Brian Pardo LPHI Deposition

pardo brian 8-27-08.txt 0001 1

DISTRICT COURT, CITY AND )

2 COUNTY OF DENVER, ) COLORADO )

3 ) 1437 Bannock street )

4 Denver, CO 80202 ) )

5 FRED J. JOSEPH, ) Securities Commissioner )

6 for the State of ) Colorado, )

7 ) Plaintiff, )

8 ) V. )

9 ) LIFE PARTNERS, INC., a )

10 Texas Corporation, LIFE ) PARTNERS HOLDINGS, INC., )

11 a Texas Corporation, ) SCOTT PEDEN, SCOTT )

12 BEEMER, ERIC COX, LOWRY ) LYNNE DAVIS, GARY HANSON, )

13 TIM HARPER, KENNETH ) KELLER, MIKE LOWE, LARRY )

14 MICKELSON, JOHN ROTH, ) RALPH SIEBERT, AND BRIAN )

15 PARDO, ) )

16 Defendants. ) )

17 JOHN W. SUTHERS, ) Attorney General ) Case No. 2007 cV 5218

18 CHRISTINE C. STRETESKY, ) 31749* )

19 RUSSELL KLEIN, ) Div.: 5 31965* )

20 Asst. Attorneys General ) 1525 Sherman Street, )

21 7th Floor ) Denver, CO 80203 )

22 303-866-5278 ) 303-866-5395 Facsimile )

23 *counsel of Record )

24 ORAL DEPOSITION OF BRIAN D. PARDO

25 AUGUST 27, 2008 0002

1 ORAL DEPOSITION OF BRIAN D. PARDO, produced

2 as a witness at the instance of the PLAINTIFF FRED

3 J. JOSEPH, Securities Commissioner for the State of

4 Colorado and duly sworn, was taken in the

5 above-styled and numbered cause on the 27th of

6 August, 2008, from 9:02 a.m, to 9:45 a.m., before

7 Sherry D. Current, CSR, in and for the State of

8 Texas, reported by machine shorthand, at the offices

9 of Life Partners, Inc., 204 woodhew Drive, Waco,

10 Texas, pursuant to the Texas Rules of Civil

11 Procedure and the provisions stated on the record or

12 attached hereto.

pardo brian 8-27-08.txt 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 APPEARANCES 2

3 PLAINTIFF FRED J. JOSEPH, Securities Commissioner for the State of Colorado:

4 JOHN W. SUTHERS, Attorney General

5 CHRISTINE C. STRETESKY, 31749 RUSSELL KLEIN, 31965

6 Asst. Attorneys General 1525 Sherman Street, 7th Floor

7 Denver, CO 80203 (303) 866-5278 Telephone

8 (303) 866-5395 Facsimile 9

10 FOR THE DEFENDANTS LIFE PARTNERS, INC., a Texas Corporation, LIFE PARTNERS HOLDINGS, INC., a Texas

11 Corporation, SCOTT PEDEN, TIM HARPER, LARRY MICKELSON, JOHN ROTH, AND BRIAN PARDO:

12 Mr. Otto K. Hilbert, II

13 Robinson Waters & O'Dorisio, P.C. 1099 18th Street

14 26th Floor Denver, Colorado 80202-1926

15 (303) 297-2600 Firm (303) 824-3120 Direct

16

17 FOR THE DEFENDANTS SCOTT BEEMER, ERIC COX, LOWRY LYNNE DAVIS, GARY HANSON, KENNETH KELLER, MIKE LOWE

18 AND RALPH SIEBERT: 19

Mr. Thomas Tenenbaum 20 The Tenenbaum Law Firm

Park Ridge Corporate Center, suite 600

21 10475 Park Meadows Drive Lone Tree, Colorado 80214

22 (303) 804-3800 Telephone (303) 804-3802 Facsimile

23 24 25 0004

1

INDEX

2 PAGE VOL 3

Appearances 3

1 4

Stipulations 5

1 5

pardo brian 8-27-08.txt BRIAN D. PARDO

6 Examination by Ms. Stretesky 5 1

7 8 Signature and Changes 30 1 9 Reporter's Certificate 32 1

10 11

REQUESTED DOCUMENTS/INFORMATION 12 NO. DESCRIPTION PAGE VOL 13

14 15 16

No. 17 18 19 20

21 NO DESCRIPTION 22

NONE

CERTIFIED QUESTIONS

NONE

EXHIBITS

NONE

PAGE/LINE

PAGE VOL

23 24 25 0005

1 THE REPORTER: Before I swear the

2 witness, are there any stipulations or agreements

3 that you would like to place on the record?

4 MS. STRETESKY: No, ma'am.

5 MR. HILBERT: None.

6 MR. TENENBAUM: Nope.

7 (Witness sworn.)

8 BRIAN PARDO,

9 after having been first sworn, testified as follows:

10 EXAMINATION

11 BY MS. STRETESKY:

12 Q. Good morning, Mr. Pardo. we met

13 yesterday. I'm Christine Stretesky. I'm an

14 assistant attorney general with the state of

15 Colorado, representing Fred Joseph in this action

16 against Life Partners and the individual defendants.

17 Have you ever had your deposition

18 taken before?

19 A. Yes.

20 Q. Okay. This might be familiar to you, but

21 I'm just going to set up some ground rules. I would

22 ask that you speak loud enough for the court

23 reporter to hear. we want to get as good of a

24 record as we can get. And if she can't hear you,

25 then we won't get your answers down properly. 0006

1 A. okay.

2 Q. I'd also ask that you wait until I'm done

3 asking a question to give your answer so that we

4 don't talk over each other and we can get a clean

5 record.

6 A. Okay.

7 Q. And I also ask that you answer orally

8 either "yes" or "no," not "uh-huh" or "huh-uh" or a

9 nod of the head because that's difficult to discern

pardo brian 8-27-08.txt

10 when we're reading the transcript.

11 A. All right.

12 Q. Also, if you need to take a break, we can

13 take breaks. This isn't a test to see how long you

14 can sit in the chair and drink coffee and answer

15 questions, but I would ask and let you know that I

16 will not allow a break if a question is pending. so

17 if I ask a question, I'm going to ask that you

18 answer the question before we break for any reason,

19 regardless if it's to discuss something with your

20 counsel or go use the bathroom.

21 A. Okay.

22 Q. Also, if you don't understand a question

23 I've asked you, let me know and I will try to

24 rephrase it to where you can understand it. if you

25 answer, I'm going to assume that you understood my 0007

1 question and are answering the question that I think

2 I asked.

3 A. Okay.

4 Q. Are you on any medication that affects

5 your memory, sir?

6 A. No, I don't think so.

7 MR. HILBERT: Not that I remember.

8 (Laughter.)

9 THE WITNESS: That's what I was going

10 to say, "Not that I recall."

11 (Laughter.)

12 Q. (BY MS. STRETESKY) Have you had any

13 recent illness that would affect your memory today?

14 A. I don't think so.

15 Q. All right. could you give me a brief

16 description of your employment history?

17 A. Yes. I was in the Army -- I guess I can

18 start there?

19 Q. Sure.

20 A. -- from 1962 to 1968. I went to work for

21 a company called Dart Industries for -- until --

22 well, anyway, it was until about the early '70s, '72

23 or '73.

24 And then I started a company called

25 Solar King, which was incorporated in 1974. And I 0008

1 remained the president and chairman of Solar King

2 until 2000, roughly. NO, no, no, no. I'm sorry.

3 1990.

4 Q. Did Solar King go out of business in 1990?

5 A. Yes. It went out of the solar energy

6 business in 1986, and we tried to -- it went into

7 Chapter 11. And myself and other investors tried to

8 save the company for four years and finally we

9 couldn't so we just gave up on it, liquidated it

10 actually in '89.

11 And then I began to -- I was

12 technically, you might say, unemployed for about a

13 year. And I had incorporated Life Partners in 1991,

14 and from there -- I've been there ever since.

15 So actually I was 17 years, I think,

16 at Solar King, and 17 or 18 years now at Life

17 Partners. So both of my careers have just been two

18 companies.

19 Q. what kind of business was solar King?

20 A. Solar energy company.


21 Q. Where was it located?

22 A. It was located in Nevada and then was

23 transferred in 1976 here to Texas.

24 Q. Waco?

25 A. Uh-huh. Yes. 0009

1 Q. Where did it file chapter 11 bankruptcy?

2 A. Here in Texas.

3 Q. And at the time that it filed bankruptcy,

4 were you president and chairman?

5 A. Yes, I was.

6 Q. Now, you said you incorporated Life

7 Partners in 1991. Which Life Partners company was

8 incorporated in 1991?

9 A. Well, Life Partners, Inc., the operating

10 company now, was incorporated in September of 1991.

11 Q. When was Life Partners Holdings

12 incorporated?

13 A. That was in connection with the reverse

14 merger when we took the entity public in 2000.

15 Q. And then had you also incorporated

16 Extended Life Services, Inc.?

17 A. I don't recall.

18 Q. Does that company name sound familiar to

19 you?

20 A. Yes, but I'm not sure I recall what the

21 function of the company is now.

22 (Telephonic interruption.)

23 Q. (BY MS. STRETESKY) Starting with Life

24 Partners, Inc., what were your titles with that

25 company? 0010

1 A. Well, I was the founder and was chairman

2 and chief executive officer. Chairman of the board

3 of directors and chief executive officer and

4 president.

5 Q. And president, as well?

6 A. Yes.

7 Q. What titles do you currently hold with

8 regard to Life Partners, Inc.?

9 (Telephonic interruption.)

10 (Brief discussion off the record.)

11 Q. (BY MS. STRETESKY) I'm sorry for the

12 interruption.

13 What are your current titles with

14 Life Partners, Inc.?

15 A. I believe that I'm just chairman of the

16 board of directors.

17 Q. Is that a compensated position?

18 A. No, I don't think it is.

19 Q. When did you cease acting as CEO of Life

20 Partners, Inc.?

21 A. When we organized or incorporated Life

22 Partners Holdings, Inc.

23 Q. That would have been sometime in 2000?

24 A. Yes.

25 Q. When did you cease acting as president for 0011

1 Life Partners, Inc.?

2 A. That's when.

3 Q. The same time?

4 A. Yeah.

5 Q. Some time in 2000.


6 Were you compensated as CEO or

7 president of Life Partners, Inc.?

8 A. Yes.

9 Q. You drew an annual salary?

10 MR. HILBERT: Object to the form.

11 A. Yes.

12 Q. (BY MS. STRETESKY) what were your duties

13 as CEO and president of Life Partners, Inc.?

14 A. To oversee the operations of the company.

15 Q. what -- what are your current titles with

16 Life Partners Holdings, Inc.?

17 A. I'm chairman and chief executive officer

18 and president of Life Partners Holdings, Inc.

19 Q. Are you compensated as chairman of the

20 board of Life Partners Holdings, Inc.?

21 MR. HILBERT: Object to form.

22 A. I'm compensated as president. I'm not

23 compensated as a board member.

24 Q. (BY MS. STRETESKY) What are your duties

25 with regards to being president of Life Partners 0012

1 Holdings, Inc.?

2 A. Oversee the operations of the company.

3 Q. what does that entail on a daily basis?

4 A. Pardon me?

5 Q. what does that entail?

6 A. Well, it entails making sure that all of

7 the management positions are filled and operating

8 properly and that the company is basically staying

9 on course as set by the board of directors.

10 Q. How many board members are on the board of

11 directors for LPHI?

12 A. Five, I believe.

13 Q. And LPHI is a publicly-traded company;

14 correct?

15 A. Yes, it is.

16 Q. And what percentage of the stock do you 17 own?

18 A. Well, I personally only own about 2,000

19 shares.

20 Q. HOW many outstanding stock total is there

21 in LPHI?

22 A. Outstanding?

23 Q. Uh-huh.

24 A. About 12 million.

25 Q. Do you have a trust that owns stock in 0013

1 LPHI?

2 MR. HILBERT: Object to the form.

3 A. There is a trust, a family trust -- yes, I

4 do. It's a family trust.

5 Q. (BY MS. STRETESKY) And how many shares

6 does the family trust own?

7 A. Approximately 6 million.

8 Q. Is the family trust the largest

9 shareholder?

10 A. Yes.

11 Q. Who has the right to vote on behalf of the

12 trust?


14 A. Well, normally I vote by proxy; but the

15 right is -- the trustee has the right to vote.

16 Q. (BY MS. STRETESKY) Who is the trustee?


17 A. Tom Phillips.

18 Q. Has there ever been a time where the trust

19 hasn't given you its proxy?


21 A. Yes. whenever they come to the annual

22 meetings.

23 Q. (BY MS. STRETESKY) whenever Mr. Phillips

24 comes to the meetings?

25 A. Yes. If he comes to the annual meetings, 0014

1 he votes.

2 Q. who directs mr. Phillips how to vote?


4 A. Mr. Phillips does. He's the trustee.

5 Q. (BY MS. STRETESKY) what's the day-to-day

6 business of Life Partners Holdings, Inc.?

7 A. Life Partners Holdings, Inc. is the

8 holding company of the operating subsidiary Life

9 Partners.

10 Q. How many employees does Life Partners

11 Holdings, Inc. have?

12 A. I'm really not sure.

13 Q. who would know that?

14 A. Scott Peden would know that.

15 Q. what's Scott Peden's position with LPHI?

16 A. With LPHI he is general counsel.

17 Q. And you understand the question I was

18 asking was how many employees the holdings company 19 has?

20 A. Yes.

21 Q. okay. what was the purpose of creating a

22 holdings company for LPI?


24 A. well, there was no particular purpose. It

25 just resulted from the fact that we took the company 0015

1 public in 2000, not to raise money but to -- to

2 provide transparency, which we felt was going to be

3 important in the growth of the industry. And as a

4 result of that, it was done through a reverse

5 merger. And that company was the public company and

6 so that company became Life Partners Holdings, Inc.,

7 and its asset was Life Partners, Inc.

8 Q. (BY MS. STRETESKY) And it's Life Partners

9 Holdings, Inc. that is publicly traded; correct?


11 A. Yes.

12 MR. HILBERT: You're fine. Just so

13 you know, periodically I will make an objection for

14 the record. And unless I instruct you not to

15 answer,go ahead and answer. I will try to squeeze

16 it in before your answer. If I don't, she will get

17 it.

18 THE WITNESS: All right.

19 Q. (BY MS. STRETESKY) You mentioned that it 20 was -- you did a reverse merger to have a

21 publicly-traded company for the purpose of

22 transparency because you felt the industry needed to

23 have -- or the direction that the industry was going 24 was that it was better for the company to be

25 transparent. 0016

1 what about the company needed to be

pardo brian 8-27-08.tXt

2 transparent?

3 A, I'm sorry?

4 Q. I don't know how to -- you said one of the

5 purposes of creating a publicly-traded company was

6 to allow for transparency; correct?

7 A. Yes.

8 Q. what was it that the creation of a public

9 company was allowing you to be transparent?


11 A. well, if you're public then you're filing

12 under -- you're regulated by the FCC and you're

13 filing periodic reports, 10-Ks and 10-Qs, and also

14 complying now with Sarbanes-Oxley, as an example.

15 But people that are interested in

16 learning about the company have a much greater view

17 from an independent third party; namely, the

18 auditors, as to the condition and health and welfare 19 and so on of the company than you would of a private

20 company where you would just simply be taking the

21 word of the owners that the company is in a certain

22 condition.

23 Q. (BY MS. STRETESKY) So you created the

24 publicly-funded company or the publicly-traded

25 company so that potential clients of LPI would have 0017

1 an independent third-party view or opinion of how

2 stable LPI was?

3 MR. HILBERT: object to form.

4 MR. TENENBAUM: Join.

5 A. well, they could derive to their

6 satisfaction any question about the company that was

7 material to the operations of the company, whatever

8 that might be.

9 Q. (BY MS. STRETESKY) Are you familiar with

10 what kind of information needs to be disclosed in

11 your, for example, 10-Q SB to the FCC?


13 A. Generally, yes.

14 Q. (BY MS. STRETESKY) Who prepares those

15 annual reports for the FCC, or for submittal to the

16 FCC?

17 A. well, they are prepared by the company,

18 but they are audited by outside auditors.

19 Q. who within the company prepares them?

20 A. well, there's -- generally speaking, it's

21 the accounting and legal departments that do the

22 bulk of the work.

23 Q. The commissioner has taken this action not

24 only against Life Partners and Life Partners

25 Holdings and yourself but a group of people who it's 0018

1 been established have entered into licensee

2 agreements with Life Partners.

3 what I'd like to explore right now is 4your communications with those what we've called

5 licensees, what your company calls licensees.

6 Do you know who Scott Beemer is?

7 A. No, I do not.

8 Q. Do you know who Eric Cox is?

9 A. No, I don't.

10 Q. Do you know who Lynne Davis is?

11 A. No.

12 Q. Do you know who Gary Hanson is?


13 A. No.

15

14 Q. No.

. Do you know who Mike Lowe is? A

16 Q. Do you know who Ken Keller is?

17 A. No.

18 Q. Do you know who John Roth is?

19 A. No.

20 Q. Do you know who Ralph Siebert is?

21 A. No. 22

23 A. Yes.

. Do you know who Tim Harper is?

24 Q. How do you know Mr. Harper?

25 A. Tim Harper is here in Texas, and he is 0019

1 what we call a master licensee.

2 Q. How were you first introduced to

3 Mr. Harper?

4 A. Mr. Harper visited us here in Waco and

5 introduced himself to us about five years ago or so.

6 Q. And did he come down to Waco to introduce

7 himself in the hopes of getting a job with Life

8 Partners?


10 A. Not -- not -- getting a job?

11 Q. (BY MS. STRETESKY) uh-huh.

12 A. I don't think so.

13 Q. Did he come to Life Partners seeking to

14 learn more about the opportunities in investing in

15 viatical settlement investments?


17 A. I don't think so, but I think you would be

18 better off to ask him those questions.

19 Q. (BY MS. STRETESKY) Did Mr. Harper come

20 and speak to you about becoming a licensee with Life

21 Partners?


23 A. Not initially. I don t recall that, no.

24 Q. (BY MS. STRETESKY) when did he, if not

25 initially, did he start engaging in discussions with 0020

1 Life Partners about becoming a licensee?

2 A. I don't recall.

3 Q. Had you had a prior relationship with

4 Mr. Harper before he came down to Waco?

5 A. No. 6 MR. HILBERT: Object to form. 7 Q. (BY MS. STRETESKY) The e sales agent

8 defendants have described in their depositions

9 meetings that they have had in Waco with Life

10 Partners' staff, particularly Mr. Peden and

11 yourself.

12 Do you recall ever having discussions

13 in Waco with Gary Hanson?


15 A. No.

16 Q. (BY MS. STRETESKY) Do you ever recall

17 meeting with a group of potential licensees or

18 licensees in your offices in Waco?

19 A. At any time you mean?

20 Q. At any time.

21 A. I -- I occasionally speak togroups of

22 licensees as a way of telling them usua ly the

23 background of the company and what the company does


24 and give them information as to our philosophy and

25 that sort of thing. 0021

1 Q. What do you tell them about the background

2 of the company?

3 A. when it was formed, what our philosophy

4 is, why we do what we do.

5 Q. And that's what I'm asking you. Tell me

6 what you tell potential licensees.


8 A. well, just what I told you I tell them. I

9 mean, if you want me to give you a word-for-word

10 speech, I --

11 Q. (BY MS. STRETESKY) I would like to hear

12 the background of Life Partners Holdings and Life

13 Partners, Inc.; yes.


15 A. I think you could find that information in

16 our public documents filed with the FCC under the

17 "Operations" section.

18 Q. (BY MS. STRETESKY) Are you unable to give

19 the background and history of Life Partners

20 Holdings, Inc. and Life Partners, Inc. at this time?


22 A. No. I just think the information is

23 available publicly.

24 Q. (BY MS. STRETESKY) And did you draft

25 what's found in the annual reports filed with the 0022

1 FCC?

2 A. No.

3 Q. Then could you please, sir, give me your

4 history of Life Partners Holdings and Life Partners,

5 Inc.?

6 MR. HILBERT: This is argumentative.

7 He just did. we just went through this.

8 THE WITNESS: It is the same as what

9 I just told you.

10 MS. STRETESKY: I'm asking him,

11 though, what he told -- what he says when he meets

12 with potential licensees.

13 MR. HILBERT: He just told you the

14 history of the company. He just gave it to you.

15 Q. (BY MS. STRETESKY) Okay. Could you

16 please give me the philosophy of Life Partners

17 Holdings, Inc. and Life Partners, Inc.?

18 A. Well, first of all, Life Partners

19 Holdings, Inc. is a holding company and has no

20 operations, so it's merely a holding vehicle. It

21 does not operate.

22 Life Partners, Inc.'s philosophy is

23 to do the best job we can to act on behalf of the

24 purchaser as their agent. The purchasers, we act as

25 their agent to give them as much information 0023

1 possible about policies that are entered into the

2 market for the purpose of being sold by the sellers

3 and their representatives.

4 So we're kind of the Caldwell Banker

5 of the insurance world, you might say, in that we,

6 Life Partners, represents, through an agency and

7 special power of attorney, clients -- who you would

8 call investors -- clients who are interested in


9 purchasing policies. And our philosophy is to do

10 the best job possible to get them the most accurate i

11 information, up-to-date information, so they can

12 make an informed decision on whether or not they

13 want to buy a policy or a portion of a policy.

14 Q. Is it your opinion that Life Partners,

15 Inc. is in the business of insurance? 16


A. No, we're not in the business of

18 insurance.

19 Q. (BY MS. STRETESKY) Is it your opinion --

20 correct me if I'm wrong -- that Life Partners, Inc.

21 is in the business of brokering insurance contracts?


23 A. No, we're not brokering insurance

24 contracts.

25 Q. (BY MS. STRETESKY) When you have occasion 0024

1 to meet with potential licensees or licensees here

2 in Waco to give them the background and the history

3 and the philosophy of Life Partners, Inc., do you

4 discuss the SEC case, Life Partners versus SEC?


6 A. I do not, but that information is provided

7 by our legal department and it is discussed, yes.

8 Q. (BY MS. STRETESKY) And your legal

9 department would be Scott Peden?

10 A. Yes, or Justin Bound.

11 (Clarification by the reporter.)

12 THE WITNESS: Bound. B -O- U - N - D.

13 Q. (BY MS. STRETESKY) Do you recall ever

14 having any communications with a client who resides

15 in Colorado?

16 A. No.

17 Q. Have you ever been to Colorado?

18 A. Yes.

19 Q. How many times?

20 A. Twice.

21 Q. And what were the circumstances?

22 A. well, the first time was to go to Vail for

23 a skiing vacation, although I don't ski.

24 (Laughter.)

25 Q. (BY MS. STRETESKY) You can sit by the 0025

1 fireplace; right?

2 A. And that was about 20 years ago.

3 Q. Okay. And the other occasion that

4 you've --

5 A. The other occasion was to lay a courtesy

6 call on our -- the owner of the -- tie trustee we

7 were using at the time, which was a bank there that

8 owns Sterling Trust, a Texas nonbank trust company.

9 Q. And what was the purpose of the courtesy

10 call?

11 A. To eat dinner. We had dinner with the

12 chairman and senior officers and just talked to them

13 about the, you know, the business. Just a courtesy

14 call; there was no specific purpose.

15 Q. Do you recall when that was?

16 A. It was more than a year ago, but I don't

17 recall exactly when.

18 Q. Are you still -- is Life Partners, Inc.

19 still using Sterling Trust as the escrow agent?


20 A. We do still use them; yes.

21 Q. Are they your primary escrow agent at this

22 time?

23 A. Well, they are one of three.

24 Q. How often do you discuss Life Partners,

25 Inc.'s business with Scott Peden? 0026


2 A. well, pretty much on an ongoing basis.

3 He's a senior officer of the company. we both work

4 here so we --

5 Q. (BY MS. STRETESKY) would it be fair to

6 say on a daily basis?

7 A. To the extent we are here, yes.

8 Q. Does he consult you prior to making

9 decisions with regard to Life Partners, Inc.?


11 A. well, not all of them, no. Not all

12 decisions, no.

13 Q. (BY MS. STRETESKY) Most decisions?


15 A. I don't know that I would say most

16 decisions. It would be a -- probably not.

17 Q. (BY MS. STRETESKY) what type of decisions

18 does he consult you on?

19 A. He consults with me on legal matters and

20 personnel matters. Part of his role is operational,

21 and so he consults with me on that. Primarily

22 technical issues of the company's operations.

23 MR. KLEIN: Can we take a little

24 break?

25 (Recess at 9:33 a.m. to 9:38 a.m.) 0027

1 Q. (BY MS. STRETESKY) I just had a few more

2 questions.

3 A. okay.

4 Q. Could you describe the process by which --

5 how Life Partners, Inc. finds policies for sale?


7 A. They are tendered to us by -- usually by

8 representatives of the sellers.

9 Q. (BY MS. STRETESKY) Could you describe the

10 process by which Life Partners utilizes licensees to

11 market policies to purchasers?



14 A. we don't market policies to purchasers.

15 Q. (BY MS. STRETESKY) What do you do?

16 A. we make policies available for purchasers

17 who are interested in owning a policy or a piece of

18 a policy as an investment.

19 Q. How do you do that?

20 MR. HILBERT: Ob . ct to form.

21 A. well, by going throug h a very significant

22 underwriting pprocess to gather all the information

23 that we possibly can that would be pertinent as to

24 all the aspects of the policy that could possibly

25 have an effect one way or the other, you know, on 0028

1 the owner if they chose to buy it. They make the

2 choice.

3 Q. (BY MS. STRETESKY) Who determines what

4 information would be pertinent to a potential

5 purchaser? pardo brian 8-27-08.txt



8 A. well, the purchasers in -- over the years

9 have pretty well, you know, told us what is

10 important to them. And then we, ourselves, having

11 an expertise in underwriting now thousands of

12 ppolicies, also understand that there are also, you

13 know, legal and technical matters concerning, for

14 instance, as an example, illustrations of premiums

15 in the future and that sort of thing that they

16 wouldn't necessarily know about.

17 So I would say it's been a

18 combination of us and purchasers, who all of our

19 purchasers are sophisticated investors under the

20 meaning of the act. And so they are pretty smart

21 people, as you found out.

22 Q. (BY MS. STRETESKY) And when you say

23 "under the act," which act are you referring to?

24 A. The Securities Act.

25 Q. The Colorado Securities Act? 0029

1 A. Well, I'm talking about the Securities Act

2 3334. I think Colorado adheres to the uniform

3 Securities Act.

4 Q. Do you understand the process by which the

5 policies are presented to potential purchasers?



8 A. I'm not sure I understand the question.

9 Q. (BY MS. STRETESKY) Could you describe to

10 me how it is that Life Partners is presented with a

11 policy for potential purchase or for sale by a

12 viator, and then how it goes from there to getting

13 in front of a potential purchaser, clients of LPI?



16 A. well, as I said, the policy, which is now

17 almost all senior life settlements, no longer --

18 viatica] settlement, as you know, is a term of art.

19 But life settlements are generally seniors who are

20 wishing to sell their policies. And I think I

21 already told you they are presented to us through

22 their brokers or agents who are wanting us to buy

23 the policy or find a buyer for the policy.

24 Once the policy is vetted and deemed

25 to be acceptable, then it is circulated in brief in 0030

1 what we call a confidential case history to

2 licensees who have clients, their clients,

3 interested in buying policies. And then they make

4 the decision. HOw they, each one, goes about making

5 that decision is up to them. we just provide them

6 with the information.

7 Q. (BY MS. STRETESKY) You mentioned that the

8 policies are vetted. Are they vetted to determine

9 who the insurance carrier is?

10 A. I think that would be pretty important,

11 wouldn't you?

12 Q. Is that a "yes"?

13 A. Yes, that's a yes. YOU can put that in

14 the definite "yes" column.

15 Q. Are they vetted to ensure that the

pardo briar 8-27-08.txt

16 contestability period of the policy is completed?

17 A. Yes.

18 Q. Are they vetted for determination of life

19 expectancy?

20 A. Yes.

21 Q. Who makes the determination of life

22 expectancy?

23 A. Usually that's --


25 A. -- done by a third party. Doctors or 0031

1 medical underwriters experienced in estimating life

2 expectancy; although the senior settlements, the

3 average age of the insured is 78 to 82, so their

4 life expectancies are estimated. But it doesn't

5 take a mental giant to figure out that, you know,

6 these people are probably not going to be around,

7 you know, a long, long time.

8 Q. (BY MS. STRETESKY) Regardless of what

9 health issues they may have?

10 A. Well, if they have a serious health issue,

11 then, of course it could be less; but if they have a

12 family history of good health, it would be

13 conceivably longer.

14 Q. Who contracts with the third party making

15 the life expectancy determinations?

16 A. We do. Life Partners does.

17 MS. STRETESKY: I don't think I have

18 anything else.

19 MR. HILBERT: Thank you.

20 (DEPOSITION CONCLUDED AT 9:45 A.M.) 21 22 23 24 25 0032

1 CHANGES AND SIGNATURE

2 WITNESS NAME: BRIAN D. PARDO DATE: 08-27-08

3 PAGE LINE CHANGE REASON 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0033

pardo Brian 8-27-08.txt 1 I, BRIAN D. PARDO, have read the foregoing

2 deposition and hereby affix my signature that same

3 is true and correct, except as noted above. 4 5 6

BRIAN D. PARDO 7

THE STATE OF 8 COUNTY OF 9

10 Before me, , on this

11 day personally appeared BRIAN D. PARDO, known to me

12 (or proved to me under oath or through

13 ) (description of

14 identity card or other document)) to be the person

15 whose name is subscribed to the foregoing instrument 16 and acknowledged to me that they executed the same

17 for the purposes and consideration therein

18 expressed.

19 Given under my hand and seal of office this

20 day of 21 22

NOTARY PUBLIC IN AND FOR 23

THE STATE OF COMMISSION EXPIRES:

24 25 0034 1

DISTRICT COURT, CITY AND )

2 COUNTY OF DENVER, ) COLORADO )

3 ) 1437 Bannock Street )

4 Denver, CO 80202 ) )

5 FRED J. JOSEPH, ) Securities Commissioner )

6 for the state of ) Colorado, )

7 ) Plaintiff, )

8 ) v. )

9 ) LIFE PARTNERS, INC., a )

10 Texas Corporation, LIFE ) PARTNERS HOLDINGS, INC., )

11 a Texas Corporation, ) SCOTT PEDEN, SCOTT )

12 BEEMER, ERIC COX, LOWRY ) LYNNE DAVIS, GARY HANSON, )

13 TIM HARPER, KENNETH ) KELLER, MIKE LOWE, LARRY )

14 MICKELSON, JOHN ROTH, ) RALPH SIEBERT, AND BRIAN )

15 PARDO, ) )

16 Defendants. ) )

17 JOHN W. SUTHERS, )

pardo brian 8-27-08.txt Attorney General ) Case No, 2007 CV 5218

18 CHRISTINE C. STRETESKY, ) 31749* )

19 RUSSELL KLEIN, ) Div.: 5 31965* )

20 Asst. Attorneys General ) 1525 Sherman Street, )

21 7th Floor ) Denver, CO 80203 )

22 303-866-5278 ) 303-866-5395 Facsimile )

23 *Counsel of Record )

24 ORAL DEPOSITION OF BRIAN D. PARDO

25 AUGUST 27, 2008 0035

1 I, Sherry D. Current, Certified shorthand

2 Reporter in and for the State of Texas, hereby

3 certify to the following:

4 That the witness, BRIAN D. PARDO, was duly sworn

5 by the officer and that the transcript of the oral

6 deposition is a true record of the testimony given

7 by the witness;

8 That the deposition transcript was submitted on 9 to the witness or

10 to the attorney for the witness for examination,

11 signature and return to me by 12

13 That the amount of time used by each party at the

14 deposition is as follows:

15 MS. STRETESKY 00 HOURS:38 MINUTE(S)

16 MR. KLEIN 00 HOURS:00 MINUTE(S)

17 MR. HILBERT 00 HOURS:00 MINUTE(S)

18 MR. TENENBAUM 00 HOURS:00 MINUTE(S)

19 That pursuant to information given to the

20 deposition officer at the time said testimony was

21 taken, the following includes counsel for all

22 parties of record:

23 PLAINTIFF FRED J. JOSEPH, Securities Commissioner for the State of Colorado:

24 JOHN W. SUTHERS, Attorney General

25 CHRISTINE C. STRETESKY, 31749 0036

1 Asst. Attorneys General 1525 Sherman street, 7th Floor

2 Denver, CO 80203 (303) 866-5278 Telephone

3 (303) 866-5395 Facsimile

4 FOR THE DEFENDANTS LIFE PARTNERS, INC., a Texas Corporation, LIFE PARTNERS HOLDINGS, INC., a Texas

5 Corporation, SCOTT PEDEN, TIM HARPER, LARRY MICKELSON, JOHN ROTH, AND BRIAN PARDO:

6 Mr. Otto K. Hilbert, II

7 Robinson waters & O'Dorisio, P.C. 1099 18th Street

8 26th Floor Denver, Colorado 80202-1926

9 (303) 297-2600 Firm (303) 824-3120 Direct

10

pardo brian 8-27-08.txt 11 FOR THE DEFENDANTS SCOTT BEEMER, ERIC COX, LOWRY

LYNNE DAVIS, GARY HANSON, KENNETH KELLER, MIKE LOWE

12 AND RALPH SIEBERT: 13

Mr. Thomas Tenenbaum 14 The Tenenbaum Law Firm

Park Ridge Corporate Center, Suite 600

15 10475 Park Meadows Drive Lone Tree, Colorado 80214

16 (303) 804-3800 Telephone (303) 804-3802 Facsimile

17

18 I further certify that I am neither counsel for,

19 related to, nor employed by any of the parties or

20 attorneys in the action in which this proceeding was

21 taken, and further that I am not financially or

22 otherwise interested in the outcome of the action.

23 Further certification requirements pursuant to

24 Rule 203 of TRCP will be certified to after they

25 have occurred. 0037

1 certified to by me this 12th of September, 2008, 2 3 4

Sherry D. Current

5 Texas CSR No. 3113 Expiration Date: 12-31-09

6 ASSOCIATED COURT REPORTERS Firm No. 29

7 P. 0. Box 1247 Waco, Texas 76703

8 (254) 753-3330 Telephone (800) 340-5881 Toll Free

9 (254) 754-4050 Facsimile 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0038

1 FURTHER CERTIFICATION UNDER RULE 203 TRCP 2

3 The original deposition was/was not returned to

4 the deposition officer on •

5 If returned, the attached changes and Signature

6 page contains any changes and the reasons therefor;

7 If returned, the original deposition was

8 delivered to MS. STRETESKY, Custodial Attorney;

9 That $ is the deposition officer's

10 charges to the PLAINTIFF FRED J. JOSEPH, Securities

11 Commissioner for the State of Colorado for preparing

pardo brian 8-27-08.txt 12 the original deposition transcript and any copies of 13 exhibits; 14 That the deposition was delivered in accordance 15 with Rule 203.3, and that a copy of this certificate 16 was served on all parties shown herein on and filed 17 with the Clerk. 18 Certified to by me this day of 19 , 2008. 20

Sherry D. Current 21 Texas CSR No. 3113

Expiration Date: 12-31-09 22 ASSOCIATED COURT REPORTERS

Firm No. 29 23 P. 0. Box 1247

Waco, Texas 76703 24 (254) 753-3330 Telephone

(800) 340-5881 Toll Free 25 (254) 754-4050 Facsimile

Brian Pardo LPHI Deposition

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