by Structured Settlement Watchdog
While headlines have focused on the victims of the alleged Baltimore City exploitation of mostly black cognitively impaired structured settlement annuitants by Access Funding and its alleged co-conspirators (referred to as a scam by CFPB regulators and the Washington Post), we begin to focus on the investors in these deals, who sold them these deals and what the potential consequences are.
While some may assume that the investors in these deals are mostly hedge funds who have the capacity to absorb losses and pay legal fees to assert their rights, the fact is that a number of these deals were sold to individual investors as "secondary market annuities", including seniors and retirees, in states where such a class of annuity purchaser is supposed to be revered and protected.
Recently some such seniors and retiree age investors have received correspondence from INF Settlement Trust, the servicing company that Access Funding used, stating that "payments assigned to you have become part of a court action initiated in the state of Maryland. We have been informed by one or more of the insurance companies' legal counsel involved that they consider this a competing claim, For this reason they have decided to withhold payments until the issue is resolved in court.
INF Settlement Trust is corresponding with such payees and placing conditions "for the continuing processing and forwarding of structured settlement payments" by requiring that payees execute a Hold Harmless Agreement.
Seniors and retirees were sold on the fiction of the term "secondary market annuities" by companies who made a market in structured settlement derivative investments. In reviewing the marketing materials that one such company gave to one such senior, boasts of its "rigorous attorney review". It is evident that the transactional risk was not covered in its marketing materials. Impressionable seniors understand what annuities are. That's why one such company explained that "Secondary Market Annuities" are easier to say (despite the fact that they are not annuities).
Somerset Wealth Strategies, Inc., which upon information and belief placed some clients into investments in structured settlement derivatives stemming from the Baltimore lead paint cases, sold as "secondary market annuities", and is associated with the website secondarymarketannuities(dot)com and recently stopped selling "Secondary Market Annuities", only listed the following as risks at the time one such investment was made by a senior:
- SMIAs are not deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC). They may be partially guaranteed by State Guaranty Associations but Somerset Wealth Strategies makes no representations or warranties in this regard.
- SMIAs are subject to interest rate risk. Market interest rates may rise while the rate of return on the SMIA is locked in...
- SMIAs typically must be held to term and therefore are not liquid purchases
The question is how many seniors, retirees and possibly injury victims (or their trusts) were sold deals out of the Baltimore scam cases and are their investments at risk? Somerset was regarded as one of the most respected companies in this area. Were their warnings sufficient for a successful "assumption of risk" defense?
Why settlement planners, personal injury lawyers and judges need to sit up and take notice, NOW
Would investors buy (or have bought) structured settlement derivatives, for a little more yield if the transactional risk was fully disclosed in its marketing materials, including but not limited to the possibility that if the validity of a "qualified order" could be questioned, that they possibly would need to pay legal fees to assert their rights and could lose everything?
Some settlement planners, holding themselves out as fiduciaries, are hocking structured settlement derivatives to personal injury victims, some successfully getting these risky investments to be approved by judges. A veteran settlement planner who sits on the board of the Registry of Settlement Planners, sent a mass marketing email to trial lawyers referring to these investments as annuities (using the sales pitch "more than one structured settlement annuity solution") despite knowing that these were not annuities.
The recent Wall case in NJ involved a senior couple from Pennsylvania who lost almost $153,000 of their retirement money when a court order was vacated after it was determined that the portions of the structured settlement transfer petition were forged. In their lawsuit against Corona Capital, the originator and Altium Group the Assignee from whom they acquired the rights they paid close to $153,000 for, the Court dismissed the originator and Altium Group effectively blamed the victim in its defense (according to court records)
Access Funding and its alleged co-conspirators are Defendants in three pending law suits
- An action against Access Funding and its alleged co-conspirators Attorney General of the State of Maryland
- A Civil Class Action brought on behalf of the sellers allegedly exploited Access Funding and its alleged co-conspirators
- An action brought by the CFPB against Access Funding and its alleged co-conspirators
The IRS issued a memorandum in response to 3 questions the substance of which could impact investors, who must rely on the validity of a "qualified order" for the duration of their investment, a time frame that could outlast responsible parties and/or their insurance coverage (if they have any).