzi fraud:

  • The Advertising of Returns That Are Impossible to Achieve: Many fractional investors were given sales presentations and saw advertising material displaying the potential of “double digit and “above market” returns. Also, LPI’s CEO, Brian Pardo, and President, Scott Peden, made these claims in public and analytical forums. In a classic Ponzi fraud advertised returns are impossible to meet.
  • The Need for New Investors: The health of LPHI’s financial statements is solely dependent upon a constant stream of new investors. LPHI cannot support its dividend (approximately half goes offshore to Gibraltar where the CEO holds his shares) or maintain its balance sheet without the cash flow necessary to forward the premiums for the fractional investors who received a premium call. If the current investors don’t at least breakeven, it is unlikely they will reinvest and LPI will have difficulties finding new investors.
  • Unregistered Securities Sold By Unlicensed Representatives: LPI’s fractional investments are not registered as securities under the 1933 Act. Without registration, there is a lack of disclosure and regulation. LPI does not disclose to their clients the performance of all fractional investments in accordance with GIPS standards (or any other performance presentation standard that I have seen). LPI does not disclose the LEs from providers other than Dr. Cassidy to their fractional investors. LPI does not provide their investors with the verification of coverage documents provided by insurance carriers necessary to see, among other things, the actual premiums required to keep the policies in force.

There are three important differences between the scheme LPI manages and a classic Ponzi fraud:

  1. Ownership of Real Assets: LPI’s fractional investors do indeed own parts of existing life insurance policies that are held in trust. Often times investors in a Ponzi scam place money in fictional investments.
  2. Likely Return of Principal: Most of LPI’s fractional investors can expect a return at some future date. The life insurance contracts they invest in are very likely to pay a death claim. The return may not be close to what the investors expected for the reasons explained above. Indeed, some investors will not receive a positive return due to the premium calls. Nevertheless, most investors will still receive a positive return.
  3. Option to Improve the Investment: LPI can always improve their product by offering full disclosure and by using the standard industry LE providers. Of course, doing so will severely hurt their margins and will place them in a Catch-22 discussed below.

Based upon the fractional investments being backed by real assets, I must conclude Life Partners is not operating a Ponzi scam. They are alleged to operate a different scheme that is dependent upon using artificially short LEs.

Is Life Partners in a Catch-22?

If LPI is not running a Ponzi scheme, then they are certainly in multiple double-bind situations. Similar to Joseph Heller’s “Catch-22”, the company is “damned if they do and damned if they don’t” in situations that include:

Changing the Dr. Donald Cassidy LEs: The average LE calculated by Dr. Donald Cassidy is much shorter than the average LE calculated by recognized professionals in the mortality industry. This use of the shorter Dr. Cassidy LE conveniently allows LPI to earn more fees on every policy sold to fractional investors. The shorter Dr. Cassidy LE also allows LPI to advertise double digit return potential to investors despite approximately 24% of every fractional investment being investment spent on fees and commissions. LPI recently received a Wells letter from the SEC. In a May 9, 2011 8-K, the company said the Wells letter was issued in regards to their

[...]knowledge of and disclosures about the accuracy of the estimates of the life expectancies of settlers.

Should LPI keep using Dr. Cassidy as their exclusive life expectancy provider an injunctive action will likely be recommended by the SEC. Should LPHI replace Dr. Cassidy with the standard mortality providers, it will be a de facto admission that their LEs are 50% too short. This will help the plaintiff and SEC claims against the company. Therefore, Life Partners is in a Catch-22 situation, damned if they keep or replace Dr. Cassidy!

The Dividend: The reason many investors own LPHI is the dividend, which is currently $0.20 per share for last quarter. Approximately half of the dividend goes offshore to the island of Gibraltar, where a trust holds the CEO’s shares.

Should LPHI stop paying the dividend, the share price will obviously fall. Should LPHI’s board of directors continue to issue high dividends in lieu of setting up reserves (for law suits and premium advances) and growing the business, investors may become angry. Investors may claim the BOD is allowing one large shareholder owning approximately half the shares to run the company for the exclusive purpose of enriching himself. Therefore, LPHI is in a Catch-22 regarding their dividend policy!

Setting Up Reserves on the Balance Sheet: To date, LPI has not shown reserves for future premium forwarding despite ample evidence that the LE’s produced by Dr. Cassidy are consistently short. LPI has not created an adequate reserve for their investments in life settlement policies (purchased from investors to settle a fraud claim with the State of Colorado), for their minority investment in an institutional life settlement pool where it is likely that the LEs (not from Dr. Cassidy) are off by 20%, and from the many lawsuits recently filed in various venues and jurisdictions claiming securities fraud, violations of RICO statutes, breach of fiduciary duty (effectively keeping two sets of books), and selling unregistered securities.

Should LPHI reserve for these items, it is likely the dividend will be cut and the share price will fall. Should LPHI not reserve for these items until they have to (when they become probable and estimable), investors will assume the company is being run to enrich the largest shareholder and not “coming clean” with all their legal and regulatory issues. Catch-22.

Premium Forwarding: LPI is under no obligation to continue forwarding premiums for those fractional investors that receive premium calls. If the company continues to forward premiums, plaintiff attorneys and the SEC may claim the Third Prong of Howey is violated (the investor’s expectation of profits came “solely from the efforts of the promoter or a third party”).

Unlike SECURITIES AND EXCHANGE COMMISSION, APELLEE v LIFE PARTNERS INC, AND BRIAN D PARDO, APPELENTS, it could be deemed that investor’s expectation of profits comes solely from LPIs continuing efforts, and not just LPI’s acquisition of policies to be used as investments for fractional investors. If these investments are deemed “securities” under the Act, sales will almost immediately cease because many of the current licensees (salespeople) are not registered. Registration will also limit the number of states where the few currently registered licensees can operate. More importantly, registration requires full disclosure. LPI’s licensees do not want to full disclose the fees, the many lawsuits, etc.

If LPI stops the premium forwarding scheme, current investors will become irate as their policies become extended (go into a premium call). Some fractional investors may stop paying premium payments, possibly lapsing their policies. Therefore, LPI/LPHI is in a Catch-22 situation regarding premium forwarding!

Use of Advance Trust/Dunnam and Dunnam as Custodian: LPI hired Dunnam & Dunnam as their escrow agent. Dunnam & Dunnam is a small law firm whose partners have social, political and business ties to LPI/LPHI. Dunnam & Dunnan’s senior partner, Vance Dunnam, is a good friend of LPI CEO Brian Pardo. Mr. Pardo recently funded the renovation of an educational center and asked that the building be named after Vance Dunnam. Vance Dunnam once filed a multi-million dollar law suit against Philip Kane (LIFE PARTNERS HOLDING, INC., et al v KANE). Kane is a critic of LPHI, who used the LPHI YAHOO! message board as his podium (Life Partners v Kane). James Dunnam, a former member of the Texas legislature, owns or had owned significant shares of LPHI stock (Source: State of Texas filings). Client agreements I have seen allow LPI and Advance Trust to spit the interest for funds that have yet to be invested.

If LPI keeps Advance Trust/Dunnam & Dunnam, they confirm that their escrow agent is not a neutral third-party. If they replace Dunnam & Dunnam, there will be scrutiny of the past financial dealings between the two firms (no allegations have yet been made of any financial impropriety) and the uncommon practice of the interest splitting will likely end. Either way, LPI is in a “Catch-22” over the keeping or replacing their escrow agent!

Increasing Commissions by 33%: The Life Settlements Wire recently received a tape recording of a LPI master licensee’s sales meeting where a new 4% bonus was announced. This bonus is purportedly paid by LPI, and represents 33% of their revenue (LPI takes approximately 12% in fees with every policy they flip to fractional investors with an additional 12% in commissions going to the licensee organizations). The new bonus confirms LPI’s terrible current sales. If LPI wants to increase sales, they now have to directly pay the people pushing the product an extra 4% even if doing so substantially lowers their margins. If they don’t pay this extra bonus, it seems sales will continue to be far below previous levels.

LPI/LPHI never announced the 4% bonus in a press release. If the bonus is announced, investors may think the firm is desperate for sales. If the bonus in not announced, LPHI investors who do not read The Life Settlements Wire may not realized the company’s margins are decreasing by 33%. Eventually, they will find out about the decrease in margins and will likely claim that they should have been aware of this “material” event. Catch-22!

Press Release of Material Information: Most public companies promptly inform investors of “material” information through press releases. LPHI seemingly has ceased doing this. News about a SEC investigation was released several months after the investigation began, and that was to confirm information released in a Wall Street Journal investigative article. Later, a master licensee was quoted in The Life Settlements Review claiming a second LE provider was now being used in conjunction with Dr. Cassidy. LPI/LPHI has never confirmed this. The use of a second LE provider could materially have an impact upon sales and margins. A master licensee was also quoted from a tape made during a sales meeting stating that LPI would forgo 33% of their fees on each deal and give it to the master licensees to pay their agents bonuses. Again, this information was never placed in a press release.

The above information is likely considered “material” by investors. If LPHI continues to avoid issuing press releases about material information, it will simply give ammunition to the law firms who have filed suit claiming stock fraud and racketeering. If LPHI does issue delayed press releases about the above issues, investors may consider it a reason to sell the stock. Catch-22!

Disclosure: The Texas State Securities Board (TSSB) sent a letter to a broker/dealer in 2010 stating their position regarding a previous lawsuit filed by the State of Colorado against LPI. The TSSB believes the Colorado lawsuit and the subsequent settlement is a “material fact.” The TSSB also contends the non-disclosure of a material fact in a sales presentation could be construed as a fraudulent business practice. I believe material facts also include the commissions investors must pay, the recent Wells letter from the SEC, the negative Wall Street Journal articles, and all lawsuits filed within the past year.

If LPI’s licensees mention the negative material facts, sales will be terrible. If licensees don’t mention negative material facts, they may guilty of a fraudulent business practice. Either way, the people selling LPI’s products can’t win. Catch-22!

Summary

LPI’s sales and business practices have similarities to Ponzi frauds. Unlike classic Ponzi scams, many of LPI’s fractional investors are very likely to have their principal returned, although their expected returns are unlikely to be met. Therefore, I do not believe LPI is operating a Ponzi scam. The company allegedly operates a scheme that is dependent upon purchasing insurance policies valued using one life expectancy, and immediately reselling the policy at a higher price based upon a newly produced (by Dr. Cassidy) shorter life expectancy.

LPI is indeed in several Catch-22 situations. I believe it will be difficult for LPI to sell fractional investments to new investors should the independent unregistered sales organizations disclose total fees and commissions, the investigative articles published by the Wall Street Journal and The Life Settlements Report, the various lawsuits filed, the State of Colorado fraud settlement, the 12b-25 filing, and the SEC’s Wells letter.

As a result of these Catch-22 dilemmas and allegations of fraud, the stock should be avoided or shorted by those who understand the risks pertaining to short sales.

Price Target of $1.50

Based upon the reasons LPHI gave in their recent Form 12b-25 filing, revenue and net earnings will be far lower than what was seen in the 2003-2007 period:

We anticipate reporting a significant change in results of operations for the year ended February 28, 2011 (“fiscal 2011”), compared to the year ended February 28, 2010 (“fiscal 2010”), primarily due to a large market drop in the estimated volume for life settlements generally and the impact in our fourth fiscal quarter of the publication of news articles criticizing our operations coupled with our disclosure of an SEC investigation.

Unlike earlier time periods, the licensees now have a lot more to overcome to make a sale. Therefore, I must assume continuation of the 4th quarter sales trend and expect LPHI to earn less than $0.04 for 2012. I must also assume the bulk of their $31,000,000 in cash will be completely spent or reserved for costs associated with Life Partner’s many legal troubles.

It is possible many investors will not believe LPHI’s dire outcome until they see the 1st quarter numbers (fiscal 2012) that will likely be published this coming August. I assume the company will have slightly negative earnings at that time, but will trade at $2.00 or higher due to their $31 million of cash and their minority investment in a life settlement portfolio. The stock will trade lower when it becomes apparent LPHI’s sales will not improve, their cash will be spent on legal expenses, and the settlement portfolio is mispriced.

LPHI is in several Catch-22 situations that will ensure it remains extremely difficult for their licensees to sell fractional investments. Without sales, and with mounting legal costs, the company will eventually spiral towards bankruptcy.

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1 Lawsuits include: Turnbow et al v. Life Partners Inc et al (Racketeering/RICO), Filed May 18, 2011; Patterson et al v. Life Partners, Inc (Diversity, Breach of Fiduciary Duty), Filed April 15, 2011; Springston et al v. Life Partners Inc. et al (Breach of Fiduciary Duties), Filed April 12, 2011; Vieira et al v. Life Partners, Inc. ( Diversity-Other Contract), Filed April 4, 2011; Act), Filed March 7, 2011; William Rice et al v. Life Partners Inc et al (RICO), Filed March 7, 2011; Santacroce v Life Partners Holdings, Inc, et al (Securities Exchange Act) Filed February 25, 2011; Dittberner vs. Life Partners Holdings, Inc. et al (Securities Fraud), Filed February 14, 2011; Goad v. Life Partners Holdings, Inc. et al (Securities Exchange Act), Filed February 4, 2011; Stone v Pardo, et al, (Securities Exchange Act), Filed February 3, 2011; Taylor v. Life Partners Holdings, Inc. et al (Securities Fraud), Filed February 2, 2011

Disclosure: The author is a private investor who is short shares of LPHI. He will benefit financially from a decline in the share price

Source: $1.50 Target Price for Life Partners Holdings: Ponzi Scheme, Catch-22 or Both?