Structured Settlements 4Real: What's Real on Structured Settlements and Settlement Planning?

Patrick Hindert Called Out On The Carpet For Specifics

A few weeks ago I received an interesting call from author and factoring promoter Patrick Hindert, who is a member of both the National Structured Settlement Trade Association (NSSTA) and The Society of Settlement Planners (SSP). He wants to debate. Game on.

Hindert told me that he is interested in "growing" the "structured settlement industry" yet he continues to display factoring plumage. Who hasn't been subject to "factoring diarrhea" from Hindert? A survey of Hindert's writings in the last 4 years shows virtually no criticism or opinion of such companies' business practices including, among other things:

1. The  "cash now" advertising fraud on consumers
2. The pervasive deceptive "big for small" lure.
3. The message by some of such companies, like Structured Asset Finance (123 Lump Sum) and others that stable value assets should be transferred (at a large discount) to buy depreciating assets.
4. The methods that some such companies use to get leads on apparently confidential sealed cases)
5. The advertising of terms associated with structured settlements that falsely suggest to consumers that factoring companies have insurance licenses and are regulated accordingly.
6. The consistently "off the mark" high discount rates charged to consumers by Peachtree Settlement Funding. Has Hindert ever suggested that consumers should shop to get better rates OR suggested as an academic, the benefit or value of dealing with such a company that consistently charges rates almost twice the most competitive market rate?
7. The Rapid Settlements representative's creepy practice of showing up at citizen's doors that was covered in Rip Off Report.
8. The use of our nation's flag and the seal of the Better Business Bureau by Patriot Settlement Resources to promote "cash now" advertising fraud.
9. The offering of kickbacks to certain structured settlement brokers, settlement planners financial planners and lawyers to get leads, the acceptance of same and the absence of adequate disclosure of same to consumers and the resulting effect on the transaction.
10. The factoring industry chiseling away at structured settlement protection act requirements to obtain independent financial advice by structured settlement recipients. At the same time inconsistent Hindert promotes settlement planning.

Consider all of the above while Hindert authored numerous challenges and criticism of the trade associations to which he belongs. While I may agree with some of his criticism of the industry (which has heretofore been slow to adapt to new media) as healthy, Hindert's selective silence in comment and criticism of "cash now pusher" business practices is notable.  How do the above business practices help consumers?

Hindert has been an active promoter of the flawed "one structured settlement industry" theory (primary/secondary market) and this author believes the de facto endorsement by the co-author of the seminal industry text has emboldened the factoring industry members who engage in behavior that enrages judges and the plaintiff's bar. How does he resolve the regulated vs unregulated issue?

What are Hindert's specifics to his apparent theory that Route 1 to (primary) industry growth is through the unregulated and unlicensed factoring industry?  Vague is no longer in vogue Hindert!

Hindert is called upon to write a white paper laying out the specifics of his thesis.

Marketing Spin Doesn't Cover Up The Fact That One Industry is Regulated and Requires Licensing and Advertising Standards and The Other INDUSTRY Doesn't

Cash Now Pusher Stone Street Capital has created a web page to try and position itself as being part of the structured settlement industry. Fakers eventually get exposed and here's an example with the impostor revealing language highlighted in blue.:

"Insurance companies have multiple roles in regard to structured settlements. They are often the defendant in a lawsuit, more often they are providing insurance coverage to one of their customers who has been sued. If a case is settled with a structured settlement, the insurance company will either purchase or issue an annuity that will pay the settlement recipient for the predetermined number of years. Settlement terms can range widely, paying recipient for as many as 10 - 40 years or for the remainder of the recipient’s life."

Download structured_settlement_market___stone_street_capital_05112008.pdf

Comments:

Cash Now pusher Stone Street Capital incorrectly states that insurance companies are often the defendant in a lawsuit. Perhaps if you are in a state like Louisiana where insurers can be sued, but I don't believe that subtlety came into their thinking in penning the statement.

Stone Street Capital also states that the insurance company (which they've already incorrectly stated is often the defendant in a lawsuit) "will either purchase or issue an annuity". Most structured settlement annuities are purchased by an assignee via qualified assignments. The defendant's insurance company (or as Stone Street would have it, the "insurance company defendant") does not "issue an annuity".

Some die hards in the "factoring industry" like Stone Street continue to follow the Patrick Hindert mantra set out on a concept map that there is primary market and a secondary market segment as part of one big structured settlement industry. It's a boring intellectual exercise but the reality is that there are two separate and distinct industries where there has been an attempt to forge together in name only by opportunists like Stone Street Capital, "pay per posts" that write for and link to them, and the like who feign expertise in structured settlements.

Consider the following substantial differences:

STRUCTURED SETTLEMENT INDUSTRY

1. Individuals and companies who place structured settlement annuities must hold a valid insurance license and be appointed by multiple annuity issuers. 
2. Licensed individuals must comply with state continuing education requirements, including regulations concerning advertising.

FACTORING INDUSTRY

1. There is no requirement to be licensed to be get someone a "cash now fix".  Not only are some factoring companies not required to be licensed, due to regulatory oversight, but a number of entities appear not to be registered to do business with the Secretary of State in all States in which they solicit the "cash now fix"
2. Other than FTC, "truth in advertising" there are no state advertising laws in place to cover solicitation. This has fostered and encouraged the misuse of terms by factoring companies and bad business behavior, purportedly including factoring company representatives showing up unannounced on people's doorsteps. There are things that these people say that those of us that are regulated would not be able to say.
3. Lack of regulation keeps the pushers "on the street corner", on your TV and in the darkest alley ways of the subliminal, targeting YOUR children, YOUR Dad, YOUR Mom, YOUR ward, your Aunt, some of whom are profoundly injured or emotionally vulnerable.

So there is no conundrum here. A cash now pusher IS NOT part of the structured settlement industry simply because of an inarticulate rendition of facts or marketing spin. Those that are regulated do not want to be lumped together or be associated with the acts of the unregulated factoring industry.

More supporting evidence of separate industries:

October 8, 1998 JG Wentworth website stated about what it does "Businesses have been doing it for years-they call it factoring. We call it Advanced Funding" Download welcome_to_j.G 10081998.pdf . This message continued through 2000 and 2001 Download welcome_to_the_j.G Wentworth 11282001.pdf  and into as late as August 2002, after the creation of IRC 5891. Download welcome_to_the_j.G Wentworth 08022002.pdf . THEN, in September 2002, JG Wentworth began to disassociate from the word "factoring"-what "businesses have been doing for years" in favor of "Advanced Funding" and for the first time unveiled its "structured settlement program" (as opposed to structured settlement factoring program) and officially became a "cash now" pusher.Download welcome_to_the_j.G Wentworth 09222002 cash now first appearance.pdf . JG Wentworth began to refer to itself in advertising as a "finance company"

In 2004, JG Wentworth, for the first time outrageously claimed to be "the leader in structured settlements". The meta tags for the web page relegate the word "factoring" to an afterthoughtDownload j.G. Wentworth_ Advanced Funding _ Cash For Structured Settle 2004.pdf

The structured settlement industry is not about some old fart pushing you for a "cash now fix", or a bunch of idiots half smiling as they're screaming from balconies that they want "cash now" (which they really can't get "now" from the advertiser), or salesmen who imply you should trade a stable value asset with a high credit rating, for a discounted present value, with the idea of running out and purchasing another asset guaranteed to depreciate in value. But the face of the factoring industry is.

NASP President's Company Google Ad Nonsense

Is there anywhere on the ad below, that appeared in a Google Search for "Structured Settlements GA", that gives any indication that it is a structured settlement factoring company. Despite advertising to the contrary and unless it has changed its business model, Novation Capital DOES NOT deliver structured settlement quotes. It is also not a structured settlement General Agency (GA).

Here is the ad (the URL link has been disabled for this post- you can see in the download below)

Structured Settlements
As Seen on TV - Call The Experts
800-486-1525 - Free Quotes and More
Download novation_cap_offensive_google_ad_5112008.pdf

Mr. Shapiro, those crazy outsourcers are at it again! Blame it on the dog!

You did such a nice job in helping to validate the "cash now" fraud in your industry, how about continuing to set an example by stopping advertising what you don't do and start advertising what you DO do.

House Investigation Into Plaintiff Lawyer Kickbacks on Class Action Cases?

Tulsa settlement planner Robert Risk's February 13th "man of class and grace", disgraced class action lawyer William Lerach, reports to Federal Prison on May 19, 2008 after pleading guilty to charges of criminal conspiracy in conjunction with a class action scheme. Two Republican members of the House of Representatives, John Boehner (R-OH) and Lamar Smith (R-TX) recently suggested that Congress has ignored the steadily unfolding scandal and call for a hearing.

"If in fact the crimes committed by Mr. Lerach and his colleagues are an 'industry practice' as Mr. Lerach himself confessed, then the United States Congress is sitting idle while criminal behavior in the trial lawyer industry threatens American jobs and feeds like a parasite on the prosperity of working families" Boehner stated in a letter to House Judiciary Chairman John Conyers (D-MI) dated May 2, 2008.

Are we shortly going to see people start defending the payment of kickbacks as "helping consumers"?

Maybe, if the comments to the Wall Street Journal's Nathan Koppel in Kickbacks to Plaintiffs: Industry Problem? provide any indication. Click here to read the post and the comments

There is an interesting social debate here.  On the one hand it is argued that the kickbacks made by Lerach and others, purportedly help consumers. Some argue that without the payoff it wouldn't be worth a lead plaintiff's time; that the consumer helping class action suits couldn't be launched and the legal work done helps consumers. The flip side of the debate says that the kickbacks cost American companies money, results in shutting companies down or forces them outside the United States; the resulting loss of American jobs or other incremental costs ultimately hurts American consumers.

New Tool Helps YOU Take Control and Know When To Tell Peachtree Settlement Funding to "Shove Their Offer Up Their Ass"

The Structured Settlement Factoring Discount Rate Calculator puts cash strapped structured settlement recipients in control.

A structured settlement factoring transaction is the source of cash of last resort for those structured settlement recipients who have exhausted all other options. Unfortunately many tort victims are victimized however, through their own ignorance and laziness, by cash now pushers like Peachtree Settlement Funding and others (click here for the "cash now" pushers list) who opportunistically charge high discount rates, due to a lack of regulation of such companies and perhaps due to the knowlege that a significant percentage of consumers are so desperate that they won't shop (even though better rates can be had elsewhere). While it is hoped that the situation will change in the near future, now there is an easy way for you to take control. There is no need for you to be a victim! Take control NOW!

With the Structured Settlement Factoring Discount Rate Calculator you, your lawyer, settlement planner, or your financial advisor can easily input the offer that you receive from a company like Peachtree Settlement Funding and then tell them to "shove their offer up their ass"

To access the Structured Settlement Factoring Discount Rate Calculator simply click the title highlighte in blue and then enter the requested information. If it seems to tough to handle then STOP, immediately call your financial advisor, settlement planner or someone who can help you enter this information. It is critical to know what the discont rate is after all expenses so that you can evaluate what the deal is going to cost you. For example if some windbag from a cash now pusher is telling you to sell your structured settlement payment rights to buy a boat, an alternative investment, throwing a plasma TV into the deal and you use the calculator to determine that there is an effective discount rate of 19.9% that is a pretty crappy alternative for you.

Another thing you can use the calculator for is to determine the net effect of structured settlement factoring vig paid on your case. Structured settlement factoring vig is the term used to describe commissions and/or referral fees paid to persons or companies who refer business to factoring companies or factoring brokers.  It is possible that the person making the referral is taking vig and not disclosing this to you, or the amount. YOU NEED TO KNOW  (1)whether that person is taking a fee (SO ASK THEM UPFRONT- HOW MUCH? HOW IS IT CALCULATED?)  and (2) the effect of that commission/fee on the ultimate discount rate you are paying. You should ask for a quote with and without a fee. If the settlement planner or advisor insists on getting paid instead of working pro bono then, armed with the information about the effect of their fee on the discount rate you have the power to negotiate. If they won't negotiate then consider working with someone else, or someone who will not charge such a fee.

You can check the structured settlement clean vendor list. The individuals on this list, including this author, have made declarations under penalty of perjury that they do not take the "vig". While it may beg the question, if an individual is not on this list that doesn't automatically mean that they are a vig taker. You must ask them and get it in writing. Only 2 settlement planners have openly declared that they take referral fees, even though factoring broker Rhonda Bentzen publically declared in December 2007 that 90% of her clients do. Other sources besides Bentzen tell us that settlement planners are building in referral fees, some substantial, whether it they disclosed or not!

Kudos to Andrew Cravenho at the Settlement Quotes Factoring Exchange for posting this valuable discount rate calculator tool for consumers, lawyers, judges, settlement planners and advisors.

What Is A Structured Annuity?

A structured annuity is a "longevity insurance" product that provides one or more fully customizable payment streams tied to the terms of a settlement agreement and release. Depending on the case, a qualified assignment or a non qualified assignment, Court Order and proof of birth and other requirements may be needed.

For examples of structured annuity payment streams please click here

A structured annuity is different from a regular annuity. Where a structured annuity is used in the resolution of a personal injury lawsuit for payment of damages under IRC 104(a)(2), or the settlement of a workers compensation claim under IRC 104(a)(1), as part of a structured settlement, the payments received by the payee*** are income tax free. The term structured annuity is commonly used interchangably with the term "structured settlement". Technically the term "structured settlement", which is defined under the Internal Revenue Code *, refers to the form of case resolution, whereas a structured annuity is one of two types of "qualified funding asset"** that may be used to fund a structured settlement. It may also be used to fund a structured judgment, such as a judgment under New York Article 50A or 50B.

A structured annuity may also be underwritten. Structured settlement underwriting means that the annuity issuer may consider medical issues of the annuitant in pricing the cost of the structured benefit streams. Only the cost of lifetime structured payments or life contingent structured payments are affected by a so-called "rated age". Depending on your position in a case, a high rated age means that it will cost less money to finance lifetime or life contingent structured payments, OR that the yield will be boosted to the plaintiff annuitant for a given set of funding as part of a structured settlement offer.

A structured annuity may also be used in conjunction with a non qualified assignment (also known as a "non qualified structured settlement" or "tax deferred structured settlement") to resolve disputes that do not involve personal physical injury or physical sickness. Creative litigators (plaintiff or defense) and financial advisers who think creatively and can get their arms around the concept (or retain a settlement consultant or settlement planner who does) can enhance their effectiveness in a wide variety of litigation settlement applications.

Some of the more "out of the box examples (click on title for more information):

Divorce structured settlements and  Non Qualified Structured Settlements In Divorce

Environmental structured settlements

A structured annuity can exclusively be obtained from a select cadre of appropriately licensed insurance agents and brokers of which this author is one. Be wary of false advertising by companies which advertise "structured settlement quote" yet their mission is to offer cash to you in exchange for your rights to receive structured payments.

If you have questions about a structured annuity, or want to obtain a structured settlement quote, please call this author, toll-free, at 888-325-8640

* see IRC 5891

** see IRC 130(d); an obligation of the US government is another form of "qualified funding asset"

***also called "annuitant", although sometimes may be different

NATLE endorsed factoring company, Strategic Capital Added to "Cash Now Pushers" List

It has to be said...The factoring company that has been endorsed by the National Association of Trial Lawyer Executives (NATLE), Strategic Capital, is on the "cash now pusher" list. What an embarassment!

Click here for the link to the NATLE web site which highlights this.

Here is  one web page Download strategic_capital_corporation_cash_now_question_592008.pdf  which ironically appears next to a tab entitled "consumer protection".

Here is another Download strategic_capital_corporation_cash_now_question_592008_no_2.pdf

Click here for the link to the webpage where NATLE represents to its members that the program was very thoroughly investigated by the NATLE Affinity Commitee. NATLE now looks foolish for this quote "When this happens, rather than have the plaintiff call one of those “1-800-Get-Your-Money-Now” companies seen on TV, they and their attorney can be assured that they are using a reputable company". That's a direct quote from the NATLE web site.

Let's face it, "cash now" is essentially a fraud on consumers. Companies like Stategic Capital, Peachtree Settlement Funding and advertise that they deliver cash now (Peachtree says "all your money now" which is even worse) but the reality is that if an AUDIT were conducted  of every transaction since they started advertising "cash now" that they do not really pay "cash now". For those of you who on any given day may be seen to "plotz" over the subtleties of "may" versus "shall" why are you lowering your standards by the de facto endorsement of "cash now"?

I ask you how NATLE can, in good concience, endorse a company that is (among others) perpetuating this misleading advertising to consumers that NATLE and its members are trying to serve? What credibility do YOU, as a NATLE member have if this endorsement of Strategic Capital is a paid endorsement, which it appears to be as an affinity program?

Why does the fine Haggard Law Firm in Coral Gables, Florida appear to endorse this company on both the Strategic Capital website and its own?

http://www.strategiccapital.com/strat_whychoose.asp

http://www.haggardparks.com/legal_links.asp

The next question is which members of the structured settlement industry are currently endorsing Strategic Capital by sending business their way? Who is taking structured settlement factoring vig from Strategic Capital?

AIG Posts Q1 Earnings Loss-Putting Things in Perspective for Structured Settlement Payees, Lawyers for Tort Victims and Parties in Litigation

I received a call today from an attorney who asked me what I thought about today's AIG announcement of its first quarter loss (see below).

Let's look back a short while before coming back to May 8th.

February 10, 2006  AIG announcement of settlement  with Eliot Spitzer and New York State Insurance Department   (and I received calls like I did today and in the months after 9-11-with press induced fears that life insurance and workers comp exposures from 9-11 would cripple structured settlement annuity insurers)

THEN

March 17, 2006 Business Insurance states that AIG posted a 6.5% increase in profit despite a drop in net income in the 4th quarter (attributed to the charge for the settlement)

May 8, 2008.  American International Group (AIG) reports a $7.81 billion first-quarter loss and announced plans to raise $12.5 billion in new capital. According to the Wall Street Journal. the insurance giant, which has been battered by soured investments on credit-default swaps and other mortgage-related investments, plans to sell new shares, equity-linked securities and fixed-income securities with a large equity component included. While the losses are a nice chunk of change, if the company raises that money, and there is no reason to suggest that it won't, then the filling of such "equity" offering will mean that investors believe in the future of the company.

If you have the jitters reading these things then take a deep breath, try and put things in perspective and discount the media sensationalism a bit. Calm doesn't sell newspapers!

Consider that AIG is the 18th largest company in the world according to the 2008 Forbes Global 2000 list with over a $trillion in assets and operations in 130 countries.  AIG Investments comprises a group of international companies in 46 offices around the world and they alone manage nearly $753 billion in assets as of March 31, 2008 according to its web site.  AIG was founded in 1919. When the company says it has the "strength to be there one has to consider that AIG has survived The Stock Market Crashes of 1929 and 1987, The Great Depression, The Real Estate Crisis of the late 1980s, World War II, The Korean War, The Bay of Pigs, The Vietnam War, the 1970s Oil Crisis, The AIDS crisis, 9-11, Eliot Spitzer (turned out he was the one who didn't survive) and plenty more economic expansions and contractions.

Consider that on May 6, 2008 UBS, Switzerland's largest bank, on Tuesday reported a first-quarter net loss of 11.5 billion Swiss francs, driven by a $19.5 billion write down tied to U.S. real estate and structured credit. The Stamford Advocate (my hometown Stamford CT is where the US operation for UBS is based) reported that 5,500 jobs are to be cut worldwide by mid-2009. That's seems alot on its face, but then you dig deeper and realize thats out of a work force of over 83,000!

Actuaries for AIG's structured settlement annuity issuers, American General Life Insurance Company and American International Life Assurance Company of New York must certify their viability annually to insurance regulators . Both companies have received the highest rating of A++XV (Superior) by AM Best. Their assignees are rated A+XV (Superior) by AM Best and secured creditor is offered as an option.

Not withstanding an educated personal preference of the attorney or client , be wary of the opportunistic  settlement planner who uses today's report to situationally trash AIG to suit their personal financial interests while concurrently placing business with them.

In a recent filing with the SEC, AIG reported that payout annuity volume for the first quarter of 2008 increased over first quarter of 2007. The report cited strong sales of structured settlements and terminal funding annuities (which are used to buy out defined benefit pension liabilities from terminating plans).

Pressman Settlements Inartful Use of "Leverage" Helps Teach A Financial Literacy Lesson

One of my pet projects is helping to improve the financial literacy in my part of the world. One of my pet peeves is when "the teachers" sling financial jargon in a sales approach or advertising that on its face contributes or has the potential to contribute to "the illiterati".

For example here's what "over 21 years experience in banking, finance and structured settlements" gets you..."We ensure sound fiscal management of funds by leveraging life insurance companies with A+, AM Best rating, or better". So states the advertising claim of Structured Settlement Brokerage firm Pressman Settlements Corporation on how their services benefit attorneys and their clients.

According to Wikipedia, the term fiscal refers to government debt, expenditures and revenues, or to finance (particularly financial revenue) in general.  On fiscal policy Investopedia states "Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy". For the state of Illinois "Fiscal Management provides budgeting and accounting suport to the Office of State Fire Marshall"

As used in finance, Wikipedia defines leverage is using given resources in such a way that the potential positive or negative outcome is magnified. It generally refers to using borrowed funds, or debt, so as to attempt to increase the returns to equity. In my opinion the use of leverage by Pressman Settlements Corporation is misplaced. See the more appropriate word "diversification" below.

The word ensure means "to make sure or certain of something". If Pressman Settlements is implying that she or it can ensure sound fiscal management of funds by leverage then one better check her or its Errors and Omissions policy. I doubt there is enough in the aggregate to cover the chance thats she or it is wrong on that claim.

Comments:

Diversification in finance is a risk management technique, related to hedging, that mixes a wide variety of investments within a portfolio. Because the fluctuations of a single security have less impact on a diverse portfolio, diversification minimizes the risk from any one investment.

A structured settlement provides a stable source of income tax free payments to tort victims on its own, or integrated as part of a settlement plan. The size of the payment sets an incremental limit on spending, but it does not set a "spending policy" or budgeting or control the economy.

Diversification of annuity issuers part of a settlement plan can be a prudent strategy but it cannot absolutely ensure anything. While annuity issuer life insurers are generally conservative, a structured settlement brokerage firm has no control over the performance of investments or investment management of any structured settlement annuity issuer. Diversification can provide greater comfort in that it may minimize the risk of default from any one annuity issuer.

Professional Designations: SFSP Publishes White Paper

The growing concern on the part of regulatory agencies – including the SEC, FINRA and the Senate Committee on Aging – that unscrupulous advisors are using their credentials to take advantage of consumers. While much of the focus to date has been on seniors, similar issues apply to solicitation of tort victims and their families. The proliferation of professional designations and credentials and resulting marketplace confusion.

The "credentialed only" Society of Financial Service Professionals ("SFSP"), of which this author is a member, uses the following guidelines to determine whether the credential is eligible for membership:

1. The credential is awarded by an accredited institution or examining body as a designation or academic degree.
2. The credential is awarded after successful completion of an examination or series of exams designed to measure mastery of a body of knowledge.
3. The credential is subject to a minimum experience requirement appropriate to the field of expertise.
4. The credential requires a commitment to continuing advanced education.
5. The credential requires adherence to a professional code of ethics.

Click here for the complete white paper published April 10, 2008

Structured settlement brokers, brokerage firms and settlement planners should be mindful about how they display their credentials and and be careful not to present them in any way that could be misleading to consumers.