U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23233 / April 7, 2015
Securities and Exchange Commission v. Pacific West Capital Group Inc., et al., Civil Action No. 2:15-CV-02563 (C.D. Cal., filed April 7, 2015)
SEC Charges Los Angeles-Based Pacific West Capital Group with Fraud in Sale of Life Settlement Investments
The Securities and Exchange Commission today charged Los Angeles-based Pacific West Capital Group, Inc. and its owner Andrew B Calhoun IV with fraud in the sale of "life settlement" investments.
Life settlements are securities structured around when life insurance policies "mature" & after the insured individual dies and benefits are paid. Life settlement investors purchase an interest in a life insurance policy and in exchange receive a share of the death benefit.
The SEC's complaint alleges that since 2004, Pacific West and Calhoun, a Beverly Hills, California, life insurance agent, have raised nearly $100 million from life settlement investors. Since at least 2012, Pacific West and Calhoun are alleged to have defrauded investors by using proceeds from the sale of new life settlements to continue funding life settlement investments sold years earlier. The complaint alleges that Pacific West and Calhoun did not disclose this practice to investors and undertook it to make life settlement investments appear successful when in fact, Pacific West had used up the primary reserves to pay premiums on those policies.
According to the complaint, Pacific West and Calhoun also made false and misleading statements about the risks of investing in life settlements, including the risk of investors having to make increased premium payments as insured individuals lived longer than Pacific West and Calhoun anticipated. Pacific West and Calhoun also are alleged to have misled investors about annual returns and to have falsely represented to investors that their investments had nothing to do with Pacific West's efforts and fortunes.
The complaint charges Pacific West and Calhoun with violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Pacific West and Calhoun are also charged with the unregistered offer and sale of the life settlements in violation Sections 5(a) and 5(c) of the Securities Act and acting as unregistered brokers in violation of Section 15(a) of the Exchange Act. The SEC's complaint further alleges that in the alternative, under Section 20(a) of the Exchange Act, Calhoun is liable as Pacific West's control person for its alleged violations of Exchange Act Sections 10(b) and 15(a) and Rule 10b-5 thereunder. Also named as defendants are Ohio-based PWCG Trust, which held and serviced the insurance policies, and five sales agents of Pacific West, Brenda C. Barry of Issaquah, Washington, and her company BAK West, Inc., Andrew B Calhoun Jr. of Anderson, South Carolina, Eric C. Cannon of Lakewood, California, and his company Century Point, LLC, and Michael W. Dotta and Caleb A. Moody, both of Los Angeles. PWCG Trust and the sales agents are all charged with the unregistered offer and sale of the life settlements in violation of Sections 5(a) and 5(c) of the Securities Act; the sales agents were also charged with acting as unregistered brokers in violation of Section 15(a) of the Exchange Act. The complaint seeks permanent injunctions against all defendants and return of allegedly ill-gotten gains with interest and penalties against Pacific West, Calhoun, and the sales agents.
Todd Brilliant, Dora Zaldivar, Kelly Bowers, and Robert Conrrad conducted the SEC's investigation. The litigation will be led by John Bulgozdy and Kristin Escalante.