Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

NJ Clarifies Investors in Structured Settlement Payment Rights Have NO PROTECTION in the Event of Insolvency

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Transfers or assignments of other people's structured settlement payment rights, have been deceptfully marketed to investors as secondary market annuities by certain members of the structured settlement secondary market and

If you buy someone else's structured settlement payments in NJ, you're not buying an insurance product. You get nothing if the insurer fails.

market, in addition to certain settlement planners and structured settlement brokers who incorporated them in settlement plans and (as the evidence showed last year), some have even used them in purported qualified assignment documents with a related factoring company. 

Then came the 2017 Revisions to the Life & Health Guaranty Associations Model Act(#520), which is has been approved by the majority, but not all US states, which expressly excludes structured settlement annuity benefits where a payee or beneficiary has transferred rights in a structured settlement factoring transaction regardless of whether the transaction occurred before or after the adoption of the 2017 Revisions became effective.

See  Bad News for Structured Settlement Investors as NAIC Encourages Adoption of Model Act #520 - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

Why States Now Exclude SMA Investors From Annuity and Insurance Insolvency Schemes? - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

New Jersey Joined the Party in August 2022.

Progress report on the clarity for investors in structured settlement payment rights and it isn't good news. I reported that it was coming and it is now effective in New Jersey.

New Jersey P.L. 2022, CHAPTER 98, effective August 12, 2022,  AN ACT concerning the “New Jersey Life and Health Insurance Guaranty Association Act” and amending P.L.1991, c.208 has SERIOUS implications for NJ investors in structured settlement payment rights. 

c. Except as otherwise provided in subsection d. of this section, P.L.1991, c.208 (C.17B:32A1 et seq.) shall not provide coverage

(11) structured settlement annuity benefits to which a payee (or beneficiary) has transferred rights in a structured settlement factoring transaction as defined pursuant to section 5891 of the federal Internal Revenue Code, 26 U.S.C. s.5891(c)(3)(A), regardless of whether the transaction occurred before or after that section became effective.

The in excess of two decade long strategic failure of state legislatures to (1) implement licensing standards and (2) to regulate the secondary market sales practices through licensing standards and regulatory enforcement of a reasonably forseeable problem

 

 

 

Genex Capital Arizona Structured Settlement Investment Litigation Update

by Structured Settlement Watchdog

Time for a quick update on the Genex Capital structured settlement investment litigation in Arizona, an important case to follow for investors in structured settlement payment rights or, contemplating making investments in other people's structured settlements (or parts thereof), and their advisers.  If you are an injury victim who is evaluating whether or not to apportion your settlement recovery to a structured settlement, this article is not for you, unless your settlement planner is recommending that you invest in other people's structured settlement payment rights.

In my June 11, 2022 blog, I reported that the Court in its June 9, 2022 under advisement ruling, declined to enter a partial summary judgment in favor of Defendants against Genex Capital Corporation in its lawsuit against New England Annuity Associates, Bulbrook-Drislane, Seeley Capital Management Inc., Income Stream Funding Partners, LLC, John Bulbrook/Jane Doe Bulbrook, and Christopher Seeley (collectively, “Defendants”)

1. The Court found that Genex Capital presented sufficient evidence demonstrating that factual disputes remain as to what damages Genex may have suffered. As a result, the Court declined to enter summary judgment on the issue of damages. The Court found that Defendants have not shown an absence of any genuine issue of material fact regarding causation. Based on its conclusions, the Court declined to enter summary judgment on the issue of damages or causation of damages.

2. The Court found that the Keefer Plaintiffs are entitled to a declaration that they are the owners of and have the right to receive payments arising from the Payment Streams and that Genex has no material right, title, or interest in the Keefers’ Payment Streams.

The Court further reasoned that although the  RPA (Genex Receivables Purchase Agreement) is clear regarding the Keefers’ interest in the Payment Streams, the RPA is equally clear regarding restrictions on reassignment. Section 3.4 of the RPA states: “Buyer shall not have the right to further assign or sell the Receivable and must keep the Receivable for the balance of its term unless otherwise expressly approved by Genex.” Statement of Facts, Ex. 1, RPA § 3.4. The Court found that Genex is entitled to a declaration that the RPA does not permit reassignment of the Receivables without Genex’s consent, but denied all other relief.

Following the June 9, 2022 under advisement ruling, Genex Capital requested reinconsideration of the ruling. Subsequently the Court requested New England Annuity Associates Defendants to file a response. New England Defendants filed an amended counterclaim in July to which Genex has filed a response. 

The latest is that local counsel of record for  Genex Capital Corporation and its CEO Roger Proctor filed to withdraw as counsel.

Pursuant to Rule 5.3(a)(2)(B)(ii) of the Arizona Rules of Civil Procedure, Timothy J. Eckstein, Jeffrey B. Molinar, William D. Furnish and BriAnne N. Illich Meeds of the firm Osborn Maledon, P.A. move to withdraw as counsel of record for Genex Capital Corporation and Roger Proctor. The undersigned attorneys seek an Order granting their withdrawal on the ground that the clients failed substantially to fulfill an obligation to the lawyer regarding the lawyers’ services and has been given reasonable warning that the lawyers will withdraw unless the obligation is fulfilled.

On September 13, 2022, The Court granted the Motion of  Timothy J. Eckstein, Jeffrey B. Molinar, William D. Furnish and BriAnne N. Illich Meeds of the firm Osborn Maledon, P.A. to withraw as Counsel for Genex Capital Corporation and Roger Proctor.

GENEX CAPITAL CORPORATION, a Delaware corporation; Plaintiff,
vs.
SEELEY CAPITAL MANAGEMENT,
INC., a Massachusetts corporation; et al.,
Defendants. __________________________________

RICHARD L. KEEFER and VICKI L.
KEEFER, et al.,
Plaintiffs,
vs.
GENEX CAPITAL CORPORATION, a
Delaware corporation; et al.,
Defendants. __________________________________

AND RELATED COUNTERCLAIMS.
Case No. CV2020-004958
(Consolidated with CV2020-013796 and
CV2020-002266)

Why You Should Follow the Arizona Litigation

The Arizona litigation is perhaps the most significant case about the limitations and transactional risks of investing in structured settlement payment rights. It is well worth taking the time to understand what has happened with the investors. 

For years such receivables  (structured settlement payment rights) have been marketed to investors across the secondary and tertiary markets as if they were annuities, in some cases even insinuating, with a disclaimer, that such investors might have the same statutory protections as those who buy real annuities.  Today 37 states, who have adopted the 2017 revisons to the Life & Health Guaranty Associations Model Act (#520) have zero protection for investors in the event of the insolvency of the obligor of the factored structured settlement receivable

See Section 3A(5(c) of the 2017 Revisions tp the LIfe & Health Guaranty Associations Model Act  (#520) which expressly excludes "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".

Genex Capital CEO Roger Proctor has done the structured settlement industry and consumers a substantial service in earlier responsive court filings by defining investments by the investors in this case, particularly when subject to a payment servicing agreement, as a "subset" or "the lesser subset" of payment rights.

[from 1/3/2022 Decl. of Roger Proctor in Response to Seeley Defendants' Motion for Partial Summary Judgment (at #56) IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA

GENEX CAPITAL CORPORATION, a Delaware corporation; Plaintiff, vs. SEELEY CAPITAL MANAGEMENT, INC., a Massachusetts corporation; et al., Defendants. AND RELATED COUNTERCLAIM; RICHARD L. KEEFER and VICKI L. KEEFER, husband and wife; et al., Plaintiffs,vs. GENEX CAPITAL CORPORATION, a Delaware corporation; et al., Defendants.  Case Nos: CV2020-004958 CV2020-013796 (Consolidated) at #1]

 

 

CrowFly Flies No More | Buffalo Structured Settlement Factoring Company Folds

by Structured Settlement Watchdog  (UPDATED August 26, 2022)

CrowFly, the John T. Bair principally owned structured settlement factoring origination and servicing company has played its swansong , the fat lady has sung and the curtain has come down, according to well placed sources. familiar with the situation. 

The demise of CrowFly came 4 months after a local media headline in Buffalo Business First " Fintech CrowFly hits another gear, tripling team and ramping up revenue" Buffalo Business First, Dan Miner Reporter  April 7, 2022. 

Only 4 months ago... Weird!

1. "The company’s revenue is up more than 400% annually the last two years and is in the process of nearly tripling its team to 15 employees. Co-founder Nita Bhatia was named CEO in late December (2021)"-Buffalo Business First
2. “We’re going to continue building out our org chart, which will help us continue our growth,” Bhatia said then. “We have only tapped a small portion of our potential market share and marketplace.”-Buffalo Business First
3. Huge estimated amount of daily budget in pay per click ads  

CrowFly has played its swan song

On August 25, 2022, the majority owner John T. Bair finally issued a statement "“After four years, and over a million in individual investment from me, achieving the goal of fundamentally changing the industry for the better became unviable,” Bair said"., in a post by Dan Miner of Buffalo Business First. It was unclear from the quote attribiuted to Bair if that " over a million" was before, or after, any fees earned on the sale of structured settlement payment rights from annuitants that Bair wrote while with Forge Consulting and Milestone Consulting? It's certainly reasonable to ask.

Question Of "Churning/ Attempted Churning" of Milestone and legacy Forge annuitants with structured settlement payments

CrowFly was billed as a "Fintech", part of a suite of companies in marketing materials, under the Milestone & Co umbrella  (formerly Seventh Amendment Holdings, LLC).  It really doesn't matter what they called it, there was an admission for anyone paying attention that CrowFly was a structured settlement factoring origination and servicing company.

For 4 years The Structured Settlement Watchdog, raised the natural question of whether CrowFly and other Bair associate entities targeted and mined Bair's primary market customers with structured settlement payments for structured settlement factoring.  Bair maintains however that CrowFly is a separate company despite the admission in a MIlestone Wealth's Form ADV Part 2 dated March 16, 2022 that Bair was the principal owner before the recent shuttering of the company. He also admitted in October 2018 using "we" from his Milestone email address that he was "the only primary market as well as secondary market origination firm that he knew of".

Carl Hunley Jr., a very talented artist, was commissioned to do a brand refresh for Seventh Amendment Holdings, LLC and various companies under its umbrella in 2020. As you can see from this March 28, 2020 posting on Behance, CrowFly was notably absent. I wonder why? CrowFly was in existence since 2017 and operating out of the same office.

Then came evidence found on the New York NECF IAPPS online court records system, a treasure trove of revelation.

• Our recent posts chronicle my findings. The New York court records show Seventh Amendment Holdings, LLC and United States Periodic Payment Assigment Company involvement as transferees in structured settlement transfers proposed to New York judges.  Seventh Amendment Holdings , which was renamed  Milestone & Co earlier this year, and USPPAC, are ongoing entities that participated in the factoring of John T. Bair written structured settlements.  No wonder Bair wanted a 3 year non compete and  a $100,000 liquidation of damages clause when I queried him about how he was going to manage conflict of interest in June 2018!  ( I didn't sign)
• My January 15, 2022 post discusses findings from a from New York court records search that reveal  numerous CrowFly transfer petitions, to add to the pile of petitions of the aformentioned Seventh Amendment Holdings, LLC and United States Periodic Payment Assignment Company,  the former name of holding company MIlestone & Co that was used as QSF admin and the latter a company used for qualified assignments. It would be reasonable for anyone, particularly lawyers referring cases, to question the level of "churning" of Bair written structures with all Bair related companies prior to and during CrowFly's existence. 
• What would be the result of research of court records in other states?  How many more cases would we find?  How much of the growth came from "churning" of Bair written structures?

Rising Interest Rates Hurt Factoring Companies With Thin Margins

Rising interest rates hurt structured settlement factoring originators like CrowFly. They cannot afford to get the pricing wrong on the originations, because if interest rates move up and they've priced too low to be competive, they may not be able to move the paper to investors. For example if CrowFly priced a deal at 4% and alternative investments are now paying greater than 4%, where is the room for CrowFly's margin and transaction costs?  Same thing goes for other companies. The situation grew dire for a number of firms when Sutton Park Capital, a funder of funders, reportedly turned off its funding spigot. A similar phenomenon occurred during the 2008-2009 financial crisis.  Then there were fewer splinter factions and small potatoes.

My condolences to CrowFly employees, some who find themselves out of work. It was only April 2022 when things were brimming with optimism and the company was hiring, growing to as many as 11 employees  (per Buffalo Business First]

Investing in Structured Settlements | What You Need To Know

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Investing in Structured Settlements | What You Need To Know

You or your US clients may be pitched investments in other people's structured settlements using the false flag claim that they are annuities. They aren't.

These alternative investments are not without risk and such investments may neither be suitable for minors, vulnerable retirees or nor personal injury victims. A growing body of litigation suggests that  it's possible that sellers and/or servicers of these alternative investments may not have provided you with enough information, or in a form that you fully comprehend, to have a complete understanding of what you are being solicited to buy, or is being bought for your clients, sufficient to evaulate the potential risks.

Watch this 5 minute video. You will be glad you did. 

 

Milestone/Bair Withdraw Structured Settlement Insurer Appointments

by Structured Settlement Watchdog

Milestone's John T. Bair, the managing member and principal owner of Buffalo based structured settlement factoring company CrowFly, LLC  [Milestone Wealth Form ADV Part 2 Section 10 IAPD - Investment Adviser Public Disclosure - Homepage (sec.gov) ] has apparently recently terminated his appointments, and the sublicensee appointments with life insurers issuing structured settlement annuities. According to New York Department of Financial Services publicly available published records at time of publishing, Bair/Milestone no longer hold appointments with Berkshire Hathaway, Pacific Life & Annuity Company, Metropolitan Tower Life Insurance Company, New York Life Insurance Company and The Prudential Insurance Company of America effective May 31, 2022, according to the New York Department of Financial Services,  Upon information and belief Bair/Milestone are not appointed with structured settlement annuity issuers USAA LIfe, American General and United of Omaha.

What About Milestone Fee Master Option 2?

In addition, it is evident that the Bair/Milestone's Massachusetts Mutual Life Insurance Company appointment was terminated as of May 31, 2022. Bair/Milestone solicited trial lawyers for several years with this dubious chuckler "Keep more of your total contingency fee and work within an existing financial framework that can return historical dividends as high as 6% or greater.  What a neat party trick by "Marty McBair" it would be to take a time machine and get historical dividends in the future. Without MassMutual, whose appointment Bair has dropped, and with Northwestern  Mutual a no-brokerage company, is Option 2, deep-sixed?

What About Milestone Fee Master Option 3?

"A more tried-and-true strategy, this approach has been allowable since 2008 but has been cost prohibitive until now. No longer limited to the eight basic structured annuity options, this platform relies on the inherent advantages in the marketplace of
annuities. All annuities are available to back the obligations of this feeMaster option". Can MIlestone and Bair seriously and accurately represent to trial lawyers and disabled plaintiffs that ALL annuities are available when they are now not, now that the appointments have terminated by Milestone/Bair?

In its most recent still published form ADV Part 2, in Section 10 (Conflict of Interest), Milestone Wealth indicates that it "may recommend an annuity listed by CrowFly to a Milestone client". To the extent what Milestone is selling to an investor, or a trust, is a factored structured settlement payment stream. It is NOT an annuity. Plaintiffs and their attorneys should be mindful that when another person's structured settlement payments are being sold to them or their clients  it is a factored structured settlement payment stream, or receivable that does not meet the definition of annuity under the laws of many states.

Factored structured settlement payment streams are not annuities and not a qualified funding asset for a structured settlement. 

He was not the first, but for 4-5 years, John Bair was the only structured settlement annuity general agent who was also cofounder, managing member and principal owner of a structured settlement factoring operation, CrowFly, LLC. [ see Milestone Wealth Form ADV Part 2, page 10 regarding Conflict of Interest]

On April 20, 2020 Bair sent a missive to trial lawyers to get their clients out of annuities while soliciting clients to buy factored structured settlement payment rights inappropriately billed as "annuities" from CrowFly, LLC.  At the time of the solicitation it was known that the 2017 Revisions to NAIC LIfe & Health Guaranty Association Model Act (#520) expressly excluded structured settlement investors from the insolvency scheme. Today 37 states have adopted the revisions and as a result provide no protection to structured settlement investors in the event of insolvency. The 2017 revisions included a retro clause that affects people who have bought such investments prior to the effective date of the adoption of the revisions.  Expect the 2017 Revisions to eventually be adopted in all 50 states.

  

 

Confiscated Structured Settlement Payments from Investors Arizona Litigation Update

by Structured Settlement Watchdog

Maricopa County Arizona judge Danielle J. Viola has issued an under advisement order in important litigation concerning investments in structured settlement payment rights. Genex Capital Corporation et al. v Seeley Capital Management Inc, et al  Superior Court Maricopa County  CV 2020-004958.

______________________

Side Bar

The Maricopa docket CV 2020-004958, consolidates the original action brought by Genex Capital in April 2020, the counterclaims of Defendants in May 2020, investor lawsuits against Genex Capital CV2020-013796 commenced October 2020, additional investor lawsuits against Genex Capital amending the same case number December 2020 and additional investor lawsuits against Genex Capital, CV 2022-002266 commenced February 2022, with associated counterclaims.  Other legal actions beteen Genex Capital and some of the same parties remain pending in other states, as well as an action by Genex Capital against another investor, octogenarian Geraldine Yeisley, a retired school teacher from Oklahoma which has also associated counterclaims [ see Genex Capital Corporation v Provident Trust Group Geraldine Yeisley Pottawatomie County OK CJ-2021-00115]

_______________________________________________________________________

Genex Capital Corporation Lawsuit Update v New England Annuity Associates et al. v Genex Capital Corporation et al.

The Court declined to enter a partial summary judgment against Genex Capital Corporation in its lawsuit against New England Annuity Associates, Bulbrook-Drislane, Seeley Capital Management Inc., Income Stream Funding Partners, LLC, John Bulbrook/Jane Doe Bulbrook, and Christopher Seeley (collectively, “Defendants”) The Court found that Genex Capital presented sufficient evidence demonstrating that factual disputes remain as to what damages Genex may have suffered. As a result, the Court declined to enter summary judgment on the issue of damages. The Court found that Defendants have not shown an absence of any genuine issue of material fact regarding causation. Based on its conclusions, the Court declined to enter summary judgment on the issue of damages or causation of damages.

Keefer Investor Lawsuit Update v Genex Capital Corporation

Keefer was the first investor lawsuit filed. Between 2011 and 2013, Plaintiffs Richard L. Keefer and Vicki L. Keefer (the “Keefers”) purchased the right to collect future structured settlement payments (“Payment Streams”) from Defendant Genex Capital Corporation (“Genex”) including rights to the Lessa Perdun payments (“Perdun Payments”) and Leigh Laura Duran payments (the “Duran Payments”). Genex executed an Assignment consistent with the applicable Receivable Purchase Agreement. Genex designated Security Title Agency, Inc. as the Servicing Company.

In September 2019, the Keefers executed documents entitled “Assignment of Sale and Assignment Agreement” to effectuate the sale and reassignment of some of the Payment Streams to New England Annuity Associates (“NEAA”). NEAA then reassigned the Payment Streams to other third-party investors and Security Title began remitting payments to the investors. Before providing notice to the Keefers of their alleged default, Genex directed Security Title to remit payments from the reassigned Payment Streams to Genex. Later, payments related to reassigned Payment Streams were held by Security Title  [ Judge Viola Under Advisement Ruling 6/7/2022 p 5 ]

On February 24, 2020 and April 3, 2020, Genex provided notice to the Keefers of the alleged default resulting from the reassignments of Payment Streams to NEAA without Genex’s consent. The notices required proof that the reassignments had been reversed within twenty days. In order to avoid a dispute, the Keefers and NEAA revoked the reassignments. Genex asserts that the Keefers did not respond to the notices of default. Genex alleges that it terminated the RPAs, repossessed the rights to the Perdun Payments and Duran Payments, and reassigned them to new investors.

Plaintiffs seek partial summary judgment that (1) they are the owners of and have the right to receive payments arising from the Payment Streams; (2) Genex has no right, title, or interest in the Keefers’ Payment Streams; and (3) Genex had and has no right to withhold, sell, or reassign the Keefers’ Payment Streams. Genex seeks summary judgment that (1) the Keefers did not have the power or the right to reassign the receivables; (2) Genex had the right to terminate and/or void the RPAs; and (3) Genex had the right to withhold and reassign future Receivables payments from the Keefers.

The parties’ motions for partial summary judgment are summed up in the following questions:

(1) What are the Keefers and Genex’s rights and interest in the Payment Streams?

(2) Did the Keefers have the power or right to reassign the Receivables?

(3) Did Genex have the right to terminate the RPAs?

(4) Can Genex withhold Receivables payments from the Keefers?        [6/7/2022 Viola Order p6]

Rights and Interest in the Payment Streams

The Court granted Plaintiffs Richard L. Keefer’s and Vicki L. Keefer’s Motion for Partial Summary Judgment in Case No. CV2020-013796 filed November 23, 2021 that (1) the Keefers are the owners of and have the right to receive payments arising from the Payment Streams; (2) Genex has no right, title, or interest in the Keefers’ Payment Streams; and (3) Genex had and has no right to withhold, sell, or reassign the Keefers’ Payment Streams. Genex had the opposite motion.

The Court reasoned that plain language of Section 3.1 of the Genex RPA and Schedule E are clear that Genex transferred all of its right and interest in the Receivables. The Court found that the Keefers are entitled to a declaration that they are the owners of and have the right to receive payments arising from the Payment Streams and that Genex has no material right, title, or interest in the Keefers’ Payment Streams.

The Court further reasoned that although the RPA is clear regarding the Keefers’ interest in the Payment Streams, the RPA is equally clear regarding restrictions on reassignment. Section 3.4 of the RPAs states: “Buyer shall not have the right to further assign or sell the Receivable and must keep the Receivable for the balance of its term unless otherwise expressly approved by Genex.” SOF, Ex. 1, RPA § 3.4. The Court found that Genex is entitled to a declaration that the RPA does not permit reassignment of the Receivables without Genex’s consent, but denied all other relief.

Furthermore, the Court reasoned

• The parties argued regarding the distinction between the right to assign and the power to assign.
• The Keefers argue that a breach of a promise not to assign does not render the assignment void or invalid.
• The Keefers also argue that the distinction between the right to assign and the power to assign does not change the fact that Genex does not obtain rights to the Payment Streams or have the ability to resell them based on an unauthorized assignment—either the reassignment was void or the reassignment constituted a breach. Neither would result in the Keefers forfeiting the Payment Streams back to Genex, said the Judge in her Order

 

____________________________________________________________________________

Side Bar

I've previously reported about the 2020 amplification of paragraph 3.4 of the Genex Capital Receivables Purchase Agreement, which appears to be an attempt by Genex Capital to address the reassignment issues that gave rise to the litigation and makes clear the potential consequences to investors in block capitals.

A prospective investor would have to agree to such terms (as well as the rest of the terms) of the latest version of the RPA, if entering into an RPA with Genex to buy receivables  (e.g. structured settlement payment rights).

________________________________________________________________________

It is undisputed that the Keefers reassigned the Payment Streams to NEAA. However, the Keefers assert that disputed issues of material fact remain that preclude summary judgment on the issue of whether there was an uncured material breach. The Keefers assert that Security Title approved the assignments. Genex also asserts that the Keefers did not respond to the Notices of Default. The Keefers assert that they revoked the reassignments and informed Genex of the revocations.  

Based on the disputed facts, the Court declines to enter summary judgment in favor of Genex declaring it had the right to terminate and/or void the RPAs.

Even if the Court concluded a material breach occurred, Genex’s remedies are limited to those set out in the RPA. Genex may have a claim for breach, but Genex does not obtain any right, title, or interest in the Payment Streams or the right to withhold, sell, or reassign the Payment Streams as a result of the Keefers’ breach and default. Genex’s remedies in the event of the Keefers’ default are as follows:
(a) terminate the Agreement in respect of the Receivable Transaction in question by Notice delivered to the Buyer on or before Closing. In such case Genex shall be entitled to keep any funds deposited by Buyer by way of liquidated damages and not as a penalty; and/or
(b) enforce specific performance of Buyer’s obligations under this Agreement; and/or
(c) terminate the Agreement generally; and/or
(d) bring an action in law or equity to recover damages for the default, including Genex’s reasonable costs and attorney’s fees. Genex shall have the right, but not the obligation, to mitigate its damages.   [Under Advisement Order 6/7/2022 p9]

Final Thoughts

Obviously there is more to come in this litigation which continues to be instructive of the transactional risks of investing in structured settlement payment rights, or subsets of those rights. 

I, for one, continue to be grateful for Mr. Proctor's introduction of the term "subset" to refer to portions of structured settlement payment rights acquired by investors that are being serviced. [Proctor Declaration of 1/3/2022]

The RPA defines “Annuity” as “a payment or set of payments paid over a fixed term by an insurance company arising from a structured settlement, lottery prize winning payment or other annuity.” SOF, Ex. 1, RFP at 3. “Receivable” is defined as “all or such part of the payments from an Annuity which Buyer has agreed purchase [sic] under this Agreement as set out in a Request.” Id. Other language from the RPA also supports the conclusion that the distinction between “Receivable” and “Annuity” is immaterial.  [ Under Advisement Order p 7]

While the judge references a defined term "annuity" in the RPA and that the distinction between annuity and recevable is immaterial, acquired structured settlement payment rights are not considered annuities or insurance products  [ NAIC Statutory Issue paper No. 160, finalized April 6, 2019] and the definition of annuity under the insurance laws of many states is inconistent with what Genex Capital or similar companies are selling to investors. For example,

Oklahoma  

Annuity | Oklahoma Insurance Department |  An annuity is a contract in which an insurance company makes a series of income payments at regular intervals in return for a premium or premiums you have paid to the insurance company. Annuities are often purchased for future retirement income. 

 

Connecticut

 

An Annuity |  CT Insurance Department | is a contract in which an insurance company makes a series of income payments at regular intervals in return for a premium or premiums you have paid. Annuities are most often bought for future retirement income, and can pay an income that can be guaranteed to last as long as you live.

 

California

ARTICLE 9. Suitability Requirements for Annuity Transactions

10509.913 (a) “Annuity” means an annuity that is an insurance product under California law that is individually solicited, regardless of whether or not the product is classified as an individual or group annuity.

 

 

 

 

 

 

NJ , WA and OH Legislate Secondary Market "Annuity" Investors Have No Insolvency Protection

by John Darer CLU ChFC MSSC CeFT RSP CLTC

New Jersey, Washington and Ohio are the latest US states to adopt the 2017 revisions to the Life & Health Guaranty Association Model Act (#520). This is great for vulnerable targeted class of structured settlement annuitants in that it reduces incentives for a vulnerable class of investors to invest in factored structured settlement payment rights in New Jersey, Ohio and Washington state.  It's terrible news for the vulnerable class of investors in structured settlement payment rights. 

Structured settlement investors  (people who invest in other people's structured settlement payment rights) are often sold investments scam labeled secondary market annuities. However investing in other people's structured settlements is not the same as investing in legitimate annuities,most notably the fact that, in adopted states, there is now an exclusion for structured settlement payments to which a payee, or beneficiary if the payee is deceased, has transferred their structured settlement payment rights in a structured settlement factoring transaction. The "buzz kill" for people who are already invested in other people's structured settlement payment rights is that the exclusion is applied retroactively and they have no protection in the event of insolvency of the underlying annuity issuer or bankruptcy of the qualified assignment company.

Shouldn't any individual or company that is offering other people's structured settlement payment rights to investors include this as part of the disclaimers to any investor.  It seems to me that any indivdual or company that has sold investors other people's structured settlement payment rights in the past, should update its investors about the new developments.

37 states in all have adopted the 2017 Life & Health Guaranty Association revisions, with the retro insolvency exclusion detrimental to investors, leaving a bakers dozen of states to go.  According to a March 2022 publication by the NAIC with a few states added in the interim, these presently include AK, AR, AZ, CT, DE, FL, IA, ID, IL, IN, KY, LA, MD, ME, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NV, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WV, and WY.  

Invest wisely. The friendly faces could be your financial adviser or settlement planner. Their E&O insurance likely contains an exclusion for insolvencies.

 

A Secondary Market Annuity is a Load of Hooey

by Structured Settlement Watchdog

A #SecondaryMarketAnnuity is not an #annuity says the NAIC*. If you invest in an SMA, you have no insolvency protection in 34 states, with 2 considering it and the NAIC pushing hard for all 50 states to adopt 2017 revision to the Life & Health Guaranty Association Model Act (#520).

Make sure you know what you are buying. Don't "duck up" your retirement!

Don't "duck up" your retirement

 

* Statutory Issue Paper No. 160 April 6, 2019 

Bad Lingo for Settlement Consultants 101 | "Refactored Structured Settlements"

by Structured Settlement Watchdog

Refactored Structured Settlements is the creation by some to inartfully describe investments in transferred structured settlement payment rights from other people's structured settlements. The term is used by structured settlement consultants, settlement planners and such, when used as an alternative investment vehicle to a settling plaintiff. The purpose of this post is to set the record straight and to to keep the information highway clear.

• A structured settlement factoring transaction is defined under at IRC § 5891 (c)(3)(A) as "a transfer of structured settlement payment rights (including portions of structured settlement payments} made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration".
• There is no transfer of an annuity or insurance product.
• It is worth noting that I.R.C. § 5891(c)(1) separately defines the term structured settlement as "an arrangement which is established by suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or agreement for the periodic payment of compensation under any workers' compensation law excludable from the gross income of the recipient under section104(a)(1), and under which the periodic payments are of the character described in subparagraphs (A) and (B) of section 130(c)(2), and payable by a person who is a party to the suit or agreement or to the workers' compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130".

So, to boil it down:

• A structured settlement is an arrangement 
• A structured settlement annuity is a customizable insurance product used as a qualified funded asset, which is defined at §IRC 130(d) as "any annuity contract issued by a company licensed to do business as an insurance company under the laws of any State, or any obligation of the United States, if—(1) such annuity contract or obligation is used by the assignee to fund periodic payments under any qualified assignment; (2) the periods of the payments under the annuity contract or obligation are reasonably related to the periodic payments under the qualified assignment, and the amount of any such payment under the contract or obligation does not exceed the periodic payment to which it relates; (3) such annuity contract or obligation is designated by the taxpayer (in such manner as the Secretary shall by regulations prescribe) as being taken into account under this section with respect to such qualified assignment, and
  (4) such annuity contract or obligation is purchased by the taxpayer not more than 60 days before the date of the qualified assignment and not later than 60 days after the date of such assignment.

 

When "Re-" precedes any word, it suggests something has been re-done, re-manufactured or even re-structured. Think of a retread tire. Someone patches up an unroadworthy balding tire, re- treads it and out it goes onto another car.  The end product is still a tire!

We're talking two different things in this case:

To sum up

• A transfer of structured settlement payment rights is not the transfer of an annuity or an insurance product or the creation of a new insurance product. There is no "re-tread" going on.
• An investment in structured settlement payment rights is not an investment in an annuity. It is an investment in a receivable.
• An investment in structured settlement payment rights is not an investment in a structured settlement.

For the benefit of consumers, let's keep the structured settlement information highway clear of inaccurate terms.

 

 

CrowFly | It's a Bird USPTO! It's a Fintech Buffalo Business First! No, It's a "Financial Institution" Google

by Structured Settlement Watchdog

I guess crows don't like to be pigeonholed. Can a company that has no licenses be considered a financial institution?  CrowFly LLC advertises on Google My Business that it is a Financial Institution.  Is CrowFly LLC a financial institution?  

CrowFly financial institution?  Retrieved 4-9-2022

According to the Code of Federal Regulations 31 CFR 1010.100(t), a financial institution defined as:

Each agent, agency, branch, or office within the United States of any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the capacities listed below:

(1) A bank (except bank credit card systems);

(2) A broker or dealer in securities;

(3) A money services business as defined in paragraph (ff) of this section

(4) A telegraph company;

(5)

(i) Casino. A casino or gambling casino that: Is duly licensed or authorized to do business as such in the United States, whether under the laws of a State or of a Territory or Insular Possession of the United States, or under the Indian Gaming Regulatory Act or other Federal, State, or tribal law or arrangement affecting Indian lands (including, without limitation, a casino operating on the assumption or under the view that no such authorization is required for casino operation on Indian lands); and has gross annual gaming revenue in excess of $1 million. The term includes the principal headquarters and every domestic branch or place of business of the casino.

(ii) For purposes of this paragraph (t)(5), “gross annual gaming revenue” means the gross gaming revenue received by a casino, during either the previous business year or the current business year of the casino. A casino or gambling casino which is a casino for purposes of this chapter solely because its gross annual gaming revenue exceeds $1,000,000 during its current business year, shall not be considered a casino for purposes of this chapter prior to the time in its current business year that its gross annual gaming revenue exceeds $1,000,000.

(iii) Any reference in this chapter, other than in this paragraph (t)(5) and in paragraph (t)(6) of this section, to a casino shall also include a reference to a card club, unless the provision in question contains specific language varying its application to card clubs or excluding card clubs from its application;

(6)

(i) Card club. A card club, gaming club, card room, gaming room, or similar gaming establishment that is duly licensed or authorized to do business as such in the United States, whether under the laws of a State, of a Territory or Insular Possession of the United States, or of a political subdivision of any of the foregoing, or under the Indian Gaming Regulatory Act or other Federal, State, or tribal law or arrangement affecting Indian lands (including, without limitation, an establishment operating on the assumption or under the view that no such authorization is required for operation on Indian lands for an establishment of such type), and that has gross annual gaming revenue in excess of $1,000,000. The term includes the principal headquarters and every domestic branch or place of business of the establishment. The term “casino,” as used in this chapter shall include a reference to “card club” to the extent provided in paragraph (t)(5)(iii) of this section.

(ii) For purposes of this paragraph (t)(6), “gross annual gaming revenue” means the gross revenue derived from or generated by customer gaming activity (whether in the form of per-game or per-table fees, however computed, rentals, or otherwise) and received by an establishment, during either the establishment's previous business year or its current business year. A card club that is a financial institution for purposes of this chapter solely because its gross annual revenue exceeds $1,000,000 during its current business year, shall not be considered a financial institution for purposes of this chapter prior to the time in its current business year when its gross annual revenue exceeds $1,000,000;

(7) A person subject to supervision by any state or Federal bank supervisory authority;

(8) A futures commission merchant;

(9) An introducing broker in commodities; or

(10) A mutual fund.

(ff) Money services business. A person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.

(1) Dealer in foreign exchange. A person that accepts the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more countries in exchange for the currency, or other monetary instruments, funds, or other instruments denominated in the currency, of one or more other countries in an amount greater than $1,000 for any other person on any day in one or more transactions, whether or not for same-day delivery.

(2) Check casher -

(i) In general. A person that accepts checks (as defined in the Uniform Commercial Code), or monetary instruments (as defined at § 1010.100(dd)(1)(ii), (iii), (iv), and (v)) in return for currency or a combination of currency and other monetary instruments or other instruments, in an amount greater than $1,000 for any person on any day in one or more transactions.

(ii) Facts and circumstances; Limitations. Whether a person is a check casher as described in this section is a matter of facts and circumstances. The term “check casher” shall not include:

(A) A person that sells prepaid access in exchange for a check (as defined in the Uniform Commercial Code), monetary instrument or other instrument;

(B) A person that solely accepts monetary instruments as payment for goods or services other than check cashing services;

(C) A person that engages in check cashing for the verified maker of the check who is a customer otherwise buying goods and services;

(D) A person that redeems its own checks; or

(E) A person that only holds a customer's check as collateral for repayment by the customer of a loan.

(3) Issuer or seller of traveler's checks or money orders. A person that

(i) Issues traveler's checks or money orders that are sold in an amount greater than $1,000 to any person on any day in one or more transactions; or

(ii) Sells traveler's checks or money orders in an amount greater than $1,000 to any person on any day in one or more transactions.

(4) Provider of prepaid access -

(i) In general. A provider of prepaid access is the participant within a prepaid program that agrees to serve as the principal conduit for access to information from its fellow program participants. The participants in each prepaid access program must determine a single participant within the prepaid program to serve as the provider of prepaid access.

(ii) Considerations for provider determination. In the absence of registration as the provider of prepaid access for a prepaid program by one of the participants in a prepaid access program, the provider of prepaid access is the person with principal oversight and control over the prepaid program. Which person exercises “principal oversight and control” is a matter of facts and circumstances. Activities that indicate “principal oversight and control” include:

(A) Organizing the prepaid program;

(B) Setting the terms and conditions of the prepaid program and determining that the terms have not been exceeded;

(C) Determining the other businesses that will participate in the prepaid program, which may include the issuing bank, the payment processor, or the distributor;

(D) Controlling or directing the appropriate party to initiate, freeze, or terminate prepaid access; and

(E) Engaging in activity that demonstrates oversight and control of the prepaid program.

(iii) Prepaid program. A prepaid program is an arrangement under which one or more persons acting together provide(s) prepaid access. However, an arrangement is not a prepaid program if:

(A) It provides closed loop prepaid access to funds not to exceed $2,000 maximum value that can be associated with a prepaid access device or vehicle on any day;

(B) It provides prepaid access solely to funds provided by a Federal, State, local, Territory and Insular Possession, or Tribal government agency;

(C) It provides prepaid access solely to funds from pre-tax flexible spending arrangements for health care and dependent care expenses, or from Health Reimbursement Arrangements (as defined in 26 U.S.C. 105(b) and 125) for health care expenses; or

(D)

(1) It provides prepaid access solely to:

(i) Employment benefits, incentives, wages or salaries; or

(ii) Funds not to exceed $1,000 maximum value and from which no more than $1,000 maximum value can be initially or subsequently loaded, used, or withdrawn on any day through a device or vehicle; and

(2) It does not permit:

(i) Funds or value to be transmitted internationally;

(ii) Transfers between or among users of prepaid access within a prepaid program; or

(iii) Loading additional funds or the value of funds from non-depository sources.

(5) Money transmitter -

(i) In general.

(A) A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. “Any means” includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or

(B) Any other person engaged in the transfer of funds.

(ii) Facts and circumstances; Limitations. Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term “money transmitter” shall not include a person that only:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;

(B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;

(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but is not limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the Securities and Exchange Commission (“SEC”), and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution;

(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car, from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial paper, or other value at any point during the transportation;

(E) Provides prepaid access; or

(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

(6) U.S. Postal Service. The United States Postal Service, except with respect to the sale of postage or philatelic products.

(7) Seller of prepaid access. Any person that receives funds or the value of funds in exchange for an initial loading or subsequent loading of prepaid access if that person:

(i) Sells prepaid access offered under a prepaid program that can be used before verification of customer identification under § 1022.210(d)(1)(iv); or

(ii) Sells prepaid access (including closed loop prepaid access) to funds that exceed $10,000 to any person during any one day, and has not implemented policies and procedures reasonably adapted to prevent such a sale.

(8) Limitation. For the purposes of this section, the term “money services business” shall not include:

(i) A bank or foreign bank;

(ii) A person registered with, and functionally regulated or examined by, the SEC or the CFTC, or a foreign financial agency that engages in financial activities that, if conducted in the United States, would require the foreign financial agency to be registered with the SEC or CFTC; or

(iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.