A bankrupt seller of stakes in life insurance policies didn’t just mislead investors with early death estimates. It also deceived them about how much they would get when the policyholder died, a trustee found.

Life Partners Holdings Inc. employed a “wide-ranging scheme” to cheat investors in so-called life settlements, trustee H. Thomas Moran said in court papers filed Wednesday in Fort Worth, Texas, adding new allegations about the company, which has already been the target of a Securities and Exchange Commission lawsuit.

Life settlements -- known as viaticals or death bonds -- are investments in which terminally ill or elderly persons sell their life-insurance policy for cash, and an intermediary -- in this case, Life Partners -- sells a stake in the policy to investors. When the insured person dies, the investor gets the death benefit as a return on the investment.

Artificially shortened life-expectancy figures supplied by the company’s consultant convinced investors that their returns would be greater, Moran said. He announced his findings and requested court approval to control the payout of death benefits, manage premiums and take other measures to unwind the fraud in Chapter 11 bankruptcy.

Life Partners lied about when policies lapsed, charged massive undisclosed fees and deceived investors about its practices in order to dodge securities regulations -- all of which came on top of “egregious and continuous self-dealing by insiders,” Moran said.

SEC Suit

Life Partners filed for bankruptcy in January seeking to avoid a $46 million Securities and Exchange Commission fraud judgment against it and key officers, including the former chief executive. The SEC found a consultant hired by Life Partners to estimate life expectancies had used unreasonable methods, resulting in underestimates.

Moran’s investigation uncovered other techniques used to extend the fraud, including forcing investors to abandon their stake in policies and reselling them for personal gain. The company commingled investors’ money and used it in unauthorized ways the report didn’t specify.

Life Partners generated huge profits by concealing the actual amount it paid to acquire policies, Moran said, describing an instance in which it charged investors almost $3 million for contracts that cost the company only $700,000.