The Securities and Exchange Commission says in a December 8, 2009 press release that Rockford Group LLC used cold calling and a Web site to raise at least $11 million from more than 200 investors in 41 different states and Canada since March 2009. Rockford Group falsely touted itself as a leading private equity firm with an $800 million pipeline of investments and many Fortune 500 companies as clients, and told investors their money would be safely invested in structured settlements in private lawsuits.
According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Rockford Group LLC does not appear to engage in any investment activity that would generate any returns for investors, let alone its claimed returns of at least 15 percent annually. Instead, dividend payments made to investors have been funded by other investors' contributions, and Rockford Group transferred most of the money collected from investors to banks in Latvia and Hong Kong.
IMPORTANT TO OUR READERS AND ANYONE WHO HAS OR IS CONSIDERING A STRUCTURED SETTLEMENT.
The SEC further alleges that Rockford Group HAS NO STRUCTURED SETTLEMENT ASSETS and does not appear to engage in any investment activity that would generate returns for investors.
Genadi Yagodayev the sole member of the Rockford Group LLC, is the latest person to be charged with fleecing investors in purported structured settlement funding, following closely on the tails of the recent Scott Rothstein ponzi, which was found not to have anything to do with legitimate structured settlements.
The good thing I take from this news is that structured settlement scams appear to be on the SEC's radar screen.
The important thing for attorneys, judges and personal injury victims is that legitimate structured settlements funded with annuities can only be placed by life insurance agents who are licensed in your state with life insurance companies that are also licensed in your state. It is very easy to go to your state's insurance department web site to verify is the person you are speaking to is indeed licensed in your state.
These scams victimize investors NOT tort victims who are receiving structured settlement payments as part of the settlement of their law suits.
The potential exists however, for tort victims to be caught in one of these scams if a financial advisor suggests that they, or a trust in which they are the beneficiary, invests in the factored structured settlement payments of another tort victim, particularly in private deals. Extreme caution should be exercised in such circumstances. Consider some of the SEC allegations about Rockford:
- False claims that the firm has been in existence since 1999, when it actually was not incorporated until December 2008.
- False claims that during the past 10 years, its "portfolio has increased 251 percent compared to a 12.8 percent increase in the Dow Jones Index."
- Promotional material falsely identifying 20 Fortune 500 corporations as Rockford's major institutional pension plan clients.
- False statements to at least one investor that Rockford Group is "going public" and that large investors in its Fixed Dividend Contracts will receive special access to shares sold in its initial public offering.
An opportunity exists for factoring companies and their trade association, National Association of Settlement Purchasers (NASP) to publicly address how their offerings to investors differ from the scam meisters. It's also an excellent time to revisit a licensing standard which would be beneficial to sellers of structured settlement payment rights and investors alike as well as improve the industry's overall reputation.