Exhibit 10.1

 

LOGO [g344352ex10_1-pg001.jpg]

 

  

U.S. Department of Justice

 

United States Attorney

District of New Hampshire

  

 

   Federal Building    603/225-1552    53 Pleasant Street, 4th Floor      
Concord, New Hampshire 03301       April 30, 2012   

Maria A. Barton, Esq.

Benton J. Campbell, Esq.

Barry M. Sabin, Esq.

Latham and Watkins LLP

885 Third Avenue

New York, New York 10022

Re:    Imperial Holdings, Inc.

Dear Ms. Barton and Messrs. Campbell and Sabin:

On the understandings specified below, the United States Attorney’s Office for
the District of New Hampshire (the “USAO”) will not criminally prosecute
Imperial Holdings, Inc. or any of its present or former subsidiaries or
affiliates (collectively referred to as “Imperial” or the “Company”) for any
crimes (except for criminal tax violations, as to which the USAO does not make
any agreement) related to the Company’s involvement in making and agreeing to
make, or aiding and abetting the making of, misrepresentations on life insurance
applications in connection with its premium finance business from 2006 through
2011, including the specific conduct described in Appendix A hereto, and
potential securities fraud claims related to the premium finance business.

The USAO enters into this Non-Prosecution Agreement based, in part, on the
following factors: (a) Imperial’s complete disclosure of the facts described in
Appendix A; (b) Imperial’s self-investigation and cooperation with the USAO to
date; (c) Imperial’s decision to voluntarily terminate its premium finance
business; (d) the fact that Imperial employees who are known at this time to
have been primarily responsible for the conduct described in Appendix A are no
longer at the Company; (e) Imperial’s acceptance of the resignation of a senior
officer and termination of senior sales staff involved in the premium finance
business; and (f) the negative impact and collateral consequences that charging
the Company would have on the Company’s employees and shareholders and other
business activities that are not part of the USAO’s investigation.

It is understood that Imperial admits, and accepts and acknowledges
responsibility for, the conduct set forth in Appendix A, and agrees not to make
any public statement contradicting Appendix A, provided, however, that nothing
in this paragraph precludes Imperial from taking good faith positions in any
other contexts, including in any civil litigation or regulatory proceeding.

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If Imperial fully complies with the understandings specified in this
Non-Prosecution Agreement, the USAO will not bring any criminal case against
Imperial based on the conduct of present and former officers, directors,
employees, agents, and consultants, related to the Company’s involvement in
making and agreeing to make, or aiding and abetting the making of,
misrepresentations on life insurance applications in connection with its premium
finance business from 2006 through 2011, including the specific conduct
described in Appendix A hereto, and potential securities fraud claims related to
the premium finance business. This Agreement does not provide any protection
against prosecution for any crimes except as set forth above, and applies only
to Imperial and its present or former subsidiaries and affiliates and not to any
other entities except as set forth in this Agreement or to any individuals.
Imperial expressly understands that the protections provided under this
Agreement shall not apply to any acquirer or successor entities unless and until
such acquirer or successor formally adopts and executes this Agreement.

This Agreement shall have a term of three years from the date of this Agreement,
except as specifically provided in the following paragraph. It is understood
that for the three-year term of this Agreement, Imperial shall: (a) commit no
U.S. crimes whatsoever; (b) truthfully and completely disclose non-privileged
information with respect to the activities of Imperial, its officers and
employees, and others concerning all matters about which the USAO inquires of
it, which information can be used for any purpose, except as otherwise limited
in this Agreement; (c) use best efforts to identify witnesses who, to Imperial’s
knowledge, possess material information regarding the matters covered by this
Agreement, including all aspects of Imperial’s premium financing business as
identified in Appendix A, Paragraph 7; and (d) bring to the USAO’s attention all
criminal conduct by, or criminal investigations of, Imperial or any of its
employees that comes to the attention of Imperial or its management, as well as
any administrative proceeding or civil action brought by any U.S. or state
governmental authority that alleges fraud by or against Imperial. Additionally,
two years from the date of this Agreement, provided that it has otherwise
complied with its obligations under this Agreement, Imperial may petition the
USAO to forego the final year of the Agreement, subject to the provisions of the
following paragraph.

Until the date upon which all investigations and prosecutions arising out of the
conduct described in this Agreement are concluded, whether or not they are
concluded within the three- year term of this Agreement, Imperial shall, with
respect to these matters: (a) cooperate fully with the USAO, and any law
enforcement agency designated by the USAO; (b) assist the USAO by providing
logistical and technical support for any meeting, interview, grand jury
proceeding, or any trial or other court proceeding; (c) use its best efforts
promptly to secure the attendance and truthful statements or testimony of any
officer, agent, or employee at any meeting or interview or before the grand jury
or at any trial or other court proceeding; and (d) provide the USAO, upon
request, all non-privileged information, documents, records, or other tangible
evidence about which the USAO or any law enforcement agency designated by the
USAO inquires, including facilitating USAO and law enforcement access to
Imperial’s non-privileged electronic data and email.

 

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It is understood that, if the USAO in its sole discretion determines that
Imperial has committed any crime after signing this Agreement, that Imperial has
given false, incomplete, or misleading testimony or information at any time, or
that Imperial otherwise has violated any provision of this Agreement, Imperial
shall thereafter be subject to prosecution for any violation of federal law of
which the USAO has knowledge, including perjury and obstruction of justice. Any
such prosecution related to the facts set forth in Appendix A that is not
time-barred by the applicable statute of limitations on the date of the signing
of this Agreement may be commenced against Imperial, notwithstanding the
expiration of the statute of limitations between the signing of this Agreement
and the expiration of the term of this agreement if the term of the Agreement
lasts three years or, if the USAO agrees to forego the last year of the term of
the Agreement as discussed above, one year beyond the effective date of the
USAO’s decision. Thus, by signing this Agreement, Imperial agrees that the
statute of limitations with respect to any prosecution related to the facts set
forth in Appendix A that is not time-barred on the date that this Agreement is
signed shall be tolled for the term of three years from the date of this
Agreement, as set out in this paragraph.

Upon execution of this Agreement, Imperial agrees to pay a monetary penalty of
$8,000,000.00, in equal amounts to the Federal Bureau of Investigation, the
United States Secret Service, and the United States Postal Inspection Service
Consumer Fraud Fund, pursuant to instructions provided to Imperial by the USAO
under separate cover, by April 30, 2012. Imperial acknowledges that no tax
deduction may be sought in connection with this payment.

It is understood that, if the USAO in its sole discretion determines that
Imperial has committed any crime after signing this Agreement, or that Imperial
has given false, incomplete, or misleading testimony, or has otherwise violated
any provision of this Agreement: (a) all statements made by Imperial to the USAO
or other designated law enforcement agents and any testimony given by Imperial
before a grand jury or other tribunal, whether prior or subsequent to the
signing of this Agreement, and any leads from such statements or testimony,
shall be admissible in evidence in any criminal proceeding brought against
Imperial; and (b) Imperial shall assert no claim under the United States
Constitution, any statute, Rule 410 of the Federal Rules of Evidence, or any
other federal rule that such statements or any leads therefrom should be
suppressed. By signing this Agreement, Imperial waives all rights in the
foregoing respects.

It is further understood that this Agreement does not bind any federal, state,
local, or foreign prosecuting authority other than the USAO. The USAO will,
however, bring the cooperation of Imperial to the attention of other prosecuting
and investigative offices, if requested by Imperial.

It is further understood that Imperial and the USAO may disclose this Agreement
to the public.

With respect to this matter, from the date of execution of this Agreement
forward, this Agreement supersedes all prior, if any, understandings, promises,
and/or conditions between the USAO and Imperial. No additional promises,
agreements, or conditions have been entered into other than those set forth in
this Agreement and none will be entered into unless in writing and signed by all
parties.

 

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  JOHN P. KACAVAS   United States Attorney By:  

/s/ Seth R. Aframe

  Seth R. Aframe By:  

/s/ Arnold H. Huftalen

  Arnold H. Huftalen   Assistant United States Attorneys   United States
Attorney’s Office   District of New Hampshire

 

AGREED AND CONSENTED TO:

Imperial Holdings, Inc.

By:  

/s/ Michael Altschuler

  Michael Altschuler   General Counsel APPROVED: By:  

/s/ Maria A. Barton

  Maria A. Barton  

/s/ Benton J. Campbell

  Benton J. Campbell  

/s/ Barry M. Sabin

  Barry M. Sabin   Attorneys for Imperial Holdings, Inc.

 

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APPENDIX A

STATEMENT OF FACTS

This Statement of Facts is incorporated by reference as part of the
Non-Prosecution Agreement, dated April 30, 2012, between the United States
Attorney’s Office for the District of New Hampshire (“USAO”) and Imperial
Holdings, Inc. or any of its present or former subsidiaries or affiliates
(collectively referred to as “Imperial”). The USAO and Imperial agree that the
following facts are true and correct:

1. Imperial is a specialty finance company headquartered in Boca Raton, Florida
and incorporated under Florida law. In February 2011, Imperial held an initial
public offering and was listed on the New York Stock Exchange.

2. Prior to February 2011, Imperial was a private limited liability company that
was organized on November 29, 2006. At that time, the company’s primary business
activities involved providing premium financing for life insurance policies and,
beginning in 2007, purchasing structured settlements. The senior representatives
of Imperial divided primary responsibility for running the premium financing and
structured settlement businesses.

3. With respect to the premium finance business, Imperial normally issued loans
for the purpose of paying premiums on universal life insurance policies. Most
loans typically matured in approximately two (2) years from the loan date. With
few exceptions, Imperial obtained funding for the loans from various credit
facilities. Between in or about December 2007 and December 2010, Imperial’s
lenders required that it obtain lender protection insurance coverage for premium
loans to ensure that the credit facilities would be repaid in the event a loan
defaulted.

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4. The stated terms of premium finance loans offered by Imperial typically
required either a personal guaranty up to the full extent of the loan or a
$5,000 cash contribution from the insured. In addition the loan agreements
provided that (1) the life insurance policy be held in an irrevocable life
insurance trust, (2) a professional co-trustee be appointed and (3) the
co-trustee be responsible for ensuring that premium payments were made from the
proceeds of the loan. At all times during the loan, the policy was owned by an
irrevocable life insurance trust for beneficiaries, who were required to be
family members of the insured.

5. At loan maturity, the borrower had several options: repay the loan and retain
ownership of the policy; sell the policy in the secondary market and use the
proceeds to pay off the loan; or default on the loan and relinquish ownership of
the policy. In the majority of loans, the borrower defaulted on the payment of
the loan and relinquished ownership of the policy under the terms of the loan
agreement.

6. Pursuant to Imperial’s business model, Imperial had the opportunity to make
money at the beginning as well as the end of the loan transaction. Life
insurance carriers normally paid commissions to agents for placing life
insurance policies. As a condition to making premium finance loans on insurance
policies, Imperial received agency fees that were calculated off of the
commissions received by the life insurance agents who wrote the underlying
policies. At the end of the loan transaction, in the instances where a loan was
repaid by the borrower, Imperial also was paid a substantial origination fee and
interest on the loan in addition to the outstanding principal.

7. Imperial financed premiums on life insurance policies that were submitted to
the Company through three separate channels. First, Imperial conducted seminars
to

 

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market life insurance policies and premium financing to individuals over 65
years old (referred to as the “retail seminar business”). Second, certain
Imperial employees who were also licensed life insurance agents worked with
external general agents and brokers to obtain life insurance for individuals
over 65 years of age from various insurance carriers and premium financing from
Imperial (referred to as the “retail non-seminar business”). Finally, Imperial
financed premiums on life insurance policies that had been obtained by external
agents and brokers (referred to as the “wholesale business”).

8. Imperial engaged in the wholesale business from 2006 through 2011. As part of
this business, the Company financed premium finance loans for policies obtained
by external agents and/or brokers who assisted prospective insureds in
completing life insurance applications and submitting the applications to
various life insurance companies.

9. Imperial employees had direct contact with prospective insureds in the retail
seminar and the retail non-seminar businesses and those Imperial employees who
were also life agents were directly involved in making representations on behalf
of the prospective insureds on applications for life insurance from the various
carriers. The retail seminar business ended in or about May 2008 and the retail
non-seminar business ended in or about January 2009.

10. From December 2006 to January 2009, in connection with its retail
non-seminar business, those Imperial employees who were also life agents
assisted prospective insureds and external general agents and brokers in
completing life insurance applications and submitting the applications to
various life insurance companies. During this process, Imperial had direct
contact with prospective insureds and/or should have demanded direct access to
prospective insureds.

 

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11. At all relevant times, certain insurance companies required that the
prospective insured applying for a life insurance policy, and sometimes the
agent, disclose information relating to premium financing on applications for
life insurance policies. These questions typically required the prospective
insured to disclose if he or she intended to seek premium financing in
connection with the policy and sometimes required the agent to disclose if he or
she was aware of any such intent on the part of the applicant.

12. From December 2006 to January 2009, in connection with the retail
non-seminar business, Imperial had a practice of disclosing on applications that
the prospective insured was seeking premium financing when the life insurance
company allowed premium financing from Imperial. However, in certain instances,
Imperial internal life agents facilitated and/or made misrepresentations on
applications that the prospective insured was not seeking premium financing when
the insurance carrier was likely to deny the policy on the basis of premium
financing.

13. To the extent that external agents, brokers and insureds caused other
misrepresentations to be made in life insurance applications in connection with
the retail non-seminar business from December 2006 to January 2009, Imperial
failed to appropriately tailor controls to prevent potential fraudulent
practices in this business.

14. From December 2006 to January 2009, in connection with the retail
non-seminar business, in the course of the application process, Imperial and
external general agents and brokers would mail, fax and/or email some of the
forms to insurance companies and would cause the insurance companies to mail,
fax and/or email policies and other related forms.

 

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15. As a result, in connection with the retail non-seminar business from
December 2006 to January 2009, in certain circumstances, Imperial facilitated
and/or made misrepresentations regarding premium financing on life insurance
applications for elderly individuals and failed to take appropriate precautions
to prevent other misrepresentations that may have been made on said life
insurance applications by employees, prospective insureds, and external agents
and brokers.

16. In or about January 2009, Imperial discontinued its retail non-seminar
business.

 

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