by Structured Settlement Watchdog
John Bair's February 7, 2020 article in the CrowFly Legal Examiner "Buffalo startup poised to disrupt structured settlement industry", is stunning in its inaccuracy. What a disappointment, but unfortunately not unexpected of late.
Four Pellets of Flying Crow Poop from John Bair
1. Bair: "Selling structured settlements has been law since 2003".
Reality Check 1 John Bair has been "selling structured settlements" since 1999, first with EPS, then Forge Consulting and then Milestone Consulting. The date upon which he or his entities began conflating the term to apply to the transfer of structured settlement payment rights (like the worst of the structured settlement secondary market) is unknown.
Reality Check 2 As someone who has touted his pro bono services to Trial Lawyers Care and pro bono structured settlement work for participants in the 9/11 Victims Compensation Fund, it's notable that Bair has had such a lapse of memory concerning the Victims of Terrorism Tax Relief Act of 2001 (VTTRA), which went into effect in January 2002. The VTTRA established 26 U.S. Code § 5891 which is titled 'Structured settlement factoring transactions'. The essential function of the IRC 5891 is the imposition of an excise tax of 40% [IRC 5891(a)] on the factoring discount in non-compliant transactions, and the guidelines for an exception from such excise tax [IRC5891(b)]. Readers can see for themselves.
26 U.S. Code § 5891. Structured settlement factoring transactions
(a)Imposition of tax
There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.
(b)Exception for certain approved transactions
The tax under subsection (a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured settlement payment rights is approved in advance in a qualified order.
(2)Qualified order For purposes of this section, the term “qualified order” means a final order, judgment, or decree which—
(A)finds that the transfer described in paragraph (1)—
(i)does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and
(ii)is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents, and
(i)under the authority of an applicable State statute by an applicable State court, or
(ii)by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.
(3)Applicable State statute For purposes of this section, the term “applicable State statute” means a statute providing for the entry of an order, judgment, or decree described in paragraph (2)(A) which is enacted by—....
Structured settlement factoring transactions had been going on before VTTRA 2001. It would make no sense to levy an excise tax unless there was knowledge of prior business practices.
2. Bair "The Industry has done nothing to protect the people they benefit from having as financial customers"
Reality Check Bair's statement of purported fact is just dead wrong. Bair speaks of his rage that a structured settlement he helped build in 2004 was obliterated when his client sold multiple times to the nebulous "guys on TV". Where was Bair, who was CEO and co-founder of Forge Consulting when the structured settlement was established? Setting aside the last few years, what articles or tweets has he posted on the subject since 2002?
An industry is the sum of its parts. Nobody has helped identify and written more about secondary market abuses than me since 2005. My blogging has helped identify the ugliest cases of secondary market abuse. In some cases this has led to legal action and media exposure that has increased awareness on a national level. An industry is the sum of its parts. As I wrote in my 2015 white paper THE STRUCTURED SETTLEMENT SECONDARY MARKET FILLS A NEED BUT RECKLESS LACK OF OVERSIGHT OF THE SECONDARY AND TERTIARY MARKET CREATES PROBLEMS IN NEED OF CONSTRUCTIVE SOLUTIONS, the key to stemming the abuses, in my opinion, is to regulate the sales practices, like the life settlement industry, is to mandate licensing and give a regulator the power to fine, suspend or revoke authority to transact business. That way you prevent fly by night companies or pop up entities from entering the business or companies founded to literally to do a single bogus deal, such as a case that I will be covering in a blog to be published very shortly. What has Bair done to use his connections to help regulate the sales practices of participants in the structured settlement secondary market? Simply trying to undercut rates, through a purported exchange, as Crowfly is doing, does not address the regulation of participants.
In 19 years after VTTRA we should shortly have all 50 state structured settlement protection acts. What role did Bair play in any state structured settlement protection act, given that he's licensed in all 50 states? NSSTA, the entity that Bair is boycotting played a significant role, as did NASP in the shaping of these acts.
Bair states he has boycotted the NSSTA, yet it is the NSSTA who had the primary role in establishing the Structured Settlement Caucus. What effort has Bair made to support this bipartisan caucus?
3. Bair "Never before has there been a professional who created structured settlements, get into the business of unwinding them"
Rhonda Bentzen, Bentzen Financial Nashville TN, was a Canadian structured settlement broker, then with SFA in the USA, following which, in or about 2002, established her own industry firm focused on the transfer of structured settlement payment rights without direct marketing and the hard sell. What makes Bair's statement devoid of reality, is that Ms. Bentzen also served in a prominent role in the Society of Settlement Planners during the time Mr. Bair was a member and was SSP membership chairperson when Mr. Bair was being considered for membership. My how time flies!
Michael Upchurch, Delta Group, Jacksonville FL and several Delta Group brokers, were upon information and belief the first to use structured settlement payment rights to fund future payments for injured plaintiffs. Upchurch had a hand in the establishment of Rescue Capital, a firm which bought structured settlement payment rights and which employed a few former JG Wentworth employees
Nick Coccimiglio, San Francisco, CA, currently a settlement planner/broker affiliated with Delta group, founded and is CEO of Multistream Capital. Multistream Capital buys income streams in bulk, divides them into payments, and uses the payments to build a new stream for each customer based on their future income needs. All payments in the MC Portfolio are indirectly funded by annuities issued by life insurance companies, according to publicly available information.
and there are others who are more than casual players in the secondary and tertiary market.
Why would John Bair reason that it's acceptable to make an easily disprovable lie about himself to potential customers to drum up business?
4. Is CrowFly A Marketplace or a "Marketplace"
"CrowFly is a conscientious online marketplace" CrowFly LinkedIn (retrieved 2/8/2020)
"Fin-tech startup in Buffalo seeking to build ethical marketplace for settlements" Buffalo Business First (2/7/2020)
"CrowFly is the first online marketplace transforming... " CrowFly Press Release WNY Venture Association (9/12/2019)
"CrowFly’s transparent, efficient marketplace..." Crowfly Legal Examiner (8/30/2019)
BUT NOW THIS
'Our "marketplace", and online service... ' CrowFly Legal Examiner (2/7/2020)
Begs the obvious question.