Gold Coast fund director linked to US bankruptcy

That firm is implicated in an alleged $137 million scam.

American businessman Andrew J.Walter, who is a director of the Gold Coast's Life Settlements Wholesale Fund and owns 25 per cent of its controlling company, is named as a defendant in a US civil suit lodged by 4600 investors.

They allege they were victims of a "pyramid scheme" and are seeking $180 million in compensation.

The revelation will increase pressure on the Brumby Government to investigate why the Victorian Funds Management Corporation last year put $600million of public sector superannuation savings into the fund. The State Opposition recently called for a public inquiry into the corporation's investment decisions.

The fund buys life insurance polices at a discounted rate from wealthy, elderly Americans and bets on when they will die.

On November 7, it banned withdrawals and new applications after it emerged that it had relied on flawed data that underestimated how long policyholders were living and increased the period of time it would be liable to pay premiums on the policies.

For the past week, the fund's directors have told investors the fund would re-open within 24 hours. However, several deadlines have been missed. Its latest deadline is today.

US company records show that between 1994 and 1998, Mr Walter was a director and senior executive at Beneficial Assistance, a firm involved in buying and selling life insurance policies held by terminally ill Americans.

Corporate regulators in numerous US states took action against Beneficial Assistance and its related companies before it filed for bankruptcy in 2002.

Mr Walter resigned from his positions at Beneficial Assistance and related companies in July 1998, receiving a $1.5 million payout. At that time, the company had $US21million in revenues from its life insurance policy business.

Australian business associates of Mr Walter's told The Age the US businessman was an innocent party in the suits against his former company.

Mr Walter, along with several other former directors of Beneficial Assistance and related companies, is named as a defendant in a lawsuit being heard in the Baltimore City Circuit Court.

The statement of claim alleges that 79 per cent of the people from whom Beneficial Assistance bought life insurance policies had lived three years longer than had been expected, meaning that the company couldn't afford to pay premiums.

Beneficial Assistance is accused of failing to disclose to investors the fact the doctor who provided 75 per cent of its life expectancy certifications had no medical degree.

The suit alleges that Mr Walter was also among dozens of sales agents acting for the company who provided misleading information to investors about the returns they could expect.

Got a tip? email: Investigations@theage.com.au

KEY POINTS

$600million of state super tied up in 'death fund'.

Fund stopped withdrawals after relying on bad actuarial data.

Brumby pressured to respond.