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Structured Settlement Investors Sue Genex Capital Corporation and Genex Strategies, Inc., Allege Conversion and Resale of Their Payments

by Structured Settlement Watchdog

Two investors have sensationally sued Genex Capital Corporation and Genex Strategies, Inc. in a lawsuit that presents a stunning example of the transactional

Seniors are suing Genex Capital (note this image is not of the Keefers)

risks of investing in factored structured settlement payment streams that are wildly different from real annuities. The investor plaintiffs are a husband and wife from Oceanside California in their late 60s.

The 7 count Complaint in the matter of RICHARD L. KEEFER and VICKI L. KEEFER, husband and wife, Plaintiffs, vs. GENEX CAPITAL CORPORATION, a Delaware corporation; GENEX STRATEGIES, INC., a Canadian corporation; HAPPY STATE BANK & TRUST  COMPANY, d/b/a/ GOLDSTAR TRUST COMPANY, a Texas corporation; SECURITY TITLE AGENCY, INC., an Arizona corporation. filed October 29, 2020 in Maricopa County Superior Court CV2020-013796, alleges:

• Breach of Contract v Genex Capital Corporation
• Breach of Implied Covenant of Good Faith and Fair Dealing vs Genex Capital Corporation
• Unjust Enrichment vs Genex Capital Corporation
• Conversion vs Genex Capital Corporation
• Aiding and Abetting v Genex Strategies, Inc.
• Civil Conspiracy vs Genex Strategies, Inc.
• Declaratory Judgment v Genex Capital Corporation

According to the Complaint against Genex et al, filed by Plaintiffs on October 29, 2020 in Maricopa County Superior Court in Phoenix, Arizona:

1. The Keefers purchased structured settlement payments from Genex Capital in a series of 10 transactions beginning on September 12, 2012 and ending on January 21, 2013. The factored payment streams were acquired through both their IRAs and in their individual capacities. Each purchase was evidenced by an Investor Assignment Agreement signed by Genex's principal and CEO Roger Proctor, a Canadian businessman from Vancouver.
2. Each Investor Assignment Agreement is signed an dated by Genex and contains language confirming the Investor has paid good and valuable consideration, “the receipt and sufficiency of which is hereby irrevocably acknowledged,” has been paid by the Investor in exchange for the assignment of the structured settlement payment rights.
3. Each Investor Assignment Agreement provides for the assignment of “all of [Genex’s] right and interest it may have” in specific structured settlement payments.
4. The Keefers subsequently assigned certain payments to New England Annuity Associates which then reassigned the payment rights to new investors.  paperwork was submitted to the servicing agent, Security Title and until February 2020  Security Title honored the reassignments to the new investors without delay or objection.
5. On or about February 3, 2020, Genex improperly redirects the Keefer Assigned Payments  to Genex Strategies, Inc., and erroneously alleges the Keefers are in default of a " Receivables Purchase Agreement" for assigning two sets of payment streams to New England Annuity Associates.
6. Plaintiffs allege upon information and belief, that Roger Proctor, in his capacity as Genex's CEO, had supervised, managed and participated in Genex's  direction to Security Title to remit payments that Genex had previously assigned to the Investors (including the Keefers), directly to Genex Strategies, Inc, rather than the investors who had already purchased the payments from Genex.
7. On or after February 24, 2020, Genex sent a notice of default to Richard Keefer alleging that his re-assignment of Perdun payments to NEAA violated the terms of a Receivables Purchase Agreement allegedly entered into between Keefer and No fully executed copy of the RPA was provided. The default letter purported to give Keefer 20 days to cure the alleged default by reversing the assignment.
8. Certain of the Keefer Assigned Payments which the Keefers never reassigned to NEAA, or any third party Investor, cease. At the time of the Complaint $32,456.48 has not been received.  Genex never provided notice of default relating to the Non Assigned Keefer Payment that ceased.
9. Upon information and belief, Genex subsequently sold and reassigned the structured settlement payment rights which belong to and are owned by the Keefers, including but not limited to the Perdun Payments, Duran Payments, and Non-Assigned Keefer Payments (hereinafter, the “Converted Payments”) to third-party Investors.
   
10. Genex has not turned over or paid any portion of the purchase price or proceeds it received from the new Investors for the Converted Payments to the Keefers
11. Genex did not notify the Keefers that Genex planned to convert their structured settlement future payment rights, treat those payment rights as its own, re-sell them to new third-party Investors, and keep any or all of the proceeds of its sale of the Converted Payments.
12. Upon information and belief, Genex effectuated the purported sale and reassignment of the Converted Payments by notifying the annuity issuers named in each of the state court approval orders to re-direct and remit the Converted Payments provided for each court order to Goldstar, rather than to Security Title.
13. Although Genex may have signed documents purporting to transfer, sell, and re-assign the Converted Payments to new third-party Investors, and then accepted payment from those third-party Investors, Genex did so without right, title, or interest in the Converted Payments.
14. Genex did not have the authority, right, or permission to sell and re-assign the Converted Payments which belong to and are owned by the Keefers.
15. Genex did not and does not have the authority, right, or permission to keep all or any of the proceeds of the sale of the Converted Payments.

Who Were the Other Investors Whose Bought From Genex, the Payments that the Keefers Have Alleged Were Converted by Genex

One wonders how many investors bought "Assured Annuities" from Genex Capital since March 2020 and how many of them were reassigned from payments that are in dispute? Given the very serious allegations against Genex, line 95 of the complaint alleges "Although Genex may have signed documents purporting to transfer, sell, and re-assign the Converted Payments to new third-party Investors, and then accepted payment from those third-party Investors, Genex did so without right, title, or interest in the Converted Payments", if you have purchased investments from Genex Capital, between then and now, perhaps it would be wise to closely examine the transactions, particularly the original court orders. Look for payments to original annuitant surnames Perdun. Duran, Dacus, McAdory, Tolentino and Bender.

Did Genex Confiscate Any Other Investors' Payments?

I included a small but highly relevant (in my opinion) excerpt of a 2020 version of the Genex Capital RPA (which bears the notation "Version date February 18, 2020"), in my July 30, 2020  Genex Capital 2020 Receivables Purchase Agreement | Think You're Buying An Annuity? Think Again.

The Version date of February 18, 2020 is notable in that it is 15 days AFTER the February 3, 2020 date where the Keefer Complaint alleges "Genex improperly redirects the Keefer Assigned Payments to Genex Strategies, Inc., and erroneously alleges the Keefers are in default of a 'Receivables Purchase Agreement' for assigning two sets of payment streams to New England Annuity Associates and the aforementioned Keefer Assigned payments were stopped to the Keefers.

Then and now, in my opinion, yield starved buyers contemplating buying structured settlement payment rights as investments in their retirement plans should definitely pause before investing and see what they're getting into. Settlement planners should be guided accordingly before recommending these alternative non annuity investments to their clients. If you or your client have already bought a factored structured settlement payment stream via Genex Capital, your heirs could unwittingly lose their inheritance by reselling the inherited payment rights at the whim of Genex Capital CEO Roger Proctor if he chooses to "unreasonably withhold" approval. 

Who is Genex Capital? Who is Genex Strategies, Inc.?

Genex Capital Corporation is in the business of purchasing (originating) structured settlement payment rights in the structured settlement secondary market.  Genex then reassigns the future structured settlement payment rights to investors in the structured settlement secondary and tertiary markets.  Structured settlement buyers commonly use payments servicing companies such as Security Title to facilitate payment administration. Upon information and belief, Genex operates a number of lead generation websites such as StructuredSettlementQuotes.com, QuoteMeaprice.com and and also markets factored structured settlement payment streams since November 2013 through Assured Annuity, on which website great pains are taken to justify the use of the term annuity, even though in a 2017 Delaware court case Greenwald v Caballero Goehringer, the Court decided that what was being sold to fund a medical malpractice settlement was not an annuity, but a Genex Capital Receivables Purchase Agreement, from an annuitant in a California case having nothing to do with the case being adjudicated in Delaware. 

At various times Genex Capital has been referred to as a division of Genex Strategies and Genex Strategies, Inc., has been, and is at the time of posting, listed as an alternate business name of Genex Capital on its Better Business Bureau listing. 

Genex Strategies, Inc, is the registrant of the trademark Genex Capital according to the United States Patent and Trademark Office. Proctor notably sponsors an annual skinny dipping contest for the Wreck Beach Preservation Society in Vancouver, donating C$5 per tush in support of the nudist beach.

 

 

 

Settlement Planner Appears to Be Rebating Costs of Qualified Settlement Fund While Selling Insurance Product

by Structured Settlement Watchdog®

Is a member of the Board of the Society of Settlement Planners  engaging in rebating as that is defined under Arizona insurance law? 

Rebating

"Settlement Professionals, Inc. "pays all the costs of a QSF" says a statement made by plaintiffs in court documents in an Arizona case that involves the sale of an Annuity from American National Insurance Company. Does this violate Arizona law?  Source:  Case No: In Re Conservatorship of T.S. 1300GC2013 00063  Superior CT AZ Yavapai County  6th Supplement to Petition for Appointment of Conservator for a minor injured in a horseback riding accident  (in response to objections of the father and Liberty Mutual Insurance company to the 5th amended supplement)

Another statement in the public court documents submitted by lawyers Larry J. Cohen and Neil J. Harrington on November 4, 2013, answers the question concerning Costs of Establishing and administering the QSF expressly states '"These costs are borne by Settlement Professionals, Inc.

AZ Rev Stat § 20-449 (2016) . Rebates on life or disability insurance

A. Except as otherwise expressly provided by law, no person shall knowingly permit or offer to make or make any contract of life insurance, life annuity or disability insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or pay or allow, or give or offer to pay, allow or give, directly or indirectly, as an inducement to such insurance or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract.

If the statement is true,  the use of "a" vs "the" implies a routine rebate, then the obvious question is how many times and in how many states has the company and its associates paid rebates as those terms are defined under the laws of Arizona and other states where the settlement planner does business?  According to the Court documents, "Mr. Melligan (sic) has personally participated in over 100  (single claimant qualified settlement funds) and other advisors report similar numbers"

It begs the question of what communication was there between the attorneys and Settlement Professionals Inc., and/or between the latter and the plaintiffs or the minor's lawyers to prompt  making the express statements they did in the court documents. There had to be an understanding.

Most States have Anti-Rebating laws

While a settlement planner might argue he/she or it is attempting to do the right thing for the client, the anti-rebating law in Arizona is perfectly clear, as it is in his/her/its home state and in most other states. In a September 24, 2007 opinion from the Office of General Counsel of the New York state insurance department opined that it was unlawful to "pay the expenses associated with a qualified settlement fund in connection with the sale or potential sale of structured settlement annuities or any other insurance". To underscore this point it is noteworthy that another settlement planner sought an exception to New York State's General Obligations law to be allowed to rebate or reduce commissions for insurance products placed for families of the 1983 Beirut barracks bombings. Here is a helpful 2009 legal analysis on the subject

Society of Settlement Planners Code of Ethics

The Society of Settlement Planners Code of Ethics adopted in 2008 and still current Rule 10(d)  states that a settlement planner shall not engage in unfair trade practices, including but not limited to: engaging, counseling or assisting another participant in the settlement process, including a client, to engage in conduct the planner knows or reasonably should know is criminal, fraudulent, illegal or is prohibited by law...".  In a February 25, 2003 press release for the SSP, Meligan was quoted "These illegal business practices... include...rebating ... against individual plaintiffs and categories of plaintiffs'. The law however,  does not appear to make a distinction about who can receive rebates. From the plain reading of the law, it appears that all rebates in connection with the sale of insurance (including annuities)  are "prohibited by law'. 

Original Petition of Appointment of Conservator does not mention Qualified Settlement Fund

The Original Petition in June 17, 2013 makes no mention of a QSF.

Structured Settlement Receivables

The settlement planner has also apparently advocated the use of what is mislabeled 'secondary market annuities" for the minor, to compete with traditional structured settlement annuities.  That structured settlement payment rights, which are not annuities (and not regulated insurance products), are called 'annuities" is misleading to the Court.  the petition also falsely states to the court that annuities issued from the secondary market are issued by Liberty Mutual.  Structured settlement derivatives are not annuities and therefore the statement is false on its face.  Even if arguendo the statement were true, Liberty does not issue annuities in the secondary market.

There is nothing in the petition that addresses the risk of investing in structured settlement payment rights (receivables). Read the immediate prior post for a cautionary story about how an elderly couple got shafted out of $150,000 investment in another deal involving another financial adviser (i.e. not Settlement Professionals, Inc.]  While a relatively novel idea at the time of the petition, the use of structured settlement derivatives is not without risk.  Is that risk in the best interests of a minor with a brain injury?

The 6th amended supplement  attempts to assuage those concerns by stating that "any secondary markets securities that might be used ...would come through First Capital Surety & Trust Company or the Bank of Utah'. I confirmed today that the former, now known as Capital First Trust Company did not ever, and does not currently, originate structured settlement derivatives.    

Comparison of Annuity Insurers

Liberty Life Assurance Company of Boston and American National both have A ratings from AM Best and Standard & Poors. Liberty has an A2 Moodys  Both companies had been in existence for over 100 years at the time of the petition.  Liberty Mutual, which guarantees the performance of Liberty Life  Download Liberty-mutual sample guarantee of Liberty LAB is ranked 76th on the fortune 500 . As of December 31, 2015 it had $121.7 billion in consolidated assets. In contrast ANICO, as of December 31, 2015, had $23.75B in assets. 

When a lifetime benefit is being contemplated for a minor.  Longevity is being considered and the size of the company backing the obligation is an important consideration. Payees from Executive life Insurance Company of New York learned that the hard way.

 Single Claimant QSF

Not satisfied with the Treasury having removed single claimant QSFs from its Priority Guidance plan after more than half a decade, in a February 2010 hearing in front of Treasury panel concerning IRC 104(a)(2) an attendee observed and published that Settlement Professionals, Inc.'s Jack Meligan and another SSP member recommended that the Treasury issue regulations explicitly holding the economic benefit doctrine not to be triggered in the context of single-claimant QSFs. He argued that such regulations are necessary as a result of the power imbalance in plaintiff-defendant negotiations.  The requested regulations never happened. Yet in the 2013 filings concerning a single claimant QSF in the instant case, the economic benefit doctrine is not addressed. Hmm.  In 2009, noted San Francisco tax attorney Robert Wood published a nice piece on the subject of single claimant qualified settlement funds and opined his preference for multi claimants.