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

Need For Greater Financial Literacy Underscored by National Enquirer Story

The October 26, 2009 issue of National Enquirer (p33) carries the story "Lucky Woman has Big Plans for $5,000 prize!"

Apparently "gutsy" Virginia Grunder, 62 of Schwenksville, PA won $5,000 in the Enquirer's cash giveaway.

Here is a list of her "big plans" for the $5,000 as reported by The National Enquirer:

• Pay some bills
• Have some surgery she needs but couldn't afford
• Then blow some money on fun things
• • "I've always thought I'd love to spend some time at an expensive 5 star hotel that would cater to all my whims-including nice meals from room service. Now I can afford to check in at the poshest place I can find!"

Wait, there's even more!

    "She vows that there will be some special treats for her two pet cats Jasper and Smokey

Can Virgina Grunder do everything she dreams she can with a Total Budget $5,000?

Step 1:      Pay off Bills-let's assume $1,300

Leaves Balance of $3,700

Step 2:      Buy Treats for Kitties. Virginia can go crazy for $200

               For example:

                Friskies Indoor (with Real Chicken Flavor) 1 year supply  $87.88

                Cosmic Catnip  $6.49

                KONG  Hugga Wubba Cat toy  $5.99

                Petlinks Twinkle Chute with Lights Cat Toy  $20.59

                Play n Squeak Ball of Furry Fury Toy $8.99

Leaves a balance  of $3,500         

                 Source: Petsmart.com

OR: Buy a Cat Genie. Upgrade the kitties' "can" for $329 and buy a years' supply of Friskies at $87.88

Source: CatGenie.com  (CatGenie 120 Tabby Package). Note that will also need $111 annually for replenishment granules.

Leaves a balance of approximately $3290

Step 3: Surgery This is where the budget starts to break WAAAAY down

Cost of various types of surgery (just for the surgery, not room, xrays etc)

Appendectomy $1,700

Colonoscopy $3,150-$3,884

Decompression Back Surgery $24,000-$29,850

Gastric Bypass Surgery $28,640

Hip Resurfacing Surgery $18,600

Partial Wrist Fusion $23,400-$30,000

Cardiac Catheterization $40,264

Source: Surgerycosts.net October 18,2009

Step 4: Set aside money for taxes on the winnings-speak to accountant

Step 5: Can Virgina Grunder REALLY "afford to check in at the poshest place she can find"?

Sampling of cost before meals* and transportation:

• Cost of most expensive hotel room in USA-Palm Fantasy Towers in Las Vegas $40,000 per night so we'll rule that out.
• Cost of most expensive room in New York, Ty Warner Penthouse at the Four Seasons  $34,000 per night. We'll rule that out too!
• One weekend night at 5 star Four Seasons Hotel Philadelphia $377.87/night with taxes (special bed n breakfast rate). Includes bed, breakfast* (room service!), valet parking. fitness center, complimentary bottled water, coffee and tea service in the lobby. Anything else has a cost.  Source: Four Seasons Philadelphia- author's call to concierge

Depending on the type of surgery and what activities she plans on doing at and around the hotel, Virginia Grunder has a slim chance to eke it out.  Clearly the surgery is a very high priority and should be paramount.

Estimated time to blow through the $5,000...less than 6 months.

For the "Dissipation Myth Bab-oons" of this world Ms. Grunder lost one leg to diabetes and faces possible amputation of another.

I think it's important for The National Enquirer to keep things in perspective when spotlighting sweepstakes winners. Financial illiteracy is a big problem and The National Enquirer  can do its readers a service by stepping up to the plate and help by writing responsible financial  stories.The way they highlight Grunder you would have thought she won $5 million dollars instead of $5,000.

"Light Bulb Lou" $5MM Lottery Winnings Gone But Happy to Have Nothing

Lou Eisenberg has defied the 90% in 5 years statistic by blowing through his lottery winnings in 20 years. On Friday November 13, 1981 "Light Bulb Lou" won $5,000,000 and took annual installments of $219,0000  (*$130,000 after taxes)over the 20 years. He spent it all and was broke by 2001. He now lives in a mobile home on $250 per week from social security and Pension checks.

Looking incredibly good for 81 years of age, with a girlfriend and a pooch,  Eisenberg's dissipation story hit Monday's New York Daily News.

in the early days of the 1980s interest rates were soaring. If Eisenberg had just put away a fraction of what he was receiving then into fixed rate investments or even Apple computer stock he'd have a few more shekels in his pocket, certainly more than the $200 he wishes he had.

The Intellectual Versus the Real World.. And So Continues The Bab-oonery

Our post concerning the Lien Resolution Group publication of "90% gone in 2 years" has elicited a predictable response from law student Jeremy Babener. He immediately contacted Brett Newman to challenge his firm's statement to which Newman emailed the following response which he has graciously copied this author.

From: Brett Newman [mailto:bnewman@helpwithliens.com]
Sent: Thursday, October 01, 2009 10:40 AM
To: 'Jeremy Babener'
Subject: RE: NYU Law Student: Confirming Information
Importance: High

 

Jeremy

 

The Lien resolution Group handles Liens.  My company, Plaintiff Solutions, facilitates the structured settlements. 

 

The website will be changed back to it’s original content this afternoon. 

 

Lastly, I never issued a study.  No formal study, as you seem to be searching for, was done in my office.   I can see that  my numbers seem to hurt your position.  All I said was that is was very obvious from our case experience that 90% of the claimants ran at a 100% burn rate in 24 months.  I can not speak for any other firms or their experience.  Only my own.   

 

 

Sincerely, Brett Newman WWW.HELPWITHLIENS.COM

According to Brett Newman, he was originally contacted by a Syracuse University classmate who was lawyer at a noted New York state personal injury law firm. The firm was tired of the revolving door of personal injury clients receiving recoveries that the law firm worked hard to obtain and then and within 3 years returning to file for bankruptcy.

Newman told this author that "The Lien Resolution Group often handles investments for former plaintiffs of settled personal injury suits.between the years of 1995 and 2001, The Lien Resolution Group invested on behalf of some twenty to twenty-five such plaintiffs who independently settled personal injury suits for lump sums. The clients were primarily from the Northeast, but several were from other parts of the country. These lump sums varied in size between $100,000 and $1.5 million. The Lien Resolution Group primarily invested such funds in mutual funds and bond funds, intending the moneys to last for the long-term. Over that six year period, all but two or three (90%) of these clients cashed out portions or all of their monies at such a pace that all the monies were gone within two years".

 This was the basis for the Lien Resolution Group web site stating, prior to September 30, 2009 "Statistically, 90% of lump sum settlements are gone in less than two years."

Further discussion

Babener to Newman:  "In my paper, I recommend the performance of an empirical study on the subject. Do you think that such a study would be productive (for example, as a basis to urge plaintiffs considering accepting a lump sum to instead take a structured settlement)?"

Comment: In his dissipation paper the gravamen of Babener's argument for an "empirical" study was to "ground the structured settlement tax subsidy", a point that seems to be in minimized in his correspondence with Newman and in his argument for single claimant QSFs.

Wikpedia on the definition of "empirical"

The word empirical denotes information gained by means of observation, experience, or experiment.
A central concept in science and the scientific method  is that all evidence must be empirical, or empirically based, that is, dependent on evidence or consequences that are observable by the senses. Empirical data are data  that are produced by experiment or observation.

Comment

Clearly Brett Newman observed consequences that were observable by HIS senses and he was initially retained by a client who observed consequences that were observable by THEIR senses.

If Babener discredits Newman's stat as a non statistical sample then he will surely discredit his Svengali, Patrick Hindert, who had sufficient obsession with a JG Wentworth 100 odd person "sample" to devote no fewer than FIVE pedantic blog posts to the subject in a two week period from November 18, 2008 to December 1, 2008, with further links to these posts in other posts. This author believes that had JG Wentworth not begun having credit troubles and given Hindert something more to write about we might have observed even more posts on the JG Wentworth "survey".

In his correspondence with Newman, Babener states "

The statistic it (dissipation study) searches for is one that is empirically sound enough that the statistical results can confidently be generalized to make conclusions about those not in the study".

Why is Babener only focusing on one "statistic"?

"Meerkat Manor"?  How About "Bab-oons Bungalow"? 

"Prepare For a Future... If You're Not Careful Everything Can Disappear"

Former Orlando Magic star David Vaughn 36, appears on NBA Fanhouse in a story that describes a journey that stretches at its peak from accommodations at the Ritz Carlton to the 2008 nadir of "accommodations" in a friend's dusty storage shed or the back seat of his Chevy Impala. Vaughn is 6 foot 9 and weighs 250lbs.

It is a story of dissipation that should resonate not only with current and aspiring young athletes but teenagers and young adults who receive recoveries from a lawsuit involving their own personal injury, or from the death of a loved one.

Key points from the NBA Fanhouse article "NBA Washout David Vaughn Back From Depths of Despair"

1. "His original three-year guaranteed contract with the Magic didn't come with any guarantees of a successful life. The contract didn't come with a course in life management skills, and he had none when his basketball career finished"
2. "I went from the pinnacle of having it all, to the pits of having absolutely nothing, and seeing no light at the end of the tunnel,''
3. "It's a lot harder to get out of big-time professional sports than it is to get into it.' You get sucked into that lifestyle, and there's no easy way out.''-Kyle Rote, Jr., former NASL soccer star and former agent of Vaughn's
4. He thinks back to the '90s when he played in the NBA, living large and acting wild like a child with too many quarters in an arcade.

At least Vaughn's story has an ending that is happier than its beginning. I also hope that the epilogue is better for him and his family.

Yet stories like Vaughn's fuel the incentive to go after " financial crack dealers" like Structured Asset Funding, those that act like them, and those that support them.  Structured Asset Funding solicits business from tort victims by tempting them with dreams of $100,000 sports cars and boats as a reason to sell structured settlement payment rights.

Guaranteed income solutions that may help (together with counseling)

Structured celebrity endorsement fees are one solution for athletes and other celebrities to help secure their futures.

A Structured settlement is a financial planning solution that helps those who have suffered a personal injury or lost a loved one due to an accident. It offers a certain amount of spendthrift protection, tax benefits and can be funded either with a structured settlement annuity or via obligations of the United States government (often through a combination of Treasury Inflation Protections Securities called "TIPS" and Zero Coupon STRIPS)

For more information contact John D. Darer toll-free at 888-325-8640

FOOTNOTE: The "Dissipation Myth" manure spreaders may wish to note that the article states that Vaughn's basketball career ended in 2003 and the nadir came in 2008. My math says that it's 5 years, how about yours?

More "Irrelevant Statistics" for "The Dissipation Myth" Bab-oons

The "irrelevant stats" just keep rolling in for "Dissipation Myth" Bab-oon palooza...

In Dumb and Dumber, which appears in today's Finance and Markets Newsletter, Villanova Associate Professor Robert LeClair, principal in Leimberg & LeClair, Inc. discusses how "many people had little understanding of the most basic financial concepts and were often completely unable to perform the simplest calculations concerning their personal financial affairs.  Little wonder then that so many of us are deeply in debt, unable to handle credit, save little or nothing, and have so many other financial problems".

• A survey published in April 2009 by the Employee Benefits Research Institute found that 47% of workers think they will need less than $500,000 for a comfortable retirement.  The last point in the executive summary to the paper "Ignorance Still a Major Factor"
• A University of Michigan survey asked a simple math problem requiring knowledge of compound interest; only 18% of baby boomers got it right.

Makes a compelling case for simply handing an 18 year old or young adult a lump sum of $1million right? 

If someone cannot estimate what they will need for a comfortable retirement what evidence is there to lead one to believe that they will be more sophisticated in estimating how to allocate a settlement to maximize tax efficiency and preserve government benefits.

• Last January, the President's Advisory Council on Financial Literacy issued a 57-page report including a recommendation that states require "financial education from kindergarten to grade 12."  It also said that college students should have to take a financial literacy course before taking out student loans. 
• Purportedly quarterback Steve McNair who earned $75 million over his 13 year professional football career died without a will.  The State of Tennessee will now determine the disposition of his assets through their intestacy laws. Lord knows how much asset dissipation will occur in legal fees sorting out competing claims of his wife and children from assorted partners, the result of ineffective planning.
• Purportedly the individual who was responsible for paying Michael Jackson's life insurance premiums neglected to pay the premiums and his kids will purportedly get 10% of what they should have from insurance proceeds.

Instead of wasting money and time on a dissipation study, how about simply assuming that there is a problem and then spending money and investing time to increase the level of financial literacy?

Patrick Hindert Melts Snow... Promoted "Squandering Plaintiff" Theory!

Continuing to expose Patrick Hindert's hypocrisy for his attack on the "squandering plaintiff" theory comes from a recent and unlikely source- a series of posts about Randy Snow, the parylimpian, the second of which Hindert posted in August 9, 2008. A portion is excerpted below.

Hindert asked: "Your injury occurred in 1975 - just prior to the beginning of the structured settlement industry industry in the United States in the late 1970s. Have you had any experience with structured settlements or injury award recipients?

Randy Snow: After becoming involved in wheelchair sports, I traveled and met many persons involved in accidents. Some of those persons received large sums of money. There are many inspirational stories. Personal injury victims who have successfully managed their recoveries and successfully redefined their post-settlement lives. Many of these stories involve structured settlements. There are also MANY horror stories. Accident victims who have SQUANDERED  their recoveries and their lives. I have a friend who received a $300,000 settlement in 1980. That was a pretty nice sum in those days. In two years, his money was gone. In my experience, accident victims who are matched with professional financial advisors and settlement planners are much better". 

Frankly when Hindert posted the Randy Snow interviews it really was a "WTF" moment. In hindsight at least one of them has proved to be useful in hoisting "Hedwig" by his own petard.

How can Hindert credibly spew hot air on the "pernicious" "90% squander in 5 years" theory when he' s been out there hanging on to every word and (in particular) promoting the "squandering" words of justification from the frickin' Bruce Jenner of wheelchair athletes? 

Read June 24, 2009 "The Squandering Plaintiff Redux"

Bankruptcy and the $150,000 a month Athlete

London's Daily Mail reports that former Manchester United midfielder Eric Djemba-Djemba, 26 now plying his trade in Qatar, was in such dire financial straits when at Old Trafford - despite his £75,000-a-month wage - that it is alleged he relied upon appearance and win bonuses to get by. It is also claimed the Cameroonian (who played for "the Mancs" from ages 22-24) ran a fleet of 10 4x4 vehicles and juggled 30 bank accounts at the time". He was declared bankrupt in at a Birmingham, England court last September.

One of the super market tabloids that I've browsed from time (while waiting in line) has a recurring section called "stars they're just like us" where readers can see stars doing activities of daily living. In this case some soccer players and other athletes share a similar need to protect against wasteful dissipation of their assets with a profoundly injured person who is about to receive a large settlement or award. In the athletes case their career could end suddenly and without proper preparation they could be in serious financial trouble. Unlike the athlete the tort victim may not have the capacity to earn back their mistakes.

Structured settlements, trusts and deferred income annuities and types of financial vehicles can be used to help preserve what has been won or earned.

Pathetic Situation Demands Better Solution

Here's a little "up yours" to the "cash now" companies who use "live your dreams" advertising.

On December 26, 2002, Powerball winner Jack Whittaker won just under $315,000,000! He elected the lump sum distribution option, paying him approxmately $113,000,000, in lieu of guaranteed future periodic payments. Now just over 4 years later he's broke. This is a story has got to be one of the greatest cases of sudden wealth syndrome financial mismanagment in history.  The story can be found here (2007 story), here and here (2005 story).

Perhaps state governments ought to mandate that a certain percentage of lottery winnings , if over a certain size, be paid out periodically. Some may say that is patronizing, but consider that full dissipation puts people on the dole and a fresh burden on the taxpayer. From a public policy standpoint something is terribly wrong. A yes/no decision at the local newspaper stand after forking over a couple of bucks hardly qualifies as financial planning.

Had Whittaker been able to accept even 10-20% of his winnings in the form of periodic payments, in lieu of all or nothing it might've saved him financially.  Had he accepted the whole thing in the form of payments over time he could have blown all his money up to that point, learned his lesson and gone on to living happily every after...at least from a financial standpoint.

Does J G Wentworth Forum Shop Until It Gets Approval?

I received this letter today from a Ms. SB Cheek of California. Read it! I think it says a little something about the enforcement of the California Structured Settlement Protection Act. Apparently the judge reviewing the case determined that selling the structured settlement payments rights was not in the payee's best interest and denied the transfer application. Ms. Cheek's letter suggests that JG Wentworth (321 Henderson) proceeded, or attempted, to find a judge that would agree to the sale. Is this forum shopping happening in other states?

I'm interested in hearing from readers, members of the public and other factoring companies with what they may have experienced in this regard. Opinions are always welcome as well.

"Dear Mr. Darer,

Woa, my child's dad , a 95% burn victim ,complusive gambler, has called the JG Wentworth folks on the TV, after losing all of his worker's compensation money to gambling.  I searched and searched for an attorney to help us.  Finally after, being taken for money from some attorneys and NOT represented, I went to the courts myself with all evidence.  Needless to say the judge did deny him the right to cash in this income.  I was relieved for a few moments, but now find that he is being advised to seek another judge in the matter; not cease what he is trying to do. 

This seems so unethical of J G Wentworth (321 Henderson Co.).  They have not one care about the dependent problems. 

I understand that criminal charges can be lodged for the mishandling of the Ca. Workers Compensation Income that was clearly marked for hospital bills never paid and I understand, also for the dependents care.  But as a burn victim he feels the law would not punish him.

Any advice is welcome to get this monster off our backs.

S B Cheek

you have permission to reprint this."

The Long Term Consequences of a Bad "Cash Now" Decision

I often receive a call or an email from someone who sold the rights to their structured settlement payments to a factoring company, settlement transfer company, or settlement purchaser, who now regrets their decision and is seeking recourse. Unfortunately for many of them its a case of caveat venditor, or "seller beware"

Today's email involved a gentleman who, in 1997, sold rights to $867,000 in future payments over the then following 23 years to JG Wentworth for $110,000! That was a hefty discount even then. The payment rights sold were deferred tax free lump sums clearly set to milestone years in this man's life. Clearly he wishes he had those structured settlement payments to look forward to now.

If you are considering selling your structured settlement payment rights speak with a financial professional, unrelated to the company seeking to buy your payment rights. to make sure there are no better options. At the very least, sleep on it and then, with a fresh mind, think of the long term implications. Learn from the experiences of these other folks.

And, if you have resolved that you must sell, don't succumb to pressure tactics from the buyer. If you make it through the Court approval process now required in 46 states,  make sure to write down your reasons on a piece of paper, and save it. This way should you come to regret the decision in the future you can open your "time capsule" and have a reminder of why your younger self traded away your long term security. Learn from the experiences of others!