A&O Reaches $11M Settlement with Bond Insurer
Posted April 07, 2010 1:41PM PST

The bankrupt A&O life settlement funds will receive $11 million under a legal settlement with Costa Rican bond insurer Provident Capital Indemnity.

Jeff Marwil, who was recently named as bankruptcy trustee for the A&O funds, disclosed the settlement on a conference call with A&O creditors today.

About 720 investors and creditors are owed about $92 million from seven A&O life settlement funds that filed for Chapter 11 bankruptcy. Federal authorities and Texas securities regulators are investigating allegations of fraud on the part of A&O's principals, Marwil said. He said 23 life insurance policies held by A&O funds remain active.

Many of the policies were supposed to be insured by Provident Capital. Provident is not authorized to write insurance in the U.S., the Securities and Exchange Commission said in an unrelated case. Texas insurance and securities regulators have issued cease-and-desist orders against Provident.

The Provident bonds were to pay the face value of a policy in exchange for transfer of the policy itself if the insured didn't die by a certain date.

Patrick Collins, a former trustee in A&O's bankruptcy, met with Provident President Minor Vargas Calvo in February. Although Vargas Calvo said the bonds were "not active," he agreed to a payment schedule for two policies with face values of $1 million and $10 million, Collins said in a recent court filing.

Source: Court Filing

Correction: A previous version of this article misidentified the defendant in an SEC lawsuit.


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