SEC enforcement chief Andrew Ceresney
SEC enforcement chief Andrew Ceresney (Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL)

Both sides are claiming victory after a jury rejected the U.S. Securities and Exchange Commission’s core claims in a fraud case against Waco, Texas–based Life Partners Holdings Inc. The SEC called the verdict a partial win, but defense lawyers say the agency is just trying to put a positive spin on the latest in a string of trial losses.

Siding with Baker & McKenzie and Patton Boggs in verdict delivered late Monday, a federal jury in Austin rebuffed the SEC’s claim that a trio of Life Partners executives violated Section 10(b)5 of the Securities Exchange Act by systematically underestimating a key accounting figure. The jury also rejected claims that the Life Partners execs violated Section 10(b)5 by engaging in insider trading. (Here’s the verdict form.)

But jurors also found that Life Partners, its CEO and its general counsel misstated company revenue in violation of Section 17(a) of the Securities Act. That antifraud provision is quite similar to Section 10(b)5 but doesn’t require a showing of scienter, or intent. In addition, the SEC prevailed on a handful of claims relating to reporting requirements.

SEC enforcement director Andrew Ceresney said in a statement that the agency is “very pleased the jury found Life Partners and its executives liable for knowingly or recklessly defrauding shareholders and filing false SEC filings.”

In a press release of its own, Life Partners’ CEO declared that the company had been “exonerated.” According to the company, the SEC’s only successful claims were all premised on a theory that Life Partners misstated its revenue recognition policy. “Before trial, the SEC had represented to the court that it was not pursuing the revenue recognition claims, and it did not present evidence regarding these claims,” the company asserted. “As a result, Life Partners has requested that the court dismiss these claims as a matter of law.”

Monday’s verdict comes on the heels of other trial losses for the SEC, as we reported here and here.

“We told the SEC they were going to lose this case and they just plowed ahead, in spite of having lost several cases before this,” said S. Cass Weiland of the Dallas office of Patton Boggs, who represented one of the individual defendants.

Life Partners brokers the sale of cast-off life insurance policies. Its customers are investors who take over the payment of premiums in hopes of a payoff when the insured party dies. The SEC’s complaint, dated January 2012, alleged that Life Partners systematically misstated life expectancy estimates, a key figure in the transactions. The Life Partners officials named as individual defendants were CEO Brian Pardo, president and general counsel R. Scott Peden and CFO David Martin.

Elizabeth Yingling and Laura O’Rourke of Baker & McKenzie represented Life Partners. Weiland represented Peden. Dallas-based solo practitioner Jay Ethington represented Pardo.