by Structured Settlement Watchdog
The Consumer Financial Protection Bureau is already looking into what JG Wentworth is doing and whether it could be construed as providing financial advice, why not the rest of the structured settlement purchasing industry?
Escobar is Link to Client First Settlement Funding/ Wells Fargo Connection
It is ironic that I write this post after seeing the movie Infiltrator last night, the story of US Customs Agent Bob Mazur who infiltrated the banking connections of the Medellin cartel led by the late Pablo Escobar in the 1980s.
In late December 2013, a Florida Resident with cognitive deficits that were immediately obvious to me, contacted me. He was extremely distraught and looking for a "Mr. Escobar from Wells Fargo'. I knew it wasn't 'Don Pablo', because he died in 1993. The Florida resident had contacted Wells Fargo because he believed this other Escobar worked there, but was told there was nobody there with that name and he thought he had been scammed. his entire $60,000 annual income stream from an Allstate Life of New York structured settlement had been sold. At 29 years old and unemployable, all he now had was under $600,000 to support him for the rest of his life and his two toddlers and someone from Wells Fargo was trying to sell him investments that were unsuitable to boot . How could this happen I thought in a state that requires a judge to approve the transaction as being in the seller's best interest. So I asked for a copy of the structured settlement transfer papers and learned from them that Client First Settlement Funding was involved. i then learned that 'Escobar' worked for Client First when I called Client First.
A chain of events followed that served to restore the Florida resident's structured settlement payments via the structured settlement transfer order being vacated. A lawyer for Client First tried to bully me into a confidentiality agreement but I refused knowing that a time would present itself to reveal some information that was vital for structured settlement consumers and investors.
It always bugged me why the Florida resident believed that Escobar worked for Wells Fargo. When I contacted then Wells Fargo rep Jeff Eglow, whose name was given to me by Burt Kroner of Client First, he indicated he had never met A.D. personally but had spoken with him via a Skype or Facetime meeting while Escobar was with the client on an Ipad in a Tampa Florida area restaurant. But I kept digging for over 2 years and here is what I have found.
Client First Settlement Funding Sent Letter With 8% Average 30 Year Investment Projections to Potential Sellers As An Inducement
The following appears on Client First Settlement Funding letterhead in a letter believed to be sent concurrent with the solicitation of an a structured settlement annuitant to sell their structured settlement payment rights:
"Please find attached an example of what your lump sum could grow to if you were able to average 8% rate of return compounding annually. in addition, rather than having all your eggs in the current insurance company's basket, you could potentially invest in 10, 20 or 30 different companies in order to spread your risk. we have relationships with 4 different financial advisors that are well equipped to show you the lifetime advanatges of investing a lump sum as opposed to continuing to receive your annuity. we are here to answer your questions..."
it is important to notice that there is no other percentage other than an average rate of 8% for 30 years even though, that would be standard practice for someone who is an investment adviser and that there is a general disclaimer that acknowledges that investments do not have guarantees and there is a possible loss of principal. Is there a coincidence that the 8% average rate is not far off from the discount rate that is charged by Client First?
It is clear from the letter that despite the disclaimer all over the letter Client First Settlement Funding used this strategy over and over again for some period of time.
In my March 27, 2015 post Amputee Burn Victim Sues Settlement Purchasers over Alleged Abuse, (Terrence Taylor 11 structured settlement transfers in 2 years), there is a discussion about Bexhill LLC, whose agent is Client First and The Alleged Client First Funding/ Wells Fargo Connection Tie-In'
"According to Terrence, as set forth in the Complaint, a representative named Alex told him that Defendant Bexhill, and its agent. Boca Raton based Client First (Funding) were affiliated with Wells Fargo, a nationally recognized banking institution. Alex told Terrence that he could invest the money he received from doing this transfer with Wells Fargo. Alex told Terrence it would be crazy to pass up this deal. [Complaint at #62]
Alex convinced Terrence that Wells Fargo would double his money if he did the
proposed deal with Defendant Bexhill and its agent. Client First. [ Complaint at #63]
In order to induce Terrence to do the deal with Bexhill and Client First, Alex accompanied Terrence to strip clubs, flew him to Florida and encouraged him to spend money recklessly. Alex took Terrence grocery shopping, to the movies and out to dinner at restaurants. Alex encouraged Terrence to spend even more lavish sums of money on women and gambling so that Terrence would "need" to sell even more of his structured settlement annuity payments to pay his debts, which would qualify Alex to eam
additional commissions. [ Ibid.]
"Alex told Terrence that it would be a bad idea for him to seek advice from an
independent advisor such as an attorney. Alex said that Terrence would get his money quickly if
he just signed the paperwork without independent professional advice". [ Complaint at #65]"
Upon information and belief Bexhill settled quickly.
The Issue of Inducement Must Be Dealt With By The CFPB and State Legislators
The question of "What is, and what is not, a proper inducement?" must be clarified. There needs to be regulation of sale practices of structured settlement transfer companies and their agents consistent with other financial services. The Florida resident was lucky to get his order vacated. Many structured settlement annuitants do not have the resources to fight hedge fund backed structured settlement purchasers.