Life Partners Holdings, Inc. CEO Files Whistleblower Complaint for Naked Short Selling and Market Manipulation
June 19 2013 - 9:57AM
Business Wire
Brian Pardo, CEO of Life Partners Holdings, Inc. (“Life
Partners”) (Nasdaq GS: LPHI), parent company of Life Partners,
Inc., announced today that an independent investigation has
uncovered substantial evidence of coordinated market manipulation
and naked short selling of Life Partners’s stock in and around
September 26, 2012. As a result of this investigation, he has filed
a whistleblower complaint with the U.S. Securities and Exchange
Commission against a number of persons and entities suspected of
illegal short-selling activities. Pardo has filed the complaint on
Life Partners’ behalf since SEC regulations require that only
individual, natural persons can file such complaints.
The investigation was conducted by former SEC Senior Counsel and
noted whistleblower, Gary Aguirre. Mr. Aguirre, who has testified
before the Senate regarding how politically influential individuals
and Wall Street firms taint the SEC’s enforcement decisions, has
been an outspoken critic against abusive short selling and the lack
of SEC enforcement against this illegal activity.
Naked short selling is the practice of short selling a company’s
stock without first borrowing the security as required in a
legitimate short sale. Because shares are not borrowed, naked short
selling is similar to counterfeiting as it can make a company
appear to have many more stockholders selling shares than are
actually being sold. In 2008, the SEC banned “abusive naked short
selling” as a method of driving down share prices. This abusive
tactic is used, often in conjunction with the dissemination of
negative rumors, to drive down a company’s stock price for the
profit of the short sellers. It can also result in massive job
losses, substantial financial losses to legitimate shareholders and
ultimately the destruction of companies.
In his complaint, Pardo describes Life Partners as a microcap
stock with 18.4 million issued shares. Pardo holds more of than
half of these shares, which are unavailable for trading.
Accordingly, Life Partners has less than 9.2 million shares
available for trading and usually less than one million shares are
available for borrowing. In the 12-month period before September
2012, Life Partners’s stock had an average daily trading volume of
112,000 shares.
The complaint demonstrates that market participants,
identifiable through blue sheets, manipulated the price of Life
Partners’ stock on September 26 and 27, 2012, through massive naked
short selling in violation of the SEC’s Regulation SHO. A public
announcement of highly favorable news after the market close on
September 25, 2012 – Life Partners success in a legal action -
generated strong upward pressure on the stock price when the market
opened on September 26. Over the next two days, approximately 15.2
million shares traded. The upside pressure was resisted by
aggressive short selling at the bid from the market’s opening on
September 26 and continued unabated until a price reversal on
September 27. Over these two days, at least 2.16 million shares
were shorted at the bid, a type of trade that fits within no
exception to the legal borrow requirements. Altogether, a
staggering 6.96 million shares were sold short over the two days.
At the time, there were at most 1 million shares available for
borrowing and perhaps none. Major violations of Reg SHO were a
virtual certainty.
The complaint further demonstrates other violations, such as the
requirement that short sellers must deliver by the settlement date.
If 6.96 million shares were properly borrowed, they would have
resulted in an increase of shares on loan. But by October 3, 2012,
the day after the settlement date for the trades on September 27,
the shares on loan had only increased by 27,600 shares. If the
shorts were not covered by the settlement date, they were naked and
in violation of Reg SHO.
Under the whistleblower provisions of the Dodd-Frank law, a
reward may be issued if the SEC is successful in collecting fines
against the violators. Mr. Pardo has assigned any such reward to
the Life Partners Holdings, Inc. and no officers or directors would
receive any part of such an award.
Life Partners Holdings CEO Brian Pardo commented, “It is a
tragedy to realize that there are well-known financial entities
that intentionally try to destroy companies with these abusive
tactics, without any regard for the lives of the workers and the
investors they ruin. The original purpose of our financial markets
was to bring capital to companies so they could grow and, in turn,
contribute to the growth of our whole economy. This small group has
hijacked our financial markets for their own gain. I just hope that
the SEC will use the clear evidence we have provided to them to
bring those who are working against our economy to justice. In my
view, naked short selling is a form of financial terrorism.”
Pardo further suggests in the complaint that FINRA settlements
with UBS and Credit Suisse speak to the enormous magnitude of naked
short selling. He points to the recent SEC settlement with the
Chicago Board Options Exchange, which shows how an SRO was
compromised by those who engage in naked short selling. An
investigation of the allegations in the whistleblower complaint
filed by Mr. Pardo promises to provide the SEC with an opportunity
to contain naked short selling while affording better insights into
how naked shorting is being used to afflict small public
companies.
Life Partners is the world’s oldest and one of the most
active companies in the United States engaged in the secondary
market for life insurance, commonly called “life settlements.”
Since its incorporation in 1991, Life Partners has completed over
149,000 transactions for its worldwide client base of over 29,000
high net worth individuals and institutions in connection with the
purchase of over 6,500 policies totaling over $3 billion in face
value.
Visit our website at: www.lphi.com.
Safe Harbor - This press release contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Prospective investors are
cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of
various factors. The statements in this news release that are not
historical statements, including statements regarding the basis,
prosecution or outcome of the claims in the whistleblower
complaint, are forward-looking statements within the meaning of the
federal securities laws. These statements are subject to numerous
risks and uncertainties, many of which are beyond our control, that
could cause actual results to differ materially from such
statements. For information concerning these risks and
uncertainties, see our most recent Form 10-K. We disclaim any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by law.
LPHI-G
Life Partners Holdings, Inc.Andrea Atwell,
254-751-7797Shareholder Relationse-mail:
info@lifepartnersinc.com