Menu

A Life Settlement Investment Shell Game?

Life, Annuity, and Retirement Solutions   |   Life, Annuity, and Retirement Litigation   |   December 22, 2014
Download Download   
Share Share Page

American International Group, Inc., through its subsidiary Lavastone Capital, LLC, filed a lawsuit against Coventry First, LLC in New York federal court. Coventry reciprocated by filing a lawsuit against Lavastone in New York state court. At issue is whether Coventry’s failure to negotiate the lowest price when acquiring a large investment portfolio of life settlements resulted in Lavastone’s loss of more than $150 million.

According to Lavastone, since the early 2000s it has paid Coventry more than $1 billion to identify life insurance policies that would make attractive investment vehicles and to acquire them from policyholders at the lowest negotiable price. Lavastone alleges that Coventry did not act in good faith when acquiring policies on its behalf. Specifically, Lavastone claims that Coventry founder Alan Buerger and members of the Buerger family were “scam artists” who bought policies at much lower prices than those disclosed to Lavastone. Coventry allegedly hid the original prices by “systematically concealing and/ or failing to disclose material information” from and to Lavastone, and by “falsifying transaction and financial records.”

Further, Lavastone alleges that Coventry managed several “shell companies” that were used to purchase the policies at the original price before selling them to Lavastone at “inflated prices.” For example, Lavastone claims that a Coventry shell company bought a policy in 2007 for $1.9 million. Three months later, Lavastone allegedly bought the same policy from Coventry for $3.5 million based on Coventry’s represented price. According to Lavastone, this constituted a significant overcharge by Coventry on this transaction, which was one of hundreds.

In its state court suit, Coventry contends that Lavastone breached its contract by acquiring life insurance policies in contravention of the exclusivity provision in its origination agreement. Coventry seeks a declaratory judgment as well.


©2020 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.