'Settlement Annuities' Ponzi Scheme in Beverly Hills Not Structured Settlements

by Structured Settlement Watchdog

Apparently 180 people were allegedly duped out of $11 million believed to be going into investments in "court owned settlement annuities" by Rosi Ray (a/k/a Gloria Lujan), the proprietor of a Beverly Hills Store called "I Want That Bag".

Highlights from the grand jury indictment in United States v Rosi Ray  United States District Court, Central District of California  SA CR 10 00243 states:

1. The scheme to defraud ran between in or about 2007 and at least October 2009.
2. Defendant allegedly solicited individuals, and caused others to solicit individuals to invest with her
3. The alleged scam involved the purported "purchase of court-ordered monetary settlement annuities from accident victims at a discount, which settlement annuities would then be cashed in at a substantial profit". 
4. According to the indictment, Rosi Ray promised investors a "substantial monthly return", anywhere from 10 to 200 percent over a period of two to twelve months"  (emphasis added)
5. She allegedly told investors the only risk is that they might not be paid on time
6. She did not purpose and did not intend to purchase settlement annuities at a discount or at all.
7. In the Fall of 2008 she used the AIG bailout to conceal her alleged fraud
8. Investor money was used to pay for Ray's son's drag racing career, her own personal expenses and the expenses of " I Want That Bag".

Our own research shows that neither Rosi Ray nor Gloria Lujan come up on the grid as a financial adviser on the website of the Securities Exchange Commission or as a registered representative on FINRA BrokerCheck.

Ray is represented by the California Federal Public Defender and is out on $100,000 bail. She was forced to surrender her passport.

Commentary

• You would need Moses to "raise his staff to part the sea of red (flags) on this scam.
• What Rosi Ray was allegedly selling were not settlement annuities, but structured settlement payment rights, which are structured settlement derivatives. There is a significant difference in that the former is an insurance product the latter is not.
• Like the Scott Rothstein scam,  which we reported on last year, the return and the period of time over which such purported return was to be earned were not believable.  Read our Scott Rothstein commentary
• Moving on to credentials. It's not like having your friends over for a "Tupperware party" folks! We're talking financial security not storage containers. That's why the government requires people who sell securities to be registered, those who sell insurance to be licensed and those who are investment advisers to be registered. All of these licenses and/or registrations have compliance requirements and mandatory continuing education. What were the "Bag Lady's" investors thinking?
• For accident victims, the structured settlements that you receive as part of your settlements are placed by individuals who MUST BE licensed insurance agents or brokers. As far as we know none of the life insurance companies issuing structured settlement annuities will permit their quote software be used unless it is by someone responsible who is licensed and appointed with them.
• For those with existing structured settlements, state structured settlement protection acts require that a judge approve the sale of structured settlement payment rights. In those states where the "best interest test" applies , the transaction must be in the best interest of the seller of those rights, and their dependents. Without Court approval there is an onerous 40% federal excise tax on the purchaser.  Link to State Structured Settlement Protection Acts
• The secondary market for structured settlement derivatives offers good opportunities for investors, including tort victims, However, extra care must be taken by yield hungry investors who are purchasing payments in any way other than as part of the initial transaction with the seller or as an institutional investor via a securitizations. There are ethical practitioners, but  from the frame of reference of someone who has resesearched this area for over a year, there is a degree of skill and knowledge needed that is not readily apparent at eye level.
• While I thought it would be obvious, ALWAYS ask for and check credentials!

Exhibits

Copy of the indictment of "Beverly Hills Bag Lady", Rosi Ray (a/k/a Gloria Lujan)

Download Rosi Ray indictment Beverly Hills settlement Ponzi

Look out for my podcast on Legal Broadcast Network, recorded earlier today and follow up posts and podcast which I will be doing with several industry players in the coming weeks as we continue to monitor the story and its press coverage to assure that  this case does not become this year's Rothstein where the the name of structured settlements was unfairly sullied by displays of media incompetence due to lack of research and a former US attorney general who fluffed his lines.

FBI Archives on the Rosi Ray Ponzi case