by Structured Settlement Watchdog
A Florida based settlement buyer has apparently taken forum shopping to the extreme. Does forum shopping invalidate a structured settlement transfer order and, if so, at what impact to the seller, buyer and investor and the United States Treasury seeking revenue?
Forum shopping is an informal label given to the practice adopted by some plaintiffs to have their legal case heard in the court thought most likely to provide a favorable judgment. Some jurisdictions have, for example, become known as "plaintiff-friendly" and so have attracted litigation even when there is little or no connection between the legal issues and the jurisdiction in which they are to be litigated [see Wikipedia on forum shopping]
After several unsuccessful attempts to get a judge to approve a structured settlement factoring transaction in the annutant's domicile state, a cash now pusher company representative and his manager purportedly instructed an annuitant to buy a one way ticket to Florida.
The representative picked the annuitant up at the airport and then went to a UPS Store to sign some documents in the presence of a notary that were represented to be similar to the documents signed in conjunction with the attempted transactions in the annuitant's home state that failed to get court approval under her state of domicile's structured settlement protection act.
The next stop was to the factoring representative's pal " Sal" (name changed) who worked at a bank. Sal had prepared a lease for the annuitant to sign. A $500 "payment to "Sal" was required. An attempt was made to open an account at Sal's bank but the bank said no.
The factoring representative then took the annuitant to another bank and the factoring representative put $50 in an account in the annuitant's name to open it on her behalf and told the annuitant she would be paying him back.
The factoring representative then took the annuitant to the Florida Department of Motor Vehicles to get a State ID and was successful on the first attempt.
The factoring company made a "cash advance" to the annuitant to pay for the hotel and food and the return plane ticket to the annitant's home state.
A short time later the annuitant was given another advance to fly back to Florida for the completion of additional documents. The factoring representative picked the annuitant up from the airport and later took the annuitant to a casino.
Additional steps were taken in an attempt to create the appearance, for the Florida Court that was hearing the structured settlement transfer petition that the annuitant was a resident of Florida. The only problem was the annuitant WAS NOT a resident of Florida nor did the annuitant have any intent to move to Florida.
And it doesn't end there folks! The factoring company purportedly offered a referral fee of several thousands of dollars to the annuitant if the annuitant could get the annuitant's daughter, also a non florida resident to do a deal with the factoring company, in Florida.
The questions are:
- Whether or not these purported actions, which I understand may happen on more than just a rare occasion, have an impact on the structured settlement factoring transactions that were consummated?
- Do the purported actions of the settlement purchaser constititute a fraud on the Florida courts?
- What efforts are judges and their clerks making to confirm that the annuitant is in fact Florida domiciled? Should they be looking for electric bills and car registrations, auto insurance cards and other forms of ID that demonstrate residence and require some passage of time?
- Under Internal Revenue Code Section 5891, the settlement purchaser is subject to a 40% excise tax on the factoring discount if there isn't a qualified order. If it is eventually determined that there has been a pattern of fraud on the courts in Florida, would that invalidate the Order? How much money could the IRS generate from the excise tax?
- How many transactions are involved where this happens?
- Shouldn't the IRS send an audit team to South Florida?
- How would an invalidated Court Order affect an investor who has put up money to purchase structured settlement payment rights?
- Since fraud is typically not covered by errors and omissions insurance, where do investors seek recourse? At what cost?
IRC 5891 and various state structured settlement protection acts are intended to give confidence to sellers and buyers of structured settlements. When a company of group of individuals abuse the law it undermines the industry's credibility with consumers and lawmakers in Washington and the various states and is harmful to the industry.