The daughter of a Holocaust survivor is suing a White Plains investment firm for $12.5 million for allegedly cashing in on a phony life insurance policy.
Shelly Pechter Himmelrich accused Jade Mountain Partners of acquiring a stranger-originated life insurance policy in the name of Jack Herbert Pechter, according to a complaint filed on Feb. 4 in U.S. District Court, White Plains.
Such policies convert legitimate life insurance policies “into cash machines,” the complaint states, “for strangers who are more interested in seeing [the insured] dead than alive.”
Speculators have wagered on the lives of strangers for hundreds of years, according to the lawsuit. In the early 2000s, institutional investors began pooling high-value life insurance policies into tax-exempt entities or trusts and selling them to other investors.
Life settlement companies identify elderly people with large life insurance death benefits, estimate the individuals life expectancy, and calculate the potential profitability of buying the policy.
The original policy-holder gets a quick cash benefit. The new policy-holder pays the monthly premiums and collects the death benefit when the individual dies.
The sooner the individual dies, the more likely the new policy-holder makes a profit.
In 1939, when Jack Pechter was five, he and his parents and three sisters escaped Poland after the Nazi invasion. Eventually, they ended up in Baltimore, and Pechter went on to develop a real estate business, became active in philanthropy, and co-founded the International Institute for Holocaust Research.
In 2006, when he was 71, a $12.5 million life insurance policy was issued in his name. But the policy was originated by Coventry life settlement company, according to the lawsuit, and did not include an insurable interest, such as his estate and survivors, as required by law.
It allegedly included a sham loan, “to conceal from the insurance carrier the fact that … premiums were paid by Coventry for the purpose of creating a wager on Mr. Pechter’s life.”
Coventry, which is not named as a defendant in the lawsuit, traded the policy on a secondary market, the complaint states. Cremello Investments D L.P, a Cayman Islands hedge fund managed by Jade Mountain Partners, acquired the policy.
Cremello and Jade Mountain should have known that the policy had been procured without an insurable interest, in violation of the law, according to the complaint.
Jade Mountain’s latest investment adviser report says it has $822.6 million in assets under management.
The firm believes “in family and friends,” its website states. It creates wealth but not for its own sake. Instead, “we do it to provide for our children and those of our clients.”
Last year, Jack Pechter, of Boca Raton, Florida, died. He was 89. Cremello Investments received the death benefit.
Now the Estate of Jack Herbert Pechter, represented by his daughter, Shelly, is accusing Jade Mountain of conspiracy to wager on human life and is demanding that Cremello and Jade Mountain pay the estate $12.5 million.
Jade Mountain did not reply to a request for comment that was submitted through its website.
