A&O Life and Related Entities File Bankruptcy
I received sad new today for A&O Life investors. Last week the company and related entities filed for Chapter 11 bankruptcy protection in Illinois. Here are the petitions filed by A&O Life and A&O Resources. Also filing bankruptcy were A&O Bonded Life Assets and A&O Bonded Life Settlements. It appears that the companies' creditors are their "investors." Russell Mackert is listed on the forms as being involved in the filings. Needless to say, I am not surprised.
I am not in a position to provide legal advice to A&O investors. However, I can tell you that if I were an A&O investor I would be hiring an investment fraud lawyer in the area where an agent sold me the investment and I would sue the agent(s) who sold it to me. If A&O was a big scam it's going to be like the Madoff scandal where the investors are not able to recover their money from A&O. The agents who sold the policies, however, will likely have insurance coverage that will cover a claim against the agent. If I were an investor, I would also be raising hell with the Securities and Exchange Commission and the Department of Justice.
Here is a list of people associated with A&O who I believe to be agents who sold the investments for the company. If you are an agent and are on this list and feel like that you are also a victim of A&O, then I am sorry. But you are partially responsible for putting your clients in these investments and in my opinion, you should be held liable for your role. People have gone to jail in Mississippi for acting as agents in what turned out to be investment fraud schemes. What happened here to A&O investors is an example of why agents and brokers carry liability insurance.
How does this happen my maturity date is Oct 14 2009 and every month i have spoken to Mackert and he has personally assured me that my investment was safe and the insurance company was in the process of paying this account off Who is accountable for these Frauds
Rosemary, it is unfortunate that the A&O and it's subsidiaries have filed for B/K. I do believe, however, that in most cases, the policies are still in force. I am not sure how this plays out in bankruptcy court...meaning do you retain ownership in your individual policy or do all of A&O's assets get thrown into the ring and subject to all creditors. If your policy were to pay a on 10/14/09, I would think that you, along with your fellow investors in that policy, should receive payment. This is the real issue/question with B/K. Who gets what and who's entitled to what? Does anyone have any insight on this?
It's my understanding that the policy benefits are paid at death, not on a date certain. It would be the bond that was payable on a certain date, and the bonds are not being paid. I'm willing to bet that A&O has been using policy cash values to pay the premiums and that most or all of these policies are in the process of blowing up. IF investors are given the opportunity to pay the premiums, those premiums will be huge. I'm also concerned that some of the insureds have died and someone pocketed the death benefit. Was any A&O investor paid on their maturity date and is so, when was the last time that an investor was paid?
Martin is naive or an A&O salesperson. Mr. Thomas is exactly correct. The premiums will skyrocket with the loss of cash value. Mackert is fully aware of the situation. They attempted to temporarily hault lawsuits by filing bankruptcy. This move is apparently a 2 edged sword. I'll be at the October meeting.
Mr. A&O Investor, thanks for your post. I agree that the premiums will skyrocket and also agree that Mackert filed for b/k to avoid lawsuits. What are the reprocussions for the investors? How will each investor maintain ties to their policies or will everything get tossed into one pot? Thanks.
Can anyone tell us where the form is to file a claim? I've heard investors have received them in the mail, but we have not received anything nor has our agent who set this up.
My mom and Dad invested part of their retirment savings in this. We were contacted by mail from a law firm in houston representing 41 investors for the bankruptcy wanting to represent us with a 2000.00 retainer. Anyone have thoughts on what to do. Seems we would be throwing more good money after bad.We hadn't even been notified by the court or anyone else about this. I like the article that reccomended going after the brokers.
From what I've gathered, here's the scoop...A&O and their subsidiary companies purchased life insurance policies in the life settlement market. Along with purchasing the policies, they also purchased a financial guarantee bonds from PCI to insure against insureds from living too long. The idea behind the bond is that if an insured was alive on a specified date, the bond would pay the investors in exchange for ownership of the policy.
In turn, A&O sold interest in these policies to investors. In exchange for their deposit, A&O guaranteed a fixed rate of return. The guaranteed amounts were based on the time of the purchase and expected payout date of the bond.
From the deposits collected by investors, A&O did 3 things...
1. Recouped their acquisition costs for the policies and the bond.
2. Escrowed funds to pay premiums on the policies through the bond pay-out date.
3. Collected fees (amounts were not disclosed to investors)
Facts:
1. A&O was not a ponzi scheme. There were real assets purchased and real dollars escrowed to pay premiums.
2. The escrow company (Prestige Escrow) filed for b/k and this impacted A&O's ability to pay premiums on certain policies in their portfolio.
3. PCI has paid claims on previous bonds, however, they are in default on at least one bond due in Jan. 2009
4. Most (if not all) of these assets are still in force...despite A&O's filing for b/k.
5. Although the life settlement market is a viable option to sell some of these policies, the anticipated amounts will be very low. Many policies are currently selling for less than 10% of the face amount.
My advice (for what it's worth):
1. Although their capital reserves are not liquid, PCI intends to pay on all bond issued. This is important because...if PCI delivers on their obligations (and this is a big IF), then the investors will be able to recoupe most, if not all, of not only their original investment, but the "guaranteed" amount as well.
2. Because of Prestige Escrow, it is very likely that these policies will need additional capital to pay premiums. If the investors can add additional capital, the policies will remain in force. Once the policies reach their bond pay-off dates, then PCI (if capitalized) could pay out the investors...again this is a big "IF" as to whether PCI will deliver.
3. DO NOT SELL THESE POLICIES IN THE LIFE SETTLEMENT MARKET. If you think that Allmendinger, Oncale, Wahab and Mackert are bad apples, the life settlement makes these guys look like saints. Believe me, this market WILL NOT do the investors any favors when selling these policies. Knowing the situation, they are like sharks hunting a wounded seal and will make ridiculously low offers to purchase these policies. I am familiar with the organization that was recently posted on this blog. They are life settlement brokers and they typically charge the lesser of 30% of the sale amount or 6% of the face amount. For example, if $10M policy was sold for $1M, the broker's fee would be $300K!!!
I am certainly not defending A&O, but this sitatuion is nothing like Bernie Madoff, Danny Pang, etc. The original principals were not thieves, but rather they were young, careless and cavalier in their approach. There is no doubt that they sold unregistered securities and failed to have the proper disclosures as required by law.
I am not a former employee or representative of A&O, but rather a very informed investor.
If you are an investor in A&O, you need to be careful about the information that you are receiving. It is important to understand all your options the risks involved in each. What I wrote in this post is the TRUTH!
I welcome your feedback.
The Boutte case was filed in Texas in 2008, which appears to have been before the Prestige Title situation blew up. The Colson litigation may have just brought it to a head sooner than it otherwise would have.
I would feel better about the legitimacy of A&O if an investor surfaced who was ever re-paid. It's difficult to view the totality of the circumstances and conclude that there was ever going to be a happy ending for the investors.
Mr. Martin,
After all the evidence that has come out in the various law suits, in particular the Boutte suit, how could you think that these guys (A&O) were operating a legitimate business? They are accused of re-selling policies, forging signatures and in another case selling policies that were still in the 2 year contestabilty period. I will bet that it will be discovered that there are many more investors than there are legitimate policies to cover interests sold to investors.
If there were close to 700 investors (as Forbes article infers) and the minimum investment was 50,000 that is approximately 35 million that they received in investors money ( this does not included the 10 million invested by Boutte). They only deposited $4.5 million in Prestige Escrow for premium payments. It is alleged that they did not pre-pay the premiums as they told investors they would do and in many cases where using the policies cash values to pay premiums. So one must ask the question, where's the rest of the money???? My opinion is that they funneled the money off shore. Ever wonder why they sold their interest to Blue Diamond a West Indies company that they claim they don't know who owns?
I think this was a scam from the beginning and that we investors are SOL.
Sam,
You bring up good points and many of which I agree with. Although I suspect that they did not run their business with any integrity, it still doesn't take away from the facts that I outlined.
Forget all the bad stuff that they've done and focus on the assets at hand. There are still policies in force...policies that you and I have ownership interest in. These policies have a financial guarantee bond tied to them and the bonding company, PCI has good intentions to pay (despite current liquidity issues).
Martin,
PCI will never pay on the bonds and not because of their liquidity problems, but because of the terms of the bond. The Bonds specifically state that they will not payout if policy premiums are delinquent or if there are outstanding loans on the policy. Using the cash value of a policy to pay the premiums is considered a loan. Therefore, if the cash value has been used to pay premiums for past several years, it doesn't matter if the investors pay the additional premiums to keep the policies in force. Because in the end the previous premiums borrowed from the cash value would have to be paid back before PCI would honor their bonds.
From all that I have been reading regarding the cases filed against A&O before the bankruptcy, I just feel that this is a much bigger mess than you think. I hope and pray that I am wrong for the sake of everyone!
Sam is an informed investor. There was not enough money in the escrow account to pay just one-one of the policies if it lasted seven years. All the policies are set to explode with loss of their cash value. We can hope that the trustee will recover some of the funds. If you can't see from the inception that this was a fraud,you are blind. From the sale of this with insurance agents selling securities to the escrow company to the phony, offshore, unauthorized re-insurer to the phony actuarial/life expectancy company to the ludicrous sale and resale to an unknown foreign company that even the negotiating attorney didn't know one owner. Martin, you tell me these boys were simply "misdirected" and "naive"then I must be Peter Pan. The answer is all these policies are bunk. These people will live much longer than anyone will be willing to pay the premiums. Search Google for promissory note fraud-the first hit is the SEC website-read it!