Trustee Appointment Status
On March 10, as I previously reported, Bankruptcy Court Judge Russell F. Nelms ordered the U.S. Trustee to appoint a Chapter 11 Trustee for LPHI. On March 13, the U.S. Trustee appointed Moran the Chapter 11 Trustee, subject to the approval of Judge Nelms. On March 19, Judge Nelms approved the appointment.
Delisting by Nasdaq
On March 18, Nasdaq announced it had halted trading in LPHI shares after the close of trading that day. The last price was 24 cents per share. Nasdaq said trading will remain halted until LPHI "has fully satisfied Nasdaq's request for additional information."
In an 8-K (material event) report that LPHI filed with the Securities and Exchange Commission (SEC) on March 12, LPHI said a hearing on the matter of delisting was scheduled for March 19. It is my understanding that Moran canceled the hearing.
First Posting by Moran
On March 20, Moran posted the first item on a new website at www.lphitrustee.com to communicate with interested parties. The item describes the background of the case, comments briefly on the current status of the case, identifies four attorneys from the Dallas firm of Thompson & Knight LLP, and invites interested parties to submit questions to email@example.com. Following that initial posting, additional material has been posted for the information of interested parties.
Seizure of Pardo's Property
On March 23, according to local newspaper and television reports in Waco, Texas, LPHI's home city, federal law enforcement officials seized luxury vehicles from the home of Brian Pardo, the former chairman and chief executive officer of LPHI. According to the reports, at least two Mercedes vehicles were confiscated. Pardo has not paid the $6.2 million civil penalty imposed on him by the federal district court and, as I reported in No. 88, the federal district court has placed liens on Pardo's property.
An Important Filing
On March 25, on behalf of Moran, attorneys at Thompson & Knight filed an emergency motion to amend LPHI's governing documents and to file voluntary Chapter 11 petitions for LPHI's two subsidiaries. They are Life Partners, Inc. (LPI), which is LPHI's operating subsidiary in the secondary market for life insurance, and the recently formed LPI Financial Services, Inc. (LPIFS).
The motion describes the background of the case, including the civil lawsuit by the SEC. Aside from the bankruptcy case and the SEC case, the motion says there are 11 open cases against LPHI/LPI in federal courts and 12 open cases against LPHI/LPI in state courts (seven in Texas, three in California, one in Florida, and one in Illinois). Also, LPHI is appealing the decision in the SEC case to the U.S. Court of Appeals for the Fifth Circuit, and is appealing decisions of two Texas appellate courts to the Texas Supreme Court. Here is the concluding paragraph of the motion:
WHEREFORE, the Trustee respectfully requests that this Court enter an order granting this Motion in its entirety and authorizing him to cause [LPHI], LPI, and LPIFS, as applicable, to (i) remove the current members of the boards of directors of LPI and LPIFS, (ii) amend the governing documents of LPI and LPIFS, entities wholly owned and managed by LPHI, (iii) elect the Trustee as the sole director of each of LPI and LPIFS, (iv) take such actions as are necessary to cause LPI and LPIFS to file voluntary chapter 11 bankruptcy petitions, seeking joint administration with the estate of [LPHI], and (v) granting such other and further relief this Court deems just and proper.
The actions taken in coming weeks by Moran and Judge Nelms bear close watching. I think they will make their decisions in what they believe are the best interests of all parties affected by the LPHI proceedings.
I am offering a complimentary PDF containing the 18-page emergency motion that Moran just filed in the bankruptcy court. Send an e-mail to firstname.lastname@example.org and ask for the LPHI/Moran March 25 motion.