A&O Life Information Update: It Looks Bad for Investors
On July 31, 2009 Russell Mackert of Shepherd Capital Management sent a letter to some investors in A&O Life Funds. Here is a copy of the letter. The news is bad. According to Mackert, the company (Provident Capital Indemnity) which issued the payment bonds backing the maturity date of the investment is not paying the investors. This is what happens when a company buys its payment bond from a little known company in Costa Rica. Incidentally, I have heard from investors who have not been paid. The letter does not mention Adley Wahab, but does refer to Prestige Title misappropriating A&O funds.
Mackert goes on to state that the policy backing the investment is in full force and effect, but that premiums are being paid from cash values built up in the policies. In other words, A&O is not paying the premiums. Although Mackert does not explain this, paying the premiums from cash values can be really bad for the policy and can lead to huge premium payments down the road because all cash values have been exhausted. This is particularly true in policies insuring the lives of elderly people, because the premiums on a life insurance policy get more expensive as we age due to shorter life expectancies. It can be sort of like when an adjustable rate mortgage resets at a higher interest rate. I believe that most or all of the A&O policies insure lives of elderly individuals.
Mackert gives the investors 3 options:
- investors pay a pro rata share of the premiums on the polices (on the policy in this letter the premium is $29,015 every 3 months)
- sell the policy on the secondary market
- do nothing and lose the entire investment.
None of the options involve A&O or the related companies paying the premiums: "the company does not have the funds to pay for such premium needs."
Many, if not all, A&O investors bought the investment from a securities broker or agent. If I were an A&O investor I would be talking to the SEC and other federal authorities, questioning the person who sold me the policy on what was his commission and what due diligence did he do, and trying to hire an attorney.
I'll bet money Mackert and Adley have something to do with this "Costa Rican" Company, if there not the company themselves, and this letter is just an attempt to squeeze money out investors since Mackert and Adley's funds are all tied up in Federal Litigations.
Mr. Mackert does not inform the investors that the reason their investment is on the verge of default is that A&O failed to pay premiums and instead used the cash value of the policy. Although the premium at this moment might be $29,000 a quarter, I would bet the premium will soar to more than twice that amount with the cash value gone. Where is the SEC? What has taken the FBI so long to pursue where the money went?
The bankruptcy trustee in this case has set up a website for investors to keep tabs on the progress of the case. It's www.lifefundstrustee.com. You can view all court postings. Note that the Texas State Securities Board and the Texas Attorney General's office are involved now as well. I'm just hoping that we all get something out of this once it's over...not counting on much though.
The creditors' meeting was held last week, and a recording of that meeting is available on the trustee's website. You can download and listen. Lots of drama, but things don't look good for the investors as far as I can tell.