Citizens, Inc. – Stock Artificially Inflated?
Citizens, Inc. – SeekingAlpha Reports; Class Action Lawsuit Filed
On March 8, 2017, SeekingAlpha reported that “Citizens, Inc. (NYSE:CIA) uses a network of unregulated brokers to sell complex life insurance policies to foreign retail investors and retirees. The policies are sold through promises of outsized ‘guaranteed’ returns backed by U.S. Treasury bonds. However, the money is not invested in U.S. Treasuries and the policies appear designed to prop up Citizens’ stock price.”
SeekingAlpha further reported that
[b]ecause most of the returns to existing policyholders are driven by funds contributed by new policyholders, Citizens displays some characteristics that appear analogous to a Ponzi scheme. The performance of CIA shares drive the returns to existing policyholders, but these purported returns hinge directly on Citizens’ ability to prop up its stock price with a constant flow of new money from policyholders. [Emphasis in original]
The money is funneled from policyholders into Citizens’ stock through a feature in which a portion of premiums is paid back as benefits and “dividends.” These funds are routed to Citizens’ transfer agent who facilitates continuous purchases of CIA shares in the open market.
The dividend feature is structured so that most of the projected policy value hinges on the performance of CIA stock. But the inherent risks are often concealed from retail investors who are falsely told that most of their money is backed by U.S. Treasury Bonds inside “savings accounts” that will secure their retirement or children’s education.
On March 16, 2017, a class action lawsuit was filed against Citizens, Inc. over alleged securities laws violations. The plaintiff alleges that Defendants made false and/or misleading statements and/or failed to disclose that Citizens’ brokers and pitchbooks falsely claimed that most of the funds from its insurance policies were directly invested in U.S. Treasury Bond; funds from Citizens’ insurance policies were funneled into continuous open market purchases that inflated Citizens’ stock price; and as a result, Defendants’ statements about Citizens’ business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
Citizens, Inc. Shareholders
If you are a Citizens, Inc. shareholder and wish to speak privately with a securities attorney to learn whether you may have legal claims against Citizens’ officers and directors, please complete the form to the right or contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected] or send an e-mail to [email protected].
Kehoe Law Firm, P.C.
Kehoe Law Firm, P.C. is a multidisciplinary, plaintiff–side law firm dedicated to protecting investors and consumers from corporate fraud, negligence, and other wrongdoing. Driven by a strong and principled sense of social responsibility and obtaining justice for the aggrieved, Kehoe Law Firm, P.C. represents plaintiffs seeking to recover investment losses resulting from securities fraud, breaches of fiduciary duty, corporate wrongdoing or malfeasance, those harmed by anticompetitive practices, and consumers victimized by fraud, false claims, deception or data breaches. Together, the partners of Kehoe Law Firm, P.C. have spent more than 30 years prosecuting precedent-setting securities and financial fraud cases in federal and state courts on behalf of institutional and individual clients.
