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A Clear Case For Mandatory Independent Evaluations for Under 25s In the NY Structured Settlement Protection Act

by Structured Settlement Watchdog

Young Black Man from Nassau County Was Targeted When He Turned 18 by Financial Vultures

A young black man was targeted by structured settlement factoring vultures from the time he turned 18 years old. By the time he was 21 years old he got royally shafted by a structured settlement factoring company for in excess of a million dollars.  3 years later he entered into a structured settlement factoring transaction with JG Wentworth and sold life contingent payments for bupkis. Upon information and belief, a review of what was represented to the Nassau County Supreme Court as facts in the young man's affidavit submitted to the Supreme Court of the State of New York in Nassau County appears to be a ruse. JG Wentworth Is set to receive the payments and likely aggregate them into a securitization that will be sold to institutional investors as they do.

The proceeds of the 2018 transaction were gone in less than 3 months as the young man is now seeking to sell his remaining 7 figures of long future life contingent payments to raise a few hundred thousand dollars. The story he told to would be buyer this month, is the same apparently phony story that was in his affidavit on the JG Wentworth deal.  

Four years ago, this young man had an unbelievable structured settlement and did not have to worry about money. Set for life, the New York resident had a triple tax free life time income with guaranteed increases.  He had an income that was about double that of the net average wage for New York State and it was triple tax free.

First he got screwed because of an opportunistic vulture factoring company, which forum shopped him from New York to Florida before 2016 Florida  SSPA reforms, but the recent stuff is in large part on him. There is a good chance that this man will shortly have nothing left,  if one of the lower echelon of the structured settlement secondary market takes the deal and somehow finds that one snoozy New York judge to rubber stamp the deal.

The young man really did get massively screwed on that first deal. Devoid of any financial counselling, before or after the deal, the young man's financial life unraveled and is rapidly tumbling to what may prove to be a wretched end, one that could soon see the man begin to suck resources from the taxpayers of the State of New York.  That's neither the way it was supposed to be, nor the way it is supposed to be. The young man's tumble is a strong reason for there to be mandatory independent professional advice for proposed sales of structured settlement payments involving under 25 year olds, and anyone else who may not be financially mature and vulnerable.  The recent history of the structured settlement secondary market is pock marked with stories of the young, immature and/or impaired getting shafted.

The all too common and abysmal practice of slick structured settlement factoring company representatives, getting the annuitant to sell early year payments sets the young adults up for failure. The factoring company representatives are often unlicensed,  not credentialed and lacking transition expertise and yet providing harmful financial advice to young people in many cases.

What should concern state regulators is that while we know a lot of what is going on from what has been uncovered in the last 6 years, we still don't know what we don't know.  

 

 

 

Beneficiary Lawsuit Against Annuity Issuer, Structure Broker in NJ District Court

by John Darer CLU ChFC MSSC RSP CLTC

A beneficiary has brought a lawsuit against the annuity issuer and guarantor, qualified assignee and structured settlement brokerage and others in the New Jersey District Court at Camden, in a dispute over payments allegedly due the payees and the contingent beneficiary from a structured settlement that was set up in 2002 to resolve a workers compensation case.

In short the Plaintiff claims that $848,000 was used to fund the structure and that only $320,000 (representing a return of principal)  was paid out before the annuity issuer stopped making payments, after her mother's death in 2008.

The complaint filed December 6, 2012 in LETZGUS v. AMERICAN GENERAL LIFE INSURANCE COMPANY et al alleges

1. That Barbara Letzgus' father Ronnie Letzgus was severely injured and permanently injured September 3, 1998 during his employment by Bensalem Steel Erectors.

2. That " as a result of personal injury incurred by Mr. Letzgus, certain benefits were paid through PMA Insurance Group under his employer's Workers Compensation policy and certain other benefits to AGL ( American General Life Insurance Company) to acquire and establish an annuity for not only the life of Mr. Letzgus but thereafter to his... spouse, Ida Letzgus, as primary beneficiary..."  [ in view of the statement in #5 it appears to this author that the annuity was funded by AIG not PMA]

3. That Mr. Letzgus named his daughter as contingent beneficiary.

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What is A Contingent Beneficiary?  

A contingent beneficiary is an individual or entity specified by an insurance contract holder who will receive the benefits if the primary beneficiary has died when the benefit is due to be paid.

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4. "That in or about 2002, an employee of PMA (Pennsylvania Manufacturing Association) Insurance Company advised Mr. Letzgus that he should establish a long term annuity for his settlement benefits and only recommended Ringler Associates for this purpose"

5.  "...That Ringler advised and established a structured settlement for Mr. Letzgus", which appeared to be funded by National Union Fire Insurance Company of Pittsburgh Pennsylvania (sic)" "for at least $848,000" "establishing a fifteen year annuity, paying $5,700/00 per month tax-free, to himself or his designated beneficiaries..."

6.  The settlement agreement was dated January 11, 2002, the periodic payments under which were assigned to American General Annuity Service Corporation on March 15, 2002.

7.  The complaint then alleges (at 13)  that on March 15, 2002, the same date as the assignment, Ross Duncan and Jane Speranzi (sic) issued a structured settlement proposal providing that Letzgus or his beneficiaries would receive $5,700 per month beginning April 15, 2002 for 180 months certain and life, with payments to increase "by a minimum of 2% per year and  he payments were guaranteed through March 15, 2017"

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What is a "Certain Period"?  

The certain period of a structured settlement or retirement annuity, represents payments that will be made whether or not the payee survives the entire payment schedule.

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8. The complaint alleges that Letzgus accepted a proposal "under the advisement of Ringler" with amounts that appear to vary between $2.49 MM and $3.49MM although states that the documentation located by the Plaintiff is not easily discerned. The complaint alleges that Letzgus was not represented by counsel, did not have an education in finance or investments and the last grade of education completed was 9th.

9. The complaint alleges that according to records Ronnie Letzgus received payments, through January 2008, in varying amount between $3,400.00 and $3,700.00 per month.

10. Letzgus died March 26, 2008, leaving his wife Ida Letzgus and his daughter Barbara, allegedly as his only surviving intended beneficiaries. Ida Letzgus died 4 months later.

11. Barbara Letzgus alleges that before his death that Ronnie Letzgus told her that he had provided for her mother and her through the annuity "which would pay her at least $5,700.00 per month and it might be more based on the investment advice of Ringler Assocoates and the funds invested in the annuity"

12. According to the complaint, some time in 2008, American General Life stopped making payments upon learning of the death of Ronnie Letzgus and none have been paid thereafter.

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NOTE: A legal complaint contains allegations, which are claims of fact by a party, which the party claims to be able to prove. Allegations remain assertions without proof, until they can be proved.

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Comments

I. According to our source, Ronnie Letzgus was represented by the now defunct Philadelphia law firm of Litvin Blumberg Matusow and Young at the time the structured settlement was established. Before it was dissolved in 2004, the firm was one of the premier plaintiff law firms in the Philadelphia area.

This aspect of the case allegations raises interesting questions ...

• Does a Defendant or insurance carrier have a duty to provide an advisor for a claimant or a plaintiff?

• Does a Defendant or insurance carrier have a duty to advise a claimant or plaintiff that they should seek independent professional advice concerning the structured settlement?

In New York,  the state's structured settlement protection act, promulgated in the New York General Obligations Law, provides at 5-1702 (e) that the Defendant or the Defendant's legal represenative must make " a statement that the claimant is advised to obtain independent professional advice relating to the legal, tax and financial implications of the settlement, including any adverse consequences and that the defendant or defendant’s legal representative may not refer any advisor, attorney or firm for such purpose.  No such requirement existed in New Jersey or Pennsylvania at the time the Letzgus structure was created. Moreover, upon information and belief, no such requirement exists in those two states today.

• If the structured settlement consultant that the Defendant is using is one that is known and trusted by plaintiff's counsel and the plaintiff's counsel is content with a single consultant advising both sides in the transaction, then where do responsibilities fall?
  

II. What was actually sold?  Was it a cash refund policy? What documentaton is there to back it up?

III. What does the settlement agreement say? What does the qualified assignmment say?  The structured annuity that is issued should match up against the settlement agreement and qualified assignment. In my experience a qualified assignee will not take on a periodic payment obligation that is not specified in the settlement agreement.

IV. Was there a delivery letter sent with a copy of the annuity contract and the fully executed qualified assignmment?

V. Were any structured settlement payments sold to a factoring company such as JG Wentworth prior to Ronnie Letzgus' death?

VI.  Not referring to anyone in particular, but in general, in my opinion,  the settlement professional of 2013 should be focused on an ongoing professional relationship in in lieu of a brief but intense encounter.  Things happen over the life continuum that need attention. People's life circumstances change. They get sick, They get healthy, They get married.  They get divorced. They have children, They have grandchildren. They start a business. They sell a business. The business is successful. The business fails. They lose or make money in the stock market.  They inherit money.  They get a promotion. they lose their job. A tragedy occurs. Force majeure  (e.g. Katrina, Sandy). 

VII. This author does not know the facts about why the payments were stopped,  yet observes that the complaint is notable for naming American General Life Insurance Company pursuant to a theory about its guarantee of the assignment company, American General Annuity Service Corporation. Subject to their terms, such guarantees generally state that the guarantor will pay if the assignee fails to pay, promptly, upon written notice.

Full case cite

LETZGUS v. AMERICAN GENERAL LIFE INSURANCE COMPANY et al

Filed: December 6, 2012 as 1:2012cv07517 

Plaintiff: BARBARA  LETZGUS, individually and as Administrator of the Estate of Ronnie Letzgus and Ida Letzgus

Defendants: AMERICAN GENERAL LIFE INSURANCE COMPANY, RINGLER ASSOCIATES, AMERICAN GENERAL ANNUITY SERVICE CORPORATION, ABC COMPANIES OR CORPORATIONS ONE THROUGH TEN and JOHN OR JANE DOES ONE THROUGH TEN

 

New York Structured Settlements Law | NY General Obligations Law §5-1702

by John Darer® CLU ChFC MSSC RSP CLTC

Structured settlement expert John Darer reviews the rights and responsibilities of plaintiffs and defendants under New York General Obligations Law §5-1702, a/k/a the New York Structured Settlement Protection Act, in this video podcast.

Defendants and defense counsel for defendants, on lawsuits pending in the New York State County of Bronx, New York, Erie, Cattarraugus, Monroe, Steuben, Albany, Nassau, Suffolk, Rockland, Westchester, Kings, Queens, Orange, Broome, Greene, Allegany, Dutchess, Fulton, Chenango, Oswego, Rensselaer, Saratoga, Putnam, Chautauqua, Sullivan, Niagara, Richmond (Staten Island) and Chemung to name a few, must be aware of this statute because on personal observation there are a number who are not and may be unwittingly exposing their clients. I'm here to help.

Bear in mind that the New York structured settlement protection statute DOES NOT preclude the Defendants or Defense counsel from engaging their own structured settlement consultant, with a customary co-brokerage arrangement (i.e. settlement brokers or consultants representing each side). The crux of the New York structured settlement law is that in a civil system both parties should have independent advice.

 

 

 

New York Judges Protect Structured Settlement Annuitants

by Structured Settlement Watchdog®

Days after Judge Deborah Karalunas (Onondaga County) held factoring company Rapid Settlements, Ltd in civil contempt for violating an earlier oral decision and written order of that court in a case titled CNA Structured Settlements and Continental Assurance Company (CNA) v. Rapid Settlement LTD and Willie T. Lawrence, a June 19, 2007 decision in Staten Island, NY shows that New York Courts are becoming more sophisticated in their understanding of structured settlement factoring transactions and, at least in New York, "it's NOT just a rubber stamp".

On the heels of Judge Hunter's recent smack down of Settlement Funding a/k/a Peachtree in the Bronx,  Robert J. Gigante JSC has joined "the barbecue" from Staten Island and shown that Peaches look good on skewers.  Kristie Suarez wanted to raise some cash to pay legal bills, stemming from a custody battle with her ex husband, which, according to the Court's Order, saw her petition to sell $663,140 in future payments for a discounted present value of 195,897.83 that would net her $19,651.78

It is interesting to follow Judge Gigante's thinking in denying the Suarez petition. He states "The discount rate used to determine the gross advance amount of $26,630.23 here is 16.01%. This rate is not fair and reasonable when compared to other courts. Other courts have found discount rates of 15.46% (Matter of Settlement Funding of NY (Cunningham), 195 2d 721) and 18.621% (In re: Settlement Capital Corp; 194 Misc 2d 711) to be unreasonable. In essence the proposed assignor would be paying credit card-like rates for the privilege of receiving her own money in advance."

If this is any indication the Courts ARE aware of the problems, ARE talking to each other on this issue and THAT is good for New York consumers. It should also be reassuring to those attorneys who have ANY trepidation in going through with a structure due to the "ease of factoring". As long as we have the wisdom of Judge Jane Solomon (who made an excellent presentation at the NSSTA Annual Meeting), and judges like Karalunas, Hunter and Gigante showing their prowess in this area, New York consumers will be OK.

With respect to the Suarez case, the Court states that "assuming the procedural guidelines are met, the court has a greater obligation to assure the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants (sic), and whether the transaction, including the discount rate used and fees and expenses are reasonable.

The court followed Matter of Settlement Capital Corp v Yates 12 Misc 3d 1198(A) in stating that "fair and reasonable were to be evaluated on a case by case basis and the totality of the circumstances".

I would like to add the following footnote not only for the benefit of Judge Gigante and New York judges but to the judiciary and lawyers throughout this country.

Focus on the effective discount rate as opposed to the "plain ole" discount rate. The effective discount rate in a structured settlement factoring transaction or structured settlement transfer may be the thing that turns what looks like a "credit card-like rate" into what looks like a "usury-like rate" Consider the discount rate in Suarez decision was said to be 16.01%. The effective discount rate, incorporating the legal fees and other charges, would be considerably more.

Read the full Suarez Order click here. Thanks to Andrew Lavoot Bluestone for uncovering this.

Other related posts

• Structured Settlement Transfers-What's Your Deep Discount Rate? February 17, 2006
• Discount Rate v Effective Discount Rate in "Cash Now" Transactions. June 7, 2007
• All Hail Judge "Bites Yer Legs" Hunter May 25, 2007