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Conestoga Life Settlements Information to Investors Fraud Class Action


“A life settlement is a transaction in which an insured person sells his or her life insurance policy to a third party,” explains the complaint for this class action. Life settlements are at issue in this case for “fraud, conspiracy, aiding and abetting, civil theft, and breach of fiduciary duty,” against defendants Conestoga Settlement Services, LLC, Conestoga International, LLC, Conestoga Trust Services, LLC, Michael McDermott, Provident Trust Group, LLC, LLC Bradford and Company, LLC, and Strategix Solutions, Ltd.

The class for this action is all Conestoga life settlement participants who (a) bought interests in Conestoga life settlements and (b) received the written sales materials.

Conestoga buys life settlements and sells fractions of them to investors. A major risk of these investments is that the insured person might outlive their life expectancy, but the defendants supposedly told investors that they had taken steps to mitigate those risks. Plaintiffs Dee and Bill Neukranz invested hundreds of thousands of dollars from their retirement account for fractional interests in eleven life insurance policies.

As it turns out, the complaint claims that the couple were given a great deal of false information, and that they are having to pay for their investment over and over again or lose the entire investment. The case centers around three main allegations. 

First, the complaint says, the defendants did not tell investors that the insurance companies who issued the policies might raise premiums and other fees. Dee Neukranz says they were shown marketing materials showing that the costs would remain flat, but they have been billed for increasing premiums. “In 2017 and 2018 alone,” the complaint says, “the Neukranzes were forced to pay nearly $21,000 more than the annual premiums they were promised.”

Second, the defendants claimed to have mitigated the risk of people outliving their life expectancies via escrow accounts. The money in these accounts, the complaint says, were to be a reserve to cover the future insurance costs for each policy over the person’s life expectancy, plus an additional period beyond that. 

However, the complaint says that in reality, the defendants “intentionally misled investors regarding the cost of insurance and the amounts actually held in escrow, and hid the fact that increasing insurance premiums were causing the escrow reserves to dwindle much faster than represented.”

Third, the defendants said that the life expectancies were “conservative” and based on “good-faith estimates and disinterested medical underwriting[.]” The complaint says this was not true: In fact, the estimates were systematically understated due to a deliberately skewed methodology and dishonest medical underwriting.”

To date, the complaint says, only one of the eleven policies has matured—and that one did not pay out anything. This is because it turned out to be a type of policy (STOLI) that the complaint calls “broadly illegal.”

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