Conestoga Settlement Services, LLC is among the defendants in a proposed class action that claims the company operated a life settlement investment scam that robbed investors of thousands of dollars. Also named as defendants in the suit are two of Conestoga’s affiliates; L.L. Bradford and Company, LLC; Provident Trust Group, LLC; Strategix Solutions, Ltd.; and the individual founder and manager of Conestoga.
According to the lawsuit, Conestoga’s alleged investment scheme was centered around purchasing life insurance policies—typically from elderly or terminally ill insureds—for less than the policies were worth and selling interests in the policies to investors such as the plaintiff. Conestoga, the lawsuit explains, was responsible for paying the premiums on the insurance policies using funds collected from the investors. In turn, the suit says, investors received payments when each policy matured—i.e., when the insured person passed away.
The risk of these investments, according to the case, is that when insureds would outlive their life expectancies, Conestoga would be required to continue paying their insurance premiums for longer than anticipated. The company allegedly assured investors that it had “carefully mitigated this risk” by engaging the help of purportedly “independent” third parties—escrow agents Provident and Strategix and accounting firm Bradford—to manage and hold funds in escrow that were meant to cover insurance premiums for a period beyond each insured’s expected life. The suit says Conestoga represented that the investments were “safe,” “simple,” “predictable,” and “designed to always win.”
According to the plaintiff, however, these assurances were false. The woman argues that the defendants falsely represented in written sales materials that:
the escrow accounts contained sufficient funds to cover premium payments over the expected life of each insured, plus an additional period beyond his or her expected life;
the insurance premiums would remain at a flat rate throughout the length of each policy;
the stated life expectancies for each policyholder were “conservative” and were “based on good-faith estimates and disinterested medical underwriting”; and
Conestoga did not invest in illegal stranger originated life insurance (STOLI) policies.
In reality, the plaintiff claims, the defendants’ escrow accounts were depleted much sooner than anticipated due to undisclosed, rising premium costs and “systematically understated” life expectancies.
When the escrow reserves ran out, the case goes on, the company allegedly called upon investors to shoulder the “oversized, untimely premiums or, alternatively, forfeit their investments.” Within only a few years after investing in the policies, the plaintiff and her late husband began receiving demands for additional premium payments from Conestoga, the case says.
“The [plaintiff and her husband] were given the impossible choice of either capitulating to these demands by paying thousands of dollars in unexpected, undisclosed insurance premiums, or else forfeiting their investments and losing their retirement savings,” the complaint alleges.
According to the plaintiff, the only policy that has matured, out of the 11 policies in which the plaintiff invested, was an illegal STOLI policy that the insurance company ultimately denied.
“In summary,” the complaint states, “in the span of two years, the [plaintiff and her husband] will have been forced to pay about $53,000 more in premiums than the amounts promised in the [policy selection sheet], and several of these payments will have occurred earlier than promised. To coerce these payments, Defendants have threatened that failure to pay will result in the loss of the [the couple’s] entire investment in the respective policies.”
The lawsuit looks to cover a proposed class of investors who purchased interests in Conestoga life settlements and received the company’s written sales materials.