Why Is Milestone Consulting Pitching Factored Structured Settlement Payment Streams as Annuities When They're Not?

by Structured Settlement Watchdog

MIlestone Consulting states that it is boycotting the National Structured Settlements Trade Association "because of its ties with insurance companies" and because of its failure to protect plaintiff rights, while upon information and belief, the Milestone CEO benefits from and has not renounced his NSSTA CSSC

The secondary market "annuity" puzzle

designation on his LinkedIn profile(at time of publication) and Milestone is contracted and appointed  with some but not all NSSTA member companies issuing structured settlement annuities, who are being "tarred and feathered" at the expense of the Factored Structured Settlement Payment Rights Milestone touts using the tertiary market's scam label "Secondary Market Annuities" while Milestone uses the names of the companies to market the alleged safety of the investment on its blog.

"If you are dead set on having a guarantee from a major insurance company for payments," they say "then consider a secondary market annuity, or structured settlement that is being transferred or sold by another. These annuities offer yields of four to six percent and are guaranteed by the same insurance companies that offer brand new ones through their brokerage distribution channels. By being a buyer of someone else’s structured settlement, you are giving yourself an actual competitive yield, and helping another family who for whatever reason is being forced to sell".   MIlestone blog 1/11/2020

" After all they are issued by the very same insurance companies that issue all structured settlements like Metropolitan, Prudential and Berkshire Hathaway" Milestone Legal Examiner 1/17/2020 by Milestone CEO

" So how can tort victims with purchasing power fix the structured settlement industry? They can be buyers of structured contracts and structured settlement annuities that are bought and sold every day" Ibid.

And the dead wrong,  "The annuity policies that changed hands were the guaranteed annuity policies from major insurers like New York Life, Metropolitan, Prudential, MassMutual, John Hancock and others".   Milestone Legal Examiner  March 5, 2018 by Milestone CEO

Comments and Questions

1. What Milestone is pitching as an annuity is not an annuity. It's a Factored Structured Settlement Payment Stream.
2. A Factored Structured Settlement Payment Stream is an instrument created by the transfer of structured settlement payment rights in a structured settlement factoring transaction  (defined at IRC 5891(c)(3)(A). With specialist knowledge Milestone knows that neither the annuity itself, nor its ownership, transfers when the rights are transferred. Or perhaps not, based on the March 5, 2018 quote.
3. Insurance companies do not "issue" Factored Structured Settlement Payment Streams, do they?
4. So, if the annuity does not transfer in a structured settlement transfer and remains owned by the qualified assignment company, and Milestone is pitching an annuity, is Milestone creating an annuity? Is any factoring company creating an annuity in a structured settlement factoring transaction or when it assigns the rights to an investor via Court Order? Where is the support that in the secondary market there are "structured settlement annuities that are bought and sold every day?
5. You don't get a closing book when you buy a legitimate annuity and you don't have the transaction risk with legitimate structured settlement annuities that you have with Factored Structured Settlement Payment streams.  5 companies selling (or in the past have sold) factored structured settlement payment streams to investors, have paid hundreds of thousands in legal fees fighting for their clients over claims to their structured settlement investments by lead paint victims arising out of the Access Funding scam in Baltimore  Maryland. Somerset's CEO and one of its former employees paid off one of its secondary market "annuity" to settle a FINRA complaint against them in September 2019 and December 2019 respectively.
6. So a big question is why would Milestone, a company led by a licensed insurance agent, market, or allow for something to be marketed that is not an annuity, as an annuity?
7. The National Association of Insurance Commissioners' (NAIC) Statutory Issue Paper 160 p6, December 2018 Ref #2081-17, said that factored structured settlement payment streams (or acquired structured settlement income streams) are neither annuities nor insurance products. Insurers who acquire factored structured settlement payment streams cannot account for them as annuities or insurance products. "New Footnote 1: This guidance is specific to acquired structured settlement income streams (legal right to receive future payments from a structured settlement) and does not capture accounting and reporting guidance for the acquisition of any insurance product (e.g., life settlement, annuities, etc.)"   and New Footnote 2: Reporting entities that hold qualifying structured settlement payment rights shall report the security on Schedule BA either as an “any other class of asset” or as a “fixed or variable interest rate investment with underlying characteristics of other fixed income instruments” if the structured settlement payment right qualifies for reporting within that reporting line (e.g., NAIC designation)
8. It's bad enough that we have to deal with Annuity.org, a factoring company shill, providing the misinformation, but why Milestone?
9. On the same blog post, Milestone uses contributions to the AAJ endowment as part of its marketing sales pitch  "being the only non-law firm donor to the AAJ Endowment". On September 24, 2007, the Office of General Counsel of the NY State Insurance Department (now DFS) opined in response to a request regarding a similar pitch, that it was unlawful when it appeared in an advertisement for the Milestone CEO's former company and directed at New York Trial Lawyers and members of ATLA (the former acronym for former name of AAJ). 
10. That being said, should donors get a free pass for representing to a lawyer's clients that something is an annuity that is not an annuity, or give reason for lawyers to ignore a client of theirs being sold something that is being called an annuity which is not an annuity.
11.  If you are advising an investor as a fiduciary, don't you need to put their interests above the selling annuitant?  
12. The two largest donors to NYSTLA were at the time of publishing, members of the National Structured Settlements Trade Association. If you go around the country you will find that NSSTA members are well represented in other states.

A. Following is an excerpt of a published opinion of the Office of General Counsel New York State Insurance Department (now Department of Financial Services) dated September 24, 2007:

"Turning to the question about advertising donations to certain not-for-profit organizations like association of trial lawyers, note as an initial matter that in Opinion of General Counsel No. 07-03-07 (March 12, 2007), the Department stated that “nothing precludes the agent or broker from making charitable contributions so long as the advertising of a charitable contribution as an incentive for new insurance business does not constitute an improper inducement in violation of Insurance Law § 2324.” This statement applies with equal force to life, accident and health insurance policies for which such an inducement would be a violation of Insurance Law § 4224.

The inquiry references an “affinity program” of an association representing trial lawyers. To participate in the program, a business must sign an agreement that provides for certain advertising-related services by the not-for-profit in exchange for a contribution from the participating business. The member businesses are responsible for providing all advertising content. The association urges its members to make purchases from any business that has joined the affinity program.

If this form of arrangement were strictly an exchange of compensation by an agent or broker for advertising services, the Department would regard the contributions as fees paid for permissible advertising, and not donations to a not-for-profit. In that circumstance, the contributions would not constitute an inducement in violation of Insurance Law § 4224.

However, where, as here, an agent or broker advertises that the agent or broker makes contributions to a not-for-profit organization of concern and interest to potential purchasers of insurance or annuities, such conduct constitutes an illegal inducement to purchase insurance that runs afoul of Insurance Law § 4224. Nor may an agent or broker evade the prohibition set forth in the Insurance Law by enlisting the aid of the not-for-profit organization to do what the agent or broker cannot do lawfully"

Sadly that's not all.

The same January 11, 2020 blog posts claims that Milestone "has been at the forefront of advocacy for plaintiffs since our inception in 1999" . Really Milestone?  While the Milestone CEO has indeed been in the business since 1999 where he started with EPS Settlements Group  (now Arcadia), Milestone was only established in 2012 (not 1999), according to its LinkedIn profile.  Second, here is a fax cover sheet from March 5, 2002 sent on behalf of the MIlestone CEO (then with EPS Settlements Group) who was the defense structured settlement broker on a medical malpractice case.  Download FAX cover sheet EPS-John Bair 3-5-2002." Note that Milestone now uses the same FAX number. A December 15, 2003 article in Buffalo Business First promoting his former company Forge Consulting, states that the Milestone CEO "was with EPS Settlements Group for 3 years" and " Bair continues. "It's why I ultimately launched this company  (Forge). It's what drove me personally to seek out a new environment to allow us to represent plaintiffs. Why was it necessary to embellish by "moving the chains" to attempt to bury EPS?  It's not like it can't be found. Why not just say you've been a plaintiff advocate since 2003?

Milestone suggests "educating yourself about non-qualified assignments which allow for tax deferral on the earnings of your settlement, and tax-exemption on the principle. (26 U.S.C. § 130c)" 

1. The word non-qualified assignment does not appear in (26 U.S.C. § 130c) or [(26 U.S.C. § 130(c)] or IRC §130(c)
2. All principles are tax exempt

• a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning.  Tax exempt 
• a rule or belief governing one's personal behavior.  Tax exempt a-rooney
• a general scientific theorem or law that has numerous special applications across a wide field. Tax exempt a-roni
• a fundamental source or basis of something.  Tax exempt verklempt

Post Script

In August 2022, with interest rates rising on alternative investments, CrowFly folded, only 4 months after a Buffalo news report that it was kicking it up a notch and expanding.