The Life Partners Creditors’ Trustee is Alan M. Jacobs. Mr. Jacobs was appointed as Creditors’ Trustee of the Life Partners Creditors’ Trust on the effective date (December 9, 2016) of the Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc. et al.
The Plan created two separate trusts, which have separate trustees and separate administrations.
The Creditors’ Trust is a litigation trust that was established as the avenue for Life Partners investors to recover compensation for investment losses they sustained as a result of their former investments in Life Partners (i.e., “Former Position Claims”), and to make distributions on account of allowed general unsecured claims generally. The Plan generally provides for beneficial interests in the Creditors’ Trust to be distributed to former investors corresponding to their allowed claims, and to investors who were Current Position Holders under the Plan but who validly elected to rescind their investments. In addition, the holders of allowed general unsecured claims, such as trade and vendor claims, also hold beneficial interests in the Creditors’ Trust corresponding to their allowed general unsecured claims.
In contrast, the Position Holder Trust administers the Life Partners’ investment portfolio, including administering the current investments of investors who were Current Position Holders under the Plan and who validly elected to remain Continuing Position Holders (including through Election 4 – Conversion), or to receive the New IRA Note (IRA Election #1), or to pool their investments with the Position Holder Trust. If you a current investor and wish to contact the Position Holder Trustee or his servicer of the policy investments, please click here.
Beneficiaries of the Life Partners Creditors’ Trust obtained their potential beneficial interest in the Creditors’ Trust in one of four ways:
There were two separate trusts established under the Plan. The Position Holder Trust administers the Life Partners’ investment portfolio, including administering the current investments of investors who were Current Position Holders under the Plan and who validly elected to remain Continuing Position Holders (including through IRA Election 4 – Conversion), or to receive the New IRA Note (IRA Election #1) or to pool their investments. The Position Holder Trust is administered by the Position Holder Trustee, Michael Quilling, and the Position Holder Trust utilizes a servicer to manage the portfolio and address investor inquiries.
Beneficial interests administered in and by the Position Holder Trust include:
It is possible to hold interests in both trusts. If you believe that you are a beneficiary of the Position Holder Trust and would like to contact the Position Holder Trustee’s Servicer or the Position Holder Trustee in order to verify your status with, and/or your beneficial interests in, the Position Holder Trust, click here.
Many investors with Life Partners held multiple investment positions in multiple policies at the time that the Plan was confirmed, and the Plan generally allowed current investors to elect different treatment options for their different investment positions if they wished to do so (subject to the terms of the Plan). Therefore it is possible for an investor creditor to have made Current Position Holder, pooling or New IRA note elections as to one or more positions, that are now administered by the Position Holder Trustee, while also making rescission elections as to one or more other positions, that resulted in the investor also holding beneficial interests in the Creditors’ Trust.
The Plan also provides that Current Position Holders under the Plan (current investors) who did not opt out generally would receive Additional Allowed Claims against the Creditors’ Trust, equal to .5% of your allowed net cash loss based claim against Life Partners.
There are additional circumstances that may have led to your being provided a claim in the Creditors Trust equal to your net cash loss.
A first and final distribution was made on June 30, 2021.
During the bankruptcy proceedings, the Ch. 11 Trustee initiated suit seeking to recover from Brian Pardo, Scott Peden, certain Pardo family members, certain family trusts, the Pardo-controlled Paget Holdings, Inc., and other affiliates and related parties. The Creditors' Trust substituted into these cases in January 2017. The case was ultimately tried to verdict in June 2017. The jury found Mr. Pardo and Mr. Peden perpetrated a fraudulent investment scheme and breached their fiduciary duties. A final judgment was ultimately entered on May 22, 2018 against Mr. Pardo and the Pardo offshore trusts. In parallel litigation, the SEC continues to pursue its judgment against Mr. Pardo and Mr. Peden. However, although the SEC seized limited assets at the outset of the bankruptcy proceedings, neither the Creditors Trust nor the SEC has been able to identify material additional assets available to satisfy their respective judgments. Likewise, after evaluating the potential collectibility of suits against other insiders and related parties, the Creditors Trust discontinued the Chapter 11 Trustee’s suits against such parties.
In March 2015, the Ch. 11 Trustee filed suit against the three outside directors of Life Partners Holdings, Inc. In April 2017, the Creditors Trust substituted into the case. After the Creditors Trust prevailed on the defendants’ motion to dismiss and motion for summary judgment, the parties reached a confidential settlement with the directors and their insurance carrier.
In March 2015, the Ch. 11 Trustee filed suit against Dr. Cassidy. After the Creditors Trust substituted into the case and evaluated collectibility issues and the absence of available insurance, the Creditors Trust negotiated a confidential settlement of this matter.
In March 2015, the Ch. 11 Trustee filed two suits against 31 charities who received donations from LPI. All of these suits have been settled.
During the bankruptcy proceedings, the Ch. 11 Trustee filed five lawsuits against approximately 750 sales agents (licensees) seeking to claw back commissions paid to advance the fraudulent investment scheme. All cases have been resolved.
In March 2015, the Ch. 11 Trustee filed suit against a defendant class of shareholders of Life Partners Holdings, Inc. seeking to claw back dividend payments. This case has been resolved.
You received this Statement (an “Annual Statement”) because as of the end of the prior calendar year you were listed as having a potential beneficial interest in the Creditors’ Trust. The Creditors’ Trust transmits Annual Statements to its beneficiaries on an annual basis.
The Statement is intended to reflect your potential beneficial interest(s) in the Creditors’ Trust as of the end of the tax year referenced on the Statement. The Statement is NOT intended to reflect any potential beneficial interest you may have in the Life Partners Position Holder Trust (or the IRA Partnership) and/or as a Continuing Fractional Interest Holder or IRA Note Holder. Because the Creditors’ Trust is completely separate from the Position Holder Trust, and the Creditors’ Trust does not have anything to do with the Position Holder Trustee’s administration of current investments, the Statement you received from the Creditors’ Trust also does not reflect any current investments that you may have with the Position Holder Trust or Life Partners.
If you also have beneficial interests in the Position Holder Trust, you should separately receive annual trust statements from the Position Holder Trust. For a more detailed explanation of the two trusts, please click here.
For additional details on how you may have obtained your interests in the Creditors’ Trust (as distinguished from Position Holder Trust, which is administered separately from the Creditors’ Trust), please return to the Creditors’ Trustee’s Responses to Frequently Asked Questions.
Please refer to the Legal Notice on the bottom of your Annual Statement for important additional details.
Unfortunately the Creditors’ Trust may not provide beneficiaries with tax advice, and therefore recommends that beneficiaries rely upon the advice of their own tax and legal advisors in all instances. Subject to that understanding, the Creditors’ Trust was established under the confirmed Life Partners’ bankruptcy plan as a “grantor trust”. A grantor trust does not pay federal or state income tax. Instead, any tax liability which would normally be paid by the trust is passed through to the individuals or entities who are beneficiaries of the trust in a pro-rata amount. Beneficiaries of the Creditors’ Trust share in any taxable income and deductible expenses, which the Creditors’ Trust passes through to its beneficiaries.
The Creditors’ Trustee did not make up or seek these rules, or create the Creditors’ Trust. It is required to adhere to applicable tax laws and rules. Following the end of each tax year the Creditors’ Trust is required to send each potential beneficiary a Cash Distribution Statement / Trust Equity Statement (“Annual Statement”), which contains the information relating to their share of the Creditors’ Trusts’ taxable income and deductions. For additional information on Annual Statements, please refer to other Responses to Frequently Asked Questions on this website.
The Creditors’ Trustee currently anticipates transmitting Annual Statements to beneficiaries for 2021, by April 1, 2022.
Final distributions were mailed to Creditors Trust beneficiaries on June 30, 2021, and will be reflected in the Final Annual Statement next to the “Current Year Total Cash Distribution” line item. If the line item for the 2021 tax year is $0.00, this means that no distribution was made in respect of a beneficial interest in the Creditors Trust for several possible reasons, including (i) any applicable calculated distribution was at or below the de minimis distribution level obviating a distribution, (ii) the applicable claim was expunged for lack of a Form W-9 or other tax certificate, or (iii) the applicable claim was waived upon settlement of litigation.
As of July 2021, the Creditors’ Trust has made final distributions to beneficiaries and NO further distributions will be made.
This allocated trust value bears very little relationship to the allowed amount of your claim or claims or what, if anything, you might eventually receive in distributions from the Creditors’ Trust. This Annual Statement reflects only your potential beneficial interest as of the relevant tax year, based on the cash assets held by the Creditors’ Trust as of the end of that tax year. As a litigation trust that is still being continually administered, claims and beneficial interests in the Creditors' Trust are still in the process of being objected to, reconciled in proper amounts, and allowed or disallowed against the trust, so a beneficiary's percentage interests in the trust, relative to other allowed beneficial interests, is constantly evolving. Also, the amount of money the Creditors’ Trust has, to which your percentage beneficial interest corresponds, is also constantly evolving as money is spent on litigation ort other administration of the Creditors’ Trust, and as recoveries come in.
If you have noted an increase in your “Allocated Trust Value” under the Trust Equity Account section of your Annual Statement relative to the amount recited in your prior Annual Statements, this increase is primarily due to the agreement of the Securities and Exchange Commission that its allowed claim against the Creditors’ Trust in the amount of $38.7 million, is to be reallocated among other allowed investor beneficiaries of the Creditors’ Trust. The Creditors’ Trust has accordingly implemented this agreed reallocation in 2019, proportionately based on each such investor beneficiary’s beneficial interest percentage relative to the aggregate interests of investor beneficiaries in the Creditors’ Trust. Therefore, this adjustment was first reflected, where appropriate, in the Creditors’ Trust’s Annual Statements for 2018 (which were delivered in the Fall of 2019).
This adjustment was reflected on your Annual Statement in two ways: (1) the line item titled “Plus/(Minus): [Year] Equity Adjustment” represents the portion of the SEC’s beneficial interest that is reallocated to you; and (2) the line item titled “Plus/(Minus): 2018 Ordinary income/(loss) true-up” represents a reconciliation for the amount of Creditors’ Trust income/(loss) that you should have been allocated in prior years based on the new reallocation. Please note that, although these two lines on your Annual Statement may include and reflect other reallocations within the Creditors’ Trust, the majority reflected on this Statement will be due specifically to the SEC’s reallocation.
The Creditors’ Trust is a litigation trust that, over the term of the trust, is continually expending trust resources in order to administer the Creditors’ Trust, including but not limited to liquidating and recovering trust assets for the benefit of its beneficiaries. Therefore, even apart from the reallocation of the SEC’s claim, the allocated trust value that corresponds to any particular beneficial interest in the Creditors’ Trust at any given time is also continually adjusting as the trust is administered.
To update your name or address on record with the Life Partners Creditors’ Trustee, please click here