by Structured Settlement Watchdog
An Unthinkable Story of Structured Settlement Factoring Predation With a Cautionary Tale For Investors in Structured Settlement Payment Rights
This is an unthinkable story of structured settlement factoring predation that must be told. A minor's structured settlement was pillaged, starting
from when he was 10 years old. Instead of receiving periodic payments to assist with college this month, he is fighting a legal battle as the structured settlement factoring companies attempt to starve this young man for years in litigation when he should have been receiving his structured settlement payments. On other side, one of the unfortunate parties adverse to the now young adult in the unfolding dispute, is a an investor who invested hundreds of thousands of his retirement money in one of the deals. This is yet another cautionary tale for investors in structured settlement payment rights, including those settlement planners who have placed, or are contemplating advising their clients into structured settlement payment rights.
Minor Received Structured Settlement From Settlement of Lawsuit Arising From Auto Accident That Killed His Mother and Unborn Brother
Zach Barber was in an auto accident when he was under 3 years old. The accident claimed the lives of his mother and unborn brother. As part of the settlement of the lawsuit that was filed after the accident Zach was to receive a series of structured settlement payments funded with annuities from Travelers Life & Annuity (now Brighthouse Financial) and The Prudential Insurance Company of America with a combined total payout of $2,700,000.00. His father also received a structured settlement.
Minor's Father Sold Off Most of His Own Structure
His father sold off most of his own structured settlement to Stone Street Capital 4 petitions between 2007 and 2012, each filed in Butler County Pennsylvania, with the last filed and approved in 2012. In 3 of the petitions the father was to pay off a loan with the final petition to start a business. Barber contends that upon information and belief Pittsburgh attorney Ron Reitz of Margolis & Edelstein was the attorney representing the factoring company in all of those transactions. Then the financial rape of the minor began.
Portrait of Financial Rape of a Minor
According to the Second Amended Petition for Citation to Show Cause filed in The Court of Common Please in Allegheny County Pennsylvania, "at various times while Zach was still a minor, Respondent Pinnacle Capital, LLC ("Pinnacle") and Sempra Finance, LLC ("Sempra"), engaged in a scheme of predatory tactics designed to obtain Zach's annuities at a significant discount. Pinnacle and Sempra's only goal was to make a profit for themselves - demonstrating a complete disregard for Zach's financial future". According to online records maintained by the Florida Secretary of State, Pinnacle Capital, LLC is managed by Frederick Love, who also happens to be General Counsel to Sutton Park Capital, LLC and the sitting President of the National Association of Settlement Purchasers (NASP). Upon information and belief Sempra Finance, LLC is one of the business entities associated with Rightway Funding, formerly known as BTG Advisors.
Filed on behalf of Zach Barber in the Second Petition for Citation to Show Cause If Any, Why Court Should Enforce Its July 6, 2005 Order in the matter of Jeffrey Barber Administrator of the Est. of Linda Lee Jenkins , a/k/a Linda Lee Barber, deceased v Bruce E. Stanko; North Hills Pharmacy Services, LLC; Pacercheck, Inc.; et al. Orphan's Court Division No. 4037 of 2005
Summary, according to the Citation to Show Cause at paragraph 5, Pinnacle and Sempra's predatory tactics include the following:
a. Pinnacle and Sempra targeted Zach's father with the intent of pressuring him to sell Zach's annuities (" structured settlement payment rights"), knowing Zach was a minor and that the sales were not in his best interest.
b. Pinnacle and Sempra each filed petitions to purchase Zach's annuities at a substantial discount. In doing so, Pinnacle and Sempra knowingly undermined a 2005 order of the Allegheny County Court that approved a guaranteed $2.7 settlement for Zach.
c. While Zach was a minor, Pinnacle and Sempra knowingly and intentionally deprived the Allegheny County Court of the opportunity to scrutinize four different petitions to sell his guaranteed settlement payments.
d. Neither Pinnacle nor Sempra ever sought approval from the Allegheny County Court for the requested sale and purchase of Zach's guaranteed settlement payments as required by the Pennsylvania Structured Settlement Protection Act. See 40 P.S. § 4003(a)(5)(i)(B).
e. Neither Pinnacle nor Sempra ever purchased a bond as required by the Pennsylvania Structured Settlement Protection Act. See 40 P.S.
f. In December 2012, when Zach was 10 years old, Pinnacle asked Judge Yeager (Butler County) to approve a sale of $600,000 of Zach's settlement for $307,673.41 in order to pay his father's mortgage. Judge Yeager denied the first petition and held that the sale was not in Zach's best interest [Butler County Case No. 12-40246]. Upon information and belief, Pinnacle thereafter advised Zach's father to obtain a Beaver County address to use for a filing in Beaver County. Pinnacle used that address to file a petition in Beaver County that was nearly identical to the petition Judge Yeager denied just 41 days earlier.
g. In the January 2013 petition, Pinnacle asked Judge Kwidis (Beaver County) to approve a sale of Zach's settlement in order to pay his father's mortgage. This is the second time Pinnacle gave that justification to a court. Pinnacle failed to notify Judge Kwidis that Judge Yeager (Butler County) had already denied a sale of Zach's settlement for the purpose of paying his father's mortgage. Judge Kwidis approved the petition to sell $600,000 of Zach's settlement for $307,673.41, without knowledge of Judge Yeager's order. [Beaver County Case No. 10155-2013]
Furthermore, Barber alleges that Pinnacle made false allegations of the father's address for purposes of obtaining jurisdiction in Beaver County. The father and son never lived in Beaver County and the address used belonged to someone else at all material times relevant to the proceeding (a copy of the deed of the someone else accompanies the recent Court filing). The Petition was filed by Attorney Ron Reitz of Margolis & Edelstein, the same attorney who the court paper's allege handled the father's petitions for Stone Street Capital. The recent filing alleges that Attorney Reitz sent mailing to the Beaver County address and the deeded owner returned it saying that the father did not live there. The recent filing also alleges that Attorney Reitz, on a Beaver County covers sheet, stated that the father and Zach Barber resided at the now rubbished Beaver County address. Barber alleges that Pinnacle knowingly allowed the Beaver County Court to believe the 2013 submission was a case of first impression when it wasn't.
Barber contends that the 2013 Beaver Order is void ab initio. That being said, It was represented to the Court that the mortgage was to be paid off in full and the deed held in trust for Zach. It further provides that the sums were for medical treatment and tutoring of Zach. No deed was ever delivered to Zach according to the papers. The property was foreclosed in 2014. A copy of the foreclosure was attached to the recent submission as Exhibit 9. Zach has not required any significant medical treatment and has not had substantial tutoring during his minority.
In 2014 and 2015, Pinnacle, through Attorney Reitz, submitted Petitions to buy the father's remaining annuities, again in Beaver County, knowing that the father did not live in Beaver County. The alleged reasons were to "buy property and pay certain debts". These were approved in uncontested hearings.
h. In October 2015, when Zach was 13 years old, Pinnacle asked Judge Kunselman (Beaver County) to approve a sale of Zach's settlement in order to pay his father's mortgage. This is the third time Pinnacle gave that justification to a court. Pinnacle failed to notify Judge Kunselman (Beaver) : (1) that Judge Yeager (Butler County) had previously denied a sale of Zach's settlement for the purpose of paying his father's mortgage; (2) that Judge Kwidis had already approved the sale of $600,000 worth of Zach's annuities for the purpose of paying his father's mortgage; and (3) the mortgage had still not been paid. Judge Kunselman approved the petition to sell $250,000 of Zach's settlement for $175,000 without knowledge of Judge Yeager's order or Judge Kwidis' order.
The Order was approved in January 2016 by Judge Kunselman [ Beaver County Case 11476-2015]. Judge Kunselman's Order makes no specific provision how the sale of Zach's structured settlement will benefit Zach, who was 16 and still a minor when this last transfer occurred.
2017 Bankruptcy Filing by Zach's Father and Step Mom
On September 14, 2017 Zach's father and his wife filed for bankruptcy [ Western District of Pennsylvania Bankruptcy Court Case 17-23688 ] The home address is listed in Butler County not Beaver County! Furthermore the bankruptcy filings list the home as the father's asset, not Zach's, and the property was still heavily mortgaged. Zach never received a deed to any real estate.
2018 The Sempra Finance Deal
According to the allegations, after obtaining two orders from Beaver County approving the sale of Zach's for more than a million dollars of Zach's settlement payments, Pinnacle's attorney notified Sempra's attorney that Zach had additional annuities that could be purchased. In doing so, it has been alleged that Pinnacle's attorney knew that Sempra would engage in further predatory tactics to buy Zach's annuities at a discount. Upon information and belief, Sempra knew about Judge Yeager's 2012 order, Judge Kwidis 2013 order, and Judge Kunselman's 2015 order. More specifically, Sempra's attorney reviewed all of Zach's annuities and knew that Zach's father had already sold the annuities with the earliest maturity dates (i.e., February 2020). Therefore, Sempra offered to purchase the annuities with later maturity dates. On February 5, 2018, Sempra filed a petition in Butler County (where Zach and his father actually resided) [ Butler County Case 2018-40027] and falsely represented to the court that there had not been any prior petitions to approve the purchase of Zach's structured settlement payment rights. The attorney for Sempra verified the 2018 Butler County Petition. Sempra attempted to justify the sale by stating that the proceeds would pay off Zach's father's mortgage. This is the fourth time the same justification was offered to a court.
According to the docket, there was no hearing in the 2018 petition. The Judge's Order makes no specific provision about how the sale of Zach's structured settlement would benefit Zach.
Despite none of the periodic payments in Zach Barber's structured settlements coming due while Zach was a minor, the father's affidavit in support of each of the transfer petitions stated that the father was the recipient of certain guaranteed payments under a structured settlement date on or about July 6, 2005 and that he agreed to sell and assign payments due to him. He stated that he understands that he (the father) will forego receipt of the Assigned payments. None of payments were actually due until Zach Barber was of the age of majority.
Zach's Grandparents File Emergency Motion With Allegheny County. Structured Settlement Payments Are Frozen
On January 31, 2020 Zach's grandparents filed a motion with the Allegheny Court that had jurisdiction over the original settlement on an emergency basis to prevent further dissipation of Zach's structured settlement. On the same day Judge Lawrence O' Toole entered an order freezing all payments under Zach's structured settlement until further Order of the Orphan's Court Division. Zach Barber reached the age of majority in February 2020 and filed an Amended Petition.
Investor in Factored Structured Settlement Payments in Good Faith, Is Adverse to the Minor in This Mess
It is alleged in multiple Court documents that an individual investor is the purported assignee of some or all of Pinnacle's purported payment rights. His acquisition of any such purported rights is subject to the Settlement Approval Order, Judge Yeager's Denial Order, Judge Kwidis' Approval Order, and Judge Kunselman's Approval Order, the Pennsylvania Structured Settlement Protection Act, and the Pennsylvania Unfair Trade Practices and Consumer Protection Law.
The individual investor is adverse to Zach Barber, the innocent who was systematically financially raped in this unfortunate mess, beginning when he was only 10 years old. In this case, knowing the value of structured settlements from experience, the investor invested hundreds of thousands in Zach Barber's structured settlement payments for his retirement plan. There is nothing in the Court papers to suggest that the investor knew anything about the financial screwing of Zach Barber at the time he invested. It is not clear who advised the investor to buy the Zach Barber structured settlement payment stream that he did, or whether any due diligence was done on his behalf prior to his investing.
Regardless of the outcome of this Matter, the story for the investor (which is similar to that of the Wall family, who were ironically from Pittsburgh), should be yet another cautionary tale for investors in structured settlement payment rights. The Wall investors ended up losing their entire investment after a fraud in the origination was discovered two years after the fact and a court found in favor of the original annuitant. The Wall litigation against the intermediary failed and their only recovery was against their financial adviser.
Relief Sought by Zach Barber
Barber seeks relief in the form of continuing the Order directing that all of Zach Barber’s structured settlement payments may not be distributed without further Order of the Court in Allegheny County which had jurisdiction over the settlement of the legal action over the death of Zach's mother and gave rise to the establishment of Zach's structured settlement, an order declaring that the May 21, 2013 Beaver County Order of Court relating to the sale of Zach’s Structure Settlement Funds is void ab initio and is of no effect in addition to the same relief for Orders of Court dated January 25, 2016 in Beaver County and April 18, 2018 in Butler County, and seeks an award of compensatory damages, counsel fees and expenses, punitive treble, statutory and exemplary damages as any other such equitable relief the court deems appropriate.
COUNT 1 Equitable Relief sought against Pinnacle Capital, LLC and its assignees
While Pinnacle and its assignees assert that the Beaver County Orders are valid and enforceable, Barber contends that:
a. The Beaver County Court lacked jurisdiction to enter Judge Kwidis' Approval Order because Father and Zach were never domiciled in Beaver County.
b. The Beaver County Court lacked jurisdiction to enter Judge Kunselman's Approval Order because Father and Zach were never domiciled in Beaver County.
c. Judge Kwidis' Approval Order was procured by fraud on the court. Specifically, Judge Kwidis was falsely informed by Father and by Attorney Reitz that Father and Zach were domiciled in Beaver County. Further, Father and Attorney Reitz each intentionally concealed Judge Yeager's Denial Order from Judge Kwidis. Even further, Father and Attorney Reitz falsely informed Judge Kwidis that the proceeds would be used to pay off a mortgage, knowing that Judge Yeager had determined that expenditure not to be in Zach's best interest.
d. Judge Kunselman' s Approval Order was procured by fraud on the court. Specifically, Judge Kwidis was falsely informed by Father and by Attorney Reitz that Father and Zach were domiciled in Beaver County. Further, Father and Attorney Reitz each intentionally concealed Judge Yeager's Denial Order from Judge Kwidis. Even further, Father and Attorney Reitz falsely informed Judge Kwidis that the proceeds would be used to pay off a mortgage, knowing that Judge Yeager had determined that expenditure not to be in Zach's best interest and that Judge Kwidis had approved the an earlier sale of Zach's settlement for the purpose of paying the mortgage (which was not done).
e. During the pendency of the 2013 Beaver County Petition, Pinnacle was not registered to conduct business in Pennsylvania.
f. During the pendency of the 2015 Beaver County Petition, Pinnacle was not registered to conduct business in Pennsylvania.
g. Judge Kwidis' Approval Order contravened the purpose of the Settlement Approval Order, and it was not supported by the requisite approval from the Allegheny County Court of Common Pleas. 40 P.S. § 4003(a)(5)(i)(B).
h. Judge Kunselman's Approval Order contravened the purpose of the Settlement Approval Order, and it was not supported by the requisite approval from the Allegheny County Court of Common Pleas. 40 P.S. § 4003(a)(5)(i)(B).
COUNT 2 Equitable Relief sought against Sempra Finance, LLC and its assignee
a. Judge Yeager's Approval Order was procured by fraud on the court. Specifically, Father and (Sempra's) Attorney Dugalic each concealed Judge Yeager's Denial Order, in which he specifically determined that the payment of Father's mortgage was not in Zach's best interest. Further, Father and Attorney Dugalic each intentionally concealed the fact that Father had sold a substantial portion of Zach's settlement through petitions to the Beaver County Court of Common Pleas.
b. During the pendency of the 2018 Butler County Petition, Sempra was not registered to conduct business in Pennsylvania.
c. Judge Yeager's Approval Order contravened the purpose of the Settlement Approval Order, and it was not supported by the requisite approval from the Allegheny County Court of Common Pleas. 40 P.S. § 4003(a)(5)(i)(B).
d. Sempra did not obtain a bond as required by 40 P.S. § 4003(a)(5)(i)(A).
e. Zach's settlement could not be sold without his written consent, because he was 16 years old. Pa.R.C.P. 2039(b)(2). Zach did not provided such consent.
COUNT 3 Violations of the Pennsylvania Structured Settlement Protection Act Against Pinnacle Capital, LLC
a. By filing petitions in Beaver County without being registered to conduct business in Pennsylvania,
b. By seeking judicial approval of the sale of Zach's structured settlement payments without obtaining requisite approval of the Allegheny County Court of Common Pleas. 40 P.S. § 4003(a)(5)(i)(B).
c. By seeking judicial approval of the sale of Zach's structured settlement payments without posting a bond. 40 P.S. § 4003(a)(5)(i)(A).. In 2013 and 2015, by seeking judicial approval of Zach's structured settlement for the stated purpose of paying his Father's mortgage, while knowing it had been judicially decreed that such a sale was not in Zach's best interest.
e. In 2015, by seeking judicial approval of Zach's structured settlement for the stated purpose of paying his Father's mortgage, knowing that a previous court had already authorized the sale of a portion of Zach's settlement for the purpose of paying the Father's mortgage.
f. In 2013 and 2015, by failing to disclose to the Beaver County Court that there had been prior petitions to sell Zach's annuities.
COUNT 4 Violation of Pennsylvania SSPA and UTPCPL v Sempra Finance
a. By violating the SSP A.
b. By making false, deceptive, and misleading representations to the Beaver County Court, which has been described in detail above.
c. By concealing material facts from the Beaver County Court.
d. By engaging in fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding, which has been described in detail above.
e. By encouraging Sempra to violate the SSPA.
f. By encouraging Sempra to pressure Father into selling Zach's annuities for a substantial profit.
COUNT 5 Alleges Conversion Against Pinnacle, Sempra, and their assignees
COUNT 6 Alleges Conversion Against Sempra and its assignee
What Can Be Learn From The Barber Case So Far?
- The gaps in enforcement of structured settlement factoring regulation need to be shored up in Pennsylvania and in other places to assure that a travesty like what happened to Zach Barber does not happen again.
- Clearly the non disclosure of prior structured settlement factoring deals played a big role in the financial rape of Zach Barber when he was a minor. There appears to have been a massive disconnect between the 2012 Butler petition denied by Judge Yeager and the 2018 petition approved by Judge Yeager. If all the dots were connected regarding his prior denial in Butler and the Beaver County transfers and the purported reason for transfer, would the rape have been exposed earlier?
- How will the National Association of Settlement Purchasers respond given that one of the central figures in this matter is an entity controlled by its President? On its website NASP says NASP is "dedicated to ensuring the secondary market for structured settlement transfers remains fair, competitive, and transparent." Having a petition submitted on your behalf in a county where someone does not live and failing to disclose material information about prior transfers and attempts to transfer seems to run contrary to that statement, in my opinion. How do you feel readers?