Structured Settlements 4Real: What's Real News in the Structured Settlements, Settlement Planning, Consulting and Lawsuit Recovery Space?

Which PLAINTIFF EXCLUSIVE Structured Settlement Firm Has People Who CURRENTLY Do Defense Work?

If there's one thing that is disingenuous in the structured settlement industry it's those "righteous" people whose moral compass allows them to CHOOSE to advertise with a straight face that they are "plaintiff exclusive", intending that to mean something, while they hide the fact that some of the company is doing defense work. Some people would call that intentional misrepresentation.

One defense case, one defense client, turns their whole advertising slogan into a lie.The use of the ABSOLUTE word exclusive, gives the structured settlement firm in question no room, no excuse for blatant false advertising. They deserve to be pilloried and will be.

Stay tuned for the outing of this firm, coming soon to a blog near you.

 This is going to be juicy.

"Will anyone do anything about it Watch Puppy? "Will my lawyer care?"

Sins of Omission and Comission in the Settlement Industry

This author is aware of a structured settlement firm whose members routinely use a small excerpt of a published document to compete with another firm. The complete published document puts the small excerpt into context but the offensive structured settlement firm in question chooses to omit those material facts for its own financial gain. It's an embarrassment to the integrity of the industry.

There is nothing wrong with competition. Complete comparisons however, are the order of the day.

This author intends to expose the firm in question in due course but will hold off approximately 30 days in the hopes that the firm in question reads this blog or this blog is pointed in their direction by someone else in the industry and they reconsider this behavior.

It is possible that there is more than one firm that uses the same published document in the same manner as the firm that is the subject of this post.

The Hartford Announces New CEO

One hopes for the sake of its policyholders that Liam McGee brings the luck of the Irish to The Hartford.

Ireland born McGee was tapped as the new CEO of 199 year old Hartford Financial Services Group, Inc., which has struggled in the last year. McGee has a strong banking background and was most recently a senior executive at Bank of America.

Given the nature of the task ahead, it seems fitting to recite this notable Irish blessing for good luck over the event of Mr.  McGee's investiture.

"May the frost never afflict your spuds.
May the outside leaves of your cabbage always be free of worms.
May the crow never pick your haystack.
And may your donkey always be in foal".

Read Wall Street Journal coverage about Liam McGee and Hartford Financial Services Group, Inc.

"Statistically 90% of lump sum settlements are gone IN LESS THAN TWO YEARS" Say New York Settlement Consultants

Eat your heart out Jeremy Babener!

The Lien Resolution Group says on its web site** that "statistically 90% of lump sum settlements are gone in less than TWO YEARS". WOW, NO... NO... I Mean WOW!

Forget The Rutter Group and their tortoise like five years, these esteemed industry colleagues apparently have the statistics for a TWO YEAR bust.

If they have the evidence Brett Newman and Leo Dunn Fox should share it!  And THEN they deserve to be held on the shoulders of the entire industry for coming up with the statistic that puts the need for a new dissipation study to rest! Bravo boys! 

** as of September 29, 2009 830pm EDT

Structured Settlements and The Big Mediation Mistake

We've all been there, a long exhaustive day of mediation ends up with a settlement and the next thing you know everyone of tired mind is scrambling to cobble together a mediation agreement or perhaps the mediator has his/her own version.

WARNING! Avoid torching all your hard work after a long day of settlement negotiations at mediation by blowing it on flawed "cookie cutter" documentation!

If a structured settlement is to be part of the resolution of a claim or suit, then the consideration for the structured settlement is the stream of periodic payments. While I know it's important to know the cost, THE COST IS NEVER THE CONSIDERATION IN A STRUCTURED SETTLEMENT. Documentation, including a mediation agreement that is binding, must reflect the correct language.

Here's how easy it is to blow if you're not paying attention:

Assuming no court approval is needed, if parties sign a mediation statement that states the parties agree to settle for the sum  of $2,000,000 and that the receipt of said sum will release all claims and mediation agreement is a binding agreement AND all parties are represented by counsel and they all sign it, is there anything else standing in the way of the plaintiff receiving the money?

Plaintiff attorneys

If your client expects to receive tax-free periodic payments as a result of a negotiated settlement, or you are structuring your attorney fees, be sure the mediation agreement does not include language that will cause constructive receipt of the money that will fund the future payments. On a large case with lifetime payments, the cost of constructive receipt could be in the millions in lost tax-free interest (tax-deferred in the case of attorney fees structures or employment settlements).

Defendants and Claims Representatives

Constructive Receipt means that there can be "no structure". If the structured settlement has somehow managed to slip through the processing, that means you are potentially exposed to an unwind of the qualified assignment and your company owning an asset where interest will now be adversely taxed . If properly structured, the qualified assignee has an income tax exclusion for owning the "qualified funding asset". If you, or who you represent, is not a tax-exempt entity you will be left holding the bag with an asset that may no longer be qualified.

Constructive receipt is the doctrine that taxes income before the income is actually received. It is contained in Treasury Regulations § 1.451-2(a) as follows:

"Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given".  Thus, to have “constructive receipt,” the plaintiff must have both the right to the income and the power to compel payment.

Under the constructive receipt doctrine, an individual who has an existing right to receive income payable immediately cannot defer taxation of that income by refusing or delaying receipt. Critical to the constructive receipt analysis is whether the individual has an unrestricted right to the funds and turns his or her back on them.

Mediators

We know you like to keep it simple.  So do we! Consider having one form for settlements that have a structured settlement component, or contemplate a structured settlement as part of the resolution, and another for cash settlement.

We've all been there, a long exhaustive day of mediation ends up with a settlement and the next thing you know everyone of tired mind is scrambling to cobble together a mediation agreement or perhaps the mediator has his/her own version.

WARNING! Avoid torching all your hard work after a long day of settlement negotiations at mediation by blowing it on flawed "cookie cutter" documentation!

If a structured settlement is to be part of the resolution of a claim or suit, then the consideration for the structured settlement is the stream of periodic payments. While I know it's important to know the cost, THE COST IS NEVER THE CONSIDERATION IN A STRUCTURED SETTLEMENT. Documentation, including a mediation agreement that is binding, must reflect the correct language.

Here's how easy it is to blow if you're not paying attention:

Assuming no court approval is needed, if parties sign a mediation statement that states the parties agree to settle for the sum  of $2,000,000 and that the receipt of said sum will release all claims and mediation agreement is a binding agreement AND all parties are represented by counsel and they all sign it, is there anything else standing in the way of the plaintiff receiving the money?

Plaintiff attorneys

If your client expects to receive tax-free periodic payments as a result of a negotiated settlement, or you are structuring your attorney fees, be sure the mediation agreement does not include language that will cause constructive receipt of the money that will fund the future payments. On a large case with lifetime payments, the cost of constructive receipt could be in the millions in lost tax-free interest (tax-deferred in the case of attorney fees structures or employment settlements).

Defendants and Claims Representatives

Constructive Receipt means that there can be "no structure". If the structured settlement has somehow managed to slip through the processing, that means you are potentially exposed to an unwind of the qualified assignment and your company owning an asset where interest will now be adversely taxed . If properly structured, the qualified assignee has an income tax exclusion for owning the "qualified funding asset". If you, or who you represent, is not a tax-exempt entity you will be left holding the bag with an asset that may no longer be qualified.

Constructive receipt is the doctrine that taxes income before the income is actually received. It is contained in Treasury Regulations § 1.451-2(a) as follows:

"Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given".  Thus, to have “constructive receipt,” the plaintiff must have both the right to the income and the power to compel payment.

Under the constructive receipt doctrine, an individual who has an existing right to receive income payable immediately cannot defer taxation of that income by refusing or delaying receipt. Critical to the constructive receipt analysis is whether the individual has an unrestricted right to the funds and turns his or her back on them.

Mediators

We know you like to keep it simple.  So do we! Consider having one form for settlements that have a structured settlement component, or contemplate a structured settlement as part of the resolution, and another for cash settlement.

NASP Code of Ethics National Association of Settlement Purchasers

According to material contained in a Symetra Life Ins. Co. v. Rapid Settlements, Ltd., --- F.Supp. ---, 2009 WL 2252248, *3 (S.D. Tex. July 28, 2009),  NASP actually has a code of ethics

As stated therein, The NASP Code of Ethics requires adherence to the SSPAs and to federal law. It
provides:

A) Members shall follow and adhere to all state and federal
statutory law applicable to the transfer of structured
settlement payments;
B) Members shall not purchase structured settlement payments
unless the transaction has been approved in advance by a
court or administrative agency;
C) Members shall not knowingly purchase worker’s
compensation payments or broker such transactions to a nonmember.

It's a pity that many members of NASP apparently choose to interpret the words "federal law" to mean only law embodied in IRC 5891.

The FEDERAL truth in advertising laws are clear and some NASP members continuously lie about their ability to deliver what they promise in their advertising, particularly with respect to the ad nauseum, "Cash Now". Why is it so hard for people to tell the truth?

Thanks to the secondary law blog for alerting us to this incomplete  "code of ethics"

"This is deceit, plain and simple" Say Legal Recruiters

One of our watchdog projects for this year has been to clean up the credential puffery and resume omissions or truth stretching (on LInkedIn) that has gone on for far too long in the settlement industry.

While reading the ABA Journal online I came across an excellent article simply titled "Keep Your Resume Honest". The following are two poignant excerpts:

"In the age of e-resumes and data systems that store millions upon millions of historical documents, recruiters and employers now have the ability to look longitudinally at information in resumes provided by candidates over many years and map the "content drift" of this information. This provides an entirely new way of determining a candidate's veracity when it comes to his or her employment history". Deborah Ben-Canaan and Martha Fay Africa  The Recorder  September 22, 2009

“Candidates may think that stretching the truth a little bit is not a big deal, but it is,” the article says. “We have heard lawyers tell us that they only worked in a job for a few months, so they left it off their resumé, or they had a bad experience in that job, so it was left off the resumé and then dates were stretched to cover any resumé ‘gaps.’ This is deceit, plain and simple.” (underline added for emphasis)

Use of Qualified Settlement Fund Will Mitigate Factoring Problem...Says NYU Law Student

The purpose of this post is to focus on the 8th wonder.  NO, NOT THE"Old School classic " by The Sugarhill Gang

 

 

I'm "wondering" about S2KM's  incredible 8TH POST about their putative "Elvis Presley" of  structured settlements, NY Law School student Jeremy Babener. In honor of this, tonight "we're gonna turn THIS motha-- sucka out!"

According to Jeremy Babener in the exclusive interview he gave to apparent structured settlement "Svengali" Patrick Hindert, Babener's QSF paper "focuses on the Treasury's treatment of single-claimant QSFs, recommending their explicit eligibility for the structured settlement tax subsidy. In order to properly consider the subject, however, one must view the question in the context of three decades of structured settlement tax and policy history".

This is the same Jeremy Babener who questioned the "structured settlement tax subsidy" due to lack of empirical evidence and called for an a new study to ground the tax subsidy. Babener dismissed the anecdotal evidence "From a policy standpoint, however, the fundamental importance of this subsidy demands more than mere opinion. A policy that impacts millions of taxpayers and subsidy recipients is deserving of a substantiated empirical foundation.”

 S2KM asks: "What linkage, if any, exists between your QSF paper and your dissipation paper?"

Babener answers: "The dissipation paper was actually the result of research for the QSF paper. To explain the justification for the structured settlement tax subsidy, I needed to find the basis for the claim that lump sum recipients frequently dissipate their settlements. In time, I realized the empirical work cited could not be found."

The dissipation paper observes there is no empirical foundation for the structured settlement tax subsidy, although much anecdotal evidence exists". The "Svengali" Hindert, who (cited by Babener)  testified before Congress about dissipation when Congress was considering the "structured settlement tax subsidy" in 1982, in June 2009 referred to a similar statistic as an "especially pernicious myth" For those readers unfamiliar with the word "pernicious" it " implies irreparable harm done through evil or insidious corrupting or undermining" (see Merriam Webster)

Babener contends that opponents of such Treasury guidance on single claimant 468B QSFs "argue that the use of single-claimant QSFs will lead to less structured settlements, and therefore more premature dissipation of settlement monies".  He ALSO states that the " QSF paper considers how to increase the effectiveness of the tax subsidy by structuring in a non-combative and less hurried context".

Wait a minute, isn't this is the same guy who said that the tax subsidy needs a strong empirical foundation? Hindert reported on June 23, 2009 that "Babener recommends a new United States study to develop "empirical and substantiated" dissipation statistics for injury victims because the United States tax subsidy for structured settlements is premised on this belief".

By acknowledging the substantial anecdotal evidence and the fact that Babener is now looking for ways to "increase the effectiveness of the tax subsidy" that is only grounded (reading between the lines) by the "flimsy" empirical  evidence, strong anecdotal evidence and the "pernicious myth", must we care about Babener conclusions (and as a by product, Hindert's)  in the vaunted dissipation paper?

S2KM Hindert:  What are the strongest public policy arguments for and against single claimant QSFs?

Babener on the arguments against: He says opponents say "By removing defendants from the structuring process, QSFs may result in many plaintiffs not being pushed to structure. However, there are at least two problems with this argument.

• First, it must be remembered that while defendants have an economic incentive to structure, they do not have an economic incentive to structure accurately, matching the timing of plaintiff’s future payments with future needs.
• Second, just as defendants have an incentive to structure to mitigate settlement costs, other parties have an economic incentive to encourage plaintiff to structure even outside of plaintiff-defendant negotiations. These are structured settlement advisors (and possibly QSF administrators), whose business depends upon plaintiffs understanding the benefits of structuring.

There will surely be plaintiffs whose use of single-claimant QSFs ends in a lump sum distribution rather than structuring. But, there are likely many more who will structure, who otherwise would not have as a result of the plaintiff-defendant settlement process. By increasing the frequency of structuring, and the accurate matching of future payments to future needs, the use of QSFs will prevent premature dissipation (and the need to factor) in many cases".

Comments:

1. Babener's assertion that defendants do not have an economic incentive to "structure accurately" demonstrate a fundamental lack of understanding of the processes that qualified settlement consultants employ when representing defendants. For the purposes of this point I will use Babener's overly simplistic definition of "structuring accurately" as matching the plaintiff's future payments with future needs. In his extensive research perhaps Babener did not encounter any settlement consultant who "accurately" priced out a life care plan, or accurately looked into collateral sources

2. While on the one hand some settlement planners retained by the defense may not be able to ask and/or obtain the answers to all of the questions that a settlement planner retained by the plaintiff might (due to access), the Registry of Settlement Planners standards of conduct acknowledges that a settlement planner "may also represent a defendant". Furthermore a skilled settlement planning expert should be able to learn a considerable amount of answers to potential questions from available forensic evidence and use this to make a thoughtful and meaningful presentation. It is very rare that even a settlement planner retained by the plaintiff, who asks a ton of questions, creates a structured settlement design that is not tweaked at least once.

3. At often $3,000-$4,000 a pop, the cost of QSFs in a single claimant context make it very expensive to use as every day every case place setting on the settlement table. My February 22, 2009 post Qualified Settlement Fund As A "Settlement Planning Standard" Caveat-1"  discusses this point.  Hindert, in a previous post acknowledges the cost and the need to bring it down.

4. Babener asserts that there are likely many more who will structure, who otherwise would not have as a result of the plaintiff-defendant settlement process. Where is the objective proof? I submit that settlement planners who recommend a single claimant QSF already know whether or not a structured settlement will take place.

5. Babener disappoints with the "kitchen sink conclusion that" by increasing the frequency of structuring, and the accurate matching of future payments to future needs, the use of QSFs will prevent premature dissipation (and the need to factor) in many cases".

6. My interpretation of Babener's statement is that he believes (or has been led to believe) QSFs will reduce "over structuring" and thus reduce factoring. As someone who has experience from both viewpoints and has participated in QSFs, including single claimant QSFs as part of case resolution, I can safely say that on a broad level this is highly speculative. The CT Woman saga about which I've previously reported, shows how a plaintiff settlement consultant did a poor job of assessing a woman's cash needs and this led to her factoring a part of her structured settlement within a minimal time lapse from conclusion of her case. All a QSF would have done it that scenario would have increased her cost and her already needless "loss of principal".

7. A single claimant QSF is not an open ended life time device. Many are open and closed within a very short time period. Moreover a QSF is not going to increase a settlement planner's "powers of clairvoyance", solve poor future decision making by the plaintiff, lack of budgeting along the continuum of the person's life or other human frailties.

What next from Hindert,"The Sauerkraut Polka"?

New Bentzen "Snirtle" ...

It truly is an amazing feat that B.S. can get more traffic on Internet than  EPS Settlements Group and SFA!

Yes that's right B.S. as in "Bentzen says", and Alexa!

And Bentzen doesn't say much, the only things she's written about this year are about this author, an obsession about late Senator Joe McCarthy, and industry gossip (although Perez Hilton she's obviously not).

On further analysis of Alexa research it appears that a lot of the traffic is bogus and driven by key words contained in the gossip.  For example "Tom Stevenson American National" drives a lot of traffic to Rhonda's site. The 91.3%  three month bounce rate is indicative of a take of visitors to the site that is underwhelming.

The tag line to one of the  "related links" compiled by Alexa is thus dripping with irony.

 "A bear, the world and the strong urge to hibernate"

"The Logan Report"

Revered NSSTA Board Member Jim Logan continues to characterize an industry professional certification in a manner that* is misleading, and inconsistent with the guidelines set down and perhaps voted on by the Board on which he serves. How can this be?

Here is Jim's profile.

Here is the NSSTA webpage entitled Promoting the CSSC

I have always known Jim to be a decent human being. Why is he doing this?

How can we have faith in, or continue to respect the people we call leaders, if THEY don't even follow the rules and guidelines THEY set?

As we move into the next phase of our watchdog commentary we intend to single out others who choose to continue to characterize the CSSC certification in a manner that is both misleading, and inconsistent with the guidelines set forth by NSSTA. Not that there was ever anything in doubt, but at this point there are no excuses.

* at the time of this post