Update: On Jan. 3, 2012, the Securities and Exchange filed suit against Life Partners accusing it and top three executives of defrauding shareholders by overvaluing the life insurance policies it buys from its customers, AP reported.

The SEC also accused Life Partners president Brian Pardo of insider trading. Pardo and the company quickly denied the charges.

Original story follows:

Commission Sarah Palin blasted “corporate crony capitalism” in an Iowa September 2011 speech to supporters. Many interpreted this as an attack on Gov. Rick Perry’s pay-to-play political machine.

Maybe this is an example of the type of thing Palin is talking about:

As first reported in the Wall Street Journal and then Dave Lieber’s Watchdog column in the Fort Worth Star-Telegram, when Texas Gov. Rick Perry and his family flew to South Carolina in August 2011 to announce his presidential run, he rode on a private jet owned by a contributor facing major troubles from federal and state regulators.

Brian Pardo, chief executive of Life Partners Holdings of Waco, gave $50,000 in 2010 to Texans for Rick Perry, records show. He’s a pioneer in the life-settlement investment industry, where investors buy death bonds. They pay for portions of strangers’ life insurance policies, pay the premiums and collect after a person dies. If the people exceed life-expectancy estimates, the investments go bad.

At the federal level, the Securities and Exchange Commission notified Life Partners this year that it intends to file an enforcement action related to accounting and disclosure practices.

At the state level, the Texas State Securities Board, part of the executive branch, has investigated Life Partners for more than a year. Recently, the board — working with the Texas attorney general’s office — filed a court petition seeking to force the company to honor its state-issued subpoenas for company records. In court papers, the board says the company engaged in fraudulent business practices.

Life Partners refuses to give information to state securities regulators. Company lawyers say the financial products are not securities and shouldn’t be regulated as such.

No federal or state charges have been brought against the company, which has denied wrongdoing. But Life Partners also faces a slew of lawsuits from shareholders and disgruntled customers.

The governor’s rides in Pardo’s airplane — one to Iowa in addition to the South Carolina trip — were first reported on the front page of The Wall Street Journal.

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Life Partners didn’t respond to a request for an interview, but in an e-mail to the Journal, Pardo wrote, “I did not discuss the SEC investigation with the governor, to the best of my recollection.”

Perry spokesman Mark Miner told The Life Settlements Report website, “Mr. Pardo was not on the airplane with Governor Perry.” It wasn’t clear which of the two flights he was referring to.

Pardo told the newspaper that the Perry campaign paid for both trips, as required by federal election law.

Neither the governor’s office nor his campaign responded to a request for information from The Watchdog. The state securities board declined to comment, too.

Life Partners describes itself as a purchasing agent that matches people who can no longer afford or don’t want to continue paying their life insurance premiums — or people who bought policies to resell — with investors who buy fractional interests in the policies.

Life Partners’ estimates on when the original policyholders will die have been inaccurate, with many living longer than expected. The Life Settlements Report, an industry newsletter, said that for 262 deaths reported by the company, life expectancy was double the company’s estimates.

The company’s former life-expectancy estimator, a Reno, Nev., doctor, handled up to 200 individual medical reports a week. His job was to guess how long each person would live. By one estimate, he spent nine minutes per case compared with an industry standard of more than an hour reviewing a person’s health history.

Pardo is quoted in the WSJ as saying he supports Perry for president.

Is this the kind of matter that Sarah Palin is talking about?

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Dave Lieber, the author, is The Watchdog columnist at the Fort Worth Star-Telegram in Texas. His new book, Bad Dad, was just released and is getting dynamite reviews. It’s a true-story mystery thriller about what happens when the worst 10 minutes of your life go viral. The columnist is arrested by a police force he investigated. Learn more atwww.BadDadBook.com where you can read Chapter One. The hardcover and e-book are for sale at BadDadBook.com. Immediate shipment!

My colleague at the Fort Worth Star-Telegram, Yamil Berard, has written a story that is significant for every Texan! Cuts ordered by Gov. Rick Perry in the state budget mean that bad doctors can continue to be bad. Same goes for bad electricity providers, bad elevators, tow truck companies, auto storage facilities, beauty shops and many, many, many other businesses.

Texans are losing major protections from their government. This is going to effect the health, pocketbook and well-being of every Texan.

Here’s her story below. I reprint it in case you missed it.

State agencies expect to investigate fewer consumer complaints of wrongdoing by insurance companies, veterinarians and utility companies, as a result of budget cuts proposed to comply with an order from Gov. Rick Perry and other legislative leaders.

Fewer elevator systems, funeral homes, beauty shops and tow truck companies would be scrutinized to make sure they’re providing safe, quality services if the cuts go through as expected.

And consumers would likely lose out on millions of dollars that they would have otherwise pocketed. The Texas Department of Insurance alone estimates that policyholders would sacrifice up to $3 million that would otherwise have been recovered from resolving hundreds of complaints.

Regulatory agencies weren’t spared from the required 5 percent budget cuts intended to help make up for an anticipated shortfall of at least $10 billion in the state budget, even though the agencies typically take in more than enough money from fees and penalties to cover their budgets. The agencies keep a portion, then send most of the money they collect to the state’s general fund to be distributed for other uses.

“It’s a hard economy,” Public Utility Counsel Sheri Givens said. “We’re stretched, but it’s something the Legislature asked for and we’ve complied.”

A question of efficiency

Now the debate is whether the agencies, as they emerge leaner, can also be meaner.

Some say the cuts are appropriate and will lead to better efficiencies in government operations.

“Families are doing the same thing, tightening their belt,” said Peggy Venable, state director of Americans for Prosperty, a political advocacy group whose national headquarters are in Washington, D.C. “We realize that government is too big.”

The group’s Texas chapter and the Lone Star Foundation have partnered to review state expenditures, Venable said. The groups are expected to propose a budget to the Legislature, she said.

The proposal would reflect methods of saving money so that spending is capped.

“Bottom line, some of those regulators and the certification processes [they use], we believe, is totally unnecessary,” she said. “And the self-regulation that takes place doesn’t really result in what we think we need.”

But others say the 5 percent budget reductions will hinder key agencies from fulfilling their role of keeping Texans out of harm’s way.

“Every day, you get on an elevator; you get your hair cut; you get your nails done,” said Alex Winslow, executive director of Texas Watch, a consumer advocacy group in Austin. “If these agencies are having to curtail the number of inspections they do, they’re going to be less likely to be able to find problems.

“Their task is to make sure Texans are safe, and if don’t have resources to do their job, it raises very serious concerns. In some cases, we’re approaching a danger zone.”

Regulatory agencies are income-generators for the state. The Legislature determines how much money the agencies can spend at the beginning of the two-year budget cycle. Agencies then may set their fees to cover operating expenses as well as the amount that the state wants returned for the general fund.

For example, the Texas State Board of Veterinary Medical Examiners collects more than $2.2 million in licensing fees. The Legislature gave it an operating budget of about $1 million for fiscal 2010. The board gives the general revenue fund about $1.6 million.

“As a general proposition, you don’t get to quote, ‘keep,’ anything,” said Dewey Helmcamp, executive director of the board. “That’s the way of the flow.”

Effects on the agencies

Some proposed cuts have been described as “dramatic” and “severe.”

The Texas Medical Board, for example, reported that the 5 percent cut will leave it without enough resources to monitor alcohol- and drug-impaired physicians and other medical professionals.

It also says that its backlog of quality-of-care cases will grow by several hundred if money for expert physician consultants is reduced. The agency already has a backlog of 500 cases. That means hundreds of complaints of bad medicine won’t be addressed, because the physician consultants cannot review cases and give guidance on whether a quality-of-care standard was violated.

“Virtually all of the TMB’s key enforcement performance measures will be negatively impacted if reviews by expert panelists have to be put on hold,” the medical board said in its report filed with the Legislative Budget Board. Without such reviews, standard of care cases, which make up 70 to 75 percent of investigations, cannot be resolved. So none of those cases would be dismissed or would result in a disciplinary action.

Givens said she didn’t want to sacrifice any of her 18 employees at the Office of Public Utility Counsel, which represents the interests of residential and small business customers in utility matters, such as rate increases. But she was asked to cut more than $87,000 from a $1.7 million budget. She is pulling it out of the amount the agency spends on professional fees and services to retain outside experts to review litigation.

The Texas Board of Nursing didn’t want to ax any single program, Executive Director Katherine Thomas said, so it made across-the-board reductions.

“It’s been very difficult, but we’ve been through budget cuts like this before,” Thomas said. “If we have to do it, we have to do it.”

It won’t be able to resolve complaints as quickly because it would have to lay off some investigative staff. Complaints would take 212 days to resolve, rather than 188 days.

And the cuts would slow down random audits and criminal background checks of thousands of state-licensed nurses, the agency says. The nursing board had expected to complete the random checks in a decade but, with the cuts, the effort will take more time.

“Nobody likes it, but we’re all in the same boat,” Helmcamp said. “I know the public probably doesn’t believe it, but we’re operating very close to the minimum we need to get by.”

The bulk of the cuts will come from dollars he would have spent to pay staff to travel to investigate cases of abuse. More of the investigative legwork will be conducted instead by phone, mail and fax, he said.

“There are some cases where we do like to send investigators out,” he said. “We’ll still be able to do that to some extent, just not as much as I would prefer.”

The Texas Department of Licensing and Regulation, which has 380 employees, isn’t filling a number of vacant positions, spokeswoman Susan Stanford said.

Those positions include inspectors of elevators, tow truck companies, auto storage facilities, beauty shops and other businesses. Inspectors make sure shops adhere to sanitation standards, use proper equipment and employ only workers with proper licensing.

The agency didn’t want to cut the budget of its licensing division, Stanford said. “It’s important for the citizens of our state to get their own licenses and not hinder the opening of a new business.”

Texas Department of Insurance spokesman Ben Gonzalez declined to comment about its proposed cuts.

“It would not be appropriate for us to comment,” Gonzalez wrote in an e-mail. “State leadership requested reduction plans.”

He referred any questions to the report the agency filed with the Legislative Budget Board.

It stated that cuts would restrict the agency’s ability to resolve about 1,600 consumer complaints, reducing the amount returned to consumers by $3 million.

The report also said that income benefits for injured employees would be delayed and that injured employees’ access to medical care would be hindered.

All agency heads are watching to see what happens. The order to propose ways to cut the budgets by 5 percent came from Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus. The legislative leaders have not yet approved the 5 percent reduction plan.

“We have not been instructed to execute that plan,” Gonzalez wrote. “Beyond that, we cannot speculate.”