by Structured Settlement Watchdog
Why is Milestone Consulting CEO and CrowFly Board Member Misrepresenting Non Insurance Products as Insurance Products To Investors?
In January 2020, in his Milestone Consulting hat, Milestone CEO John T. Bair claimed that structured settlements were irrelevant. He doubled down in a post in February. Now in March 12, 2020, with his CrowFly, LLC factoring origination hat on, CrowFly Board member published " Can Recycled Structured Settlement Annuities Replace U.S. Treasuries in Your Portfolio?"
Bair sets up the misrepresentation with a nod to Bob Dylan "The times, they are a-changing. War, pandemic, inflation, recession, oil shortages, housing markets, liquidity in the markets. These and thousands of other factors can make the stock market a wild ride for some, and downright devastating for others.
I'll tee up my touche with a quote from "Bare" Naked Ladies "Hold it now and watch the hoodwink As I make you stop, and think"*
Bair says 'replace your low-yielding corporates and Treasuries in exchange for a 20-year guaranteed structured settlement that yields 4.5 percent — a value proposition if you’ve ever seen one. Interested in these “super bonds”?'
Bair, proposes that "there is, on average, $2 billion worth of assets that are made available every year as people with structured settlements face life circumstances and need to sell at a slight discount". He says these assets are life insurance products, guaranteed by the issuer, and in most states by the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). Are these regulatory safety nets as good as Uncle Sam? No, but they are the next best thing in terms of credit. The ratings of the companies whose paper circulates in this market are Berkshire Hathaway, MetLife, New York Life, Prudential, Pacific, and others — all A+ and A++ A.M best rated insurers. Their guarantees have held up through major wars and other global calamities. So, it’s secure paper in my opinion.
Let's take Bair's statements one by one show why, in my opinion, they are wholly misleading:
- What Bair calls " Recycled Structured Settlement Annuities" are not in fact annuities, they are factored structured settlement payment streams. Life insurers buy individual streams or securitizations of factored structured settlement payments streams as investments, but they are not permitted to account for them as annuities or insurance products pursuant to the NAIC's Statutory Issue Paper 160.
- The buyer of a factored structured settlement payment stream (such as that being peddled by Mr. Bair as a Treasury alternative) is not buying an annuity or a life insurance product per Statutory Issue Paper 160.
- One has to pose a big question WHY Bair fails to refer to the instrument he is pitching to investors truthfully and accurately. Instead of " factored structured settlement payment streams" (NAIC) or "structured settlement payment rights (Internal Revenue Code), in the most recent publication he uses " recycled structured settlement annuities and "super bonds". He has also used in other published sales pitches, the tertiary market scam label "Secondary market annuity".
- One wonders how securities regulators view the use of the term "super bonds". Factored structured settlement payment streams are not bonds. Another former heavy user of "secondary market annuity" settled a FINRA complaint against him and a former employee for an aggregate $105,000 [Cooper v Somerset et al.]
- Bair's published statement, "These assets are life insurance products, guaranteed by the issuer, and in most states by the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). Here Bair is lying to investors. 31 states have adopted the Life & Health Guaranty Fund Model Act (#520) which at Section 3A(5) expressly does not cover "a person who acquires rights to receive payments through a structured settlement
factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became effective.
- Factored structured settlement payments streams are not insurance products according to the National Association of Insurance Commissioners as set forth in Statutory Issue Paper 160. Furthermore, in a January 26, 2009 opinion letter addressed to me, subsequently published by the New York State Insurance Department (now Department of Financial Services), the Office of General Counsel concluded in answer to my quesion, that N.Y. Insurance Law Section 7718 broadly prohibits the existence of LIGCONY for the purpose of selling, soliciting or inducing the purchase of annuity contracts. Thus a statement that "state insurance guaranty funds provide an additional layer of protection for future structured settlement recipients", which is aimed at New York residents, runs afoul of Insurance Law, Can Mr. Bair, who individually and through Milestone is licensed as an insurance agent in the State of New York and many other states legally make (1) the false claim that factored structured settlements are life insurance products in the inducement to buy/invest and (2) draw a conclusion from the false claim in (1), in inducing the purchase of factored structured settlement payment streams, that they are guaranteed by NOLHGA
- Bair and his agency continue to be appointed by many, but not all of the life insurers issuing structured settlement annuities.
Don't misconstrue this sharply word piece. Bair is a maverick and he does a lot of good things like End Distracted Driving and other pro bono work, but Bair sometimes just leaves you scratching your head with a reckless disregard for the truth such as here. It's just not necessary. Substitute olive oil for the snake oil. It's a lot healthier.
*from Barenaked Ladies " One Day" , 1999 Reprise records, written Ed Roberston