by Structured Settlement Watchdog
Despite a secondary market process in which the paper trail is never ending, I've learned that several settlement purchasers, including 3 members of NASP, may have been burned by a meaningful number of forged court orders that 'emanated' from a New York law firm retained by the settlement purchasers instead of the court of jurisdiction. The aggregate value of the transactions ranges from $30,000,000 to $50,000,000 at an average of $60,000 or so each, according to my sources.
Our sources tell us that at least one member of the New York law firm in question attended the recent NASP annual meeting.
Assuming the bogus falsified New York court orders mean that the thought to be completed transfers did not comply with the New York structured settlement protection act it will be interesting to see the extent of the financial impact on the settlement purchasers.
Our source suggested that three major structured settlement purchasers were affected. It is perhaps no coincidence that the JGWPT amended S-1 statement, dated October 28, 2013 mentions the following in risks related to its business operations.
"We depend on a number of third parties for the successful and timely implementation of our business strategy and the failure of any of those parties to meet certain deadlines could adversely impact our ability to generate revenue.
"Our ability to purchase structured settlement payments and lottery receivables depends on the entry of related court orders. Our ability to complete a securitization and operate our business depends on a number of third parties, including rating agencies, notaries, outside counsel, insurance companies, investment banks, the court system, servicers, sub-servicers, collateral custodians and entities that participate in the capital markets to buy the related debt. We do not control these third parties and a failure to perform according to our requirements or acts of fraud by such parties could materially impact our business. For example, there have in the past and may be in the future deficiencies in court orders obtained on our behalf by third parties that result in those court orders being invalid, including as a result of failures to perform according to our requirements and acts of fraud, in which case we would need to take additional steps to attempt to cure the deficiencies. We may or may not be successful in curing these deficiencies and, if successful, there may nonetheless be a delay in our receipt of payment streams pursuant to the court orders and if unsuccessful, we may have to repurchase such payment streams from our securitization facilities. Any delay in the receipt of, or the invalidation of, a significant number of court orders or any delay in the closing of a securitization would significantly and adversely affect our earnings."
If it can happen to JG Wentworth then it could happen to a yield chasing individual investor in structured settlement payment rights.
As a means of comparison of the seriousness of what has happened here, a New York City real estate attorney was disbarred and was charged a $100,000 fine after pleading guilty in August to securities fraud, admitting he forged six condominium plan acceptance letters at properties in Brooklyn and Queens, according to Attorney General Eric Schneiderman. In that case the disbarred lawyer admitted to forging the names of attorneys in the AG's Real Estate Finance Bureau on letters filed with the New York City Department of Finance that allowed Fridman's condo developer clients to sell apartments without the required oversight from the attorney.
In the secondary market situation described above we are talking about a New York lawyer/law firm's possible responsibility for almost 2o times the amount of falsified transactions!