SANTA BARBARA, Calif. – The law firm Foley Bezek Behle & Curtis, LLP (“FBBC”) obtained a $9.75 million settlement on behalf of almost 1,200 individuals ensnared in a fraudulent life insurance investment scheme involving Life Settlements between 2004 and 2014.
The $9,750,000 settlement, approved October 16 by Judge Lawrence P. Riff in the Superior Court of California, Los Angeles County, will allow investors to recoup thousands of dollars they lost to the scheme on a pro-rata basis based on the amount of their investment.
FBBC attorneys Thomas G. Foley, Jr., in Santa Barbara and Kevin D. Gamarnik in Costa Mesa initiated the litigation on behalf of plaintiffs Konstantin Shechter, Svetlana Averbukh and Arnold Applebaum in 2016. Co-counsels Richard E. Donahoo and Sarah L. Kokonas of the Tustin-based law firm Donahoo & Associates, PC, also played key roles in the litigation and settlement proceedings.
The plaintiffs sued Los Angeles-based Pacific West Capital Group, Inc. (“PWCG”) and the company’s sole owner Andrew B. Calhoun IV, accusing them of marketing the sale of fractional interests in universal life insurance policies to investors using misleading and incomplete information. The plaintiffs also sued Ohio-based public accounting firm, Mills, Potoczak & Company (MPC), the trustee of a trust established by PWCG to hold the purchased insurance policies, for allegedly aiding and abetting PWCG and breaching its fiduciary duties as trustees to investors. MPC funded the settlement while denying liability.
According to court documents, PWCG raised more than $99.9 million from over 3,200 investors who purchased fractionalized interests in approximately 125 life insurance policies. PWCG represented to investors their investments were expected to mature within 4 to 7 years and offered a guaranteed return of 10% to 15%. Investors were led to believe that adequate reserves PWCG set aside would be enough to pay premiums until policies matured upon the deaths of the insureds who sold their policies.
In reality, PWCG pocketed up to 25% of investors funds as profit, the lawsuit states. When the reserves to pay premiums on policies were exhausted, PWCG used funds from new investors to make premium payments on policies for which the reserves to pay premiums had been exhausted. Plaintiffs alleged that PWCG failed to gather sufficient data to accurately predict the life expectancy of the insureds who sold their policies and did not establish adequate reserves to pay the policy premiums. This put investors at risk to pay capital calls to pay premiums themselves or lose the value of their investments.
Foley Bezek Behle & Curtis, LLP is a dynamic California law firm whose attorneys have earned a national reputation in class and mass plaintiff actions, wildfire litigation, complex business litigation, lender liability, intellectual property litigation and entertainment litigation. The firm has offices in Santa Barbara and Costa Mesa.
Foley Bezek Behle & Curtis, LLP, is located at 15 W. Carrillo St. Santa Barbara. For more information about the firm visit foleybezek.com, or call (805) 962-9495
Jennifer Goddard Combs