by Structured Settlement Watchdog®
Stone Street Capital LLC filed a lawsuit against Manhattan personal injury law firm Paris & Chaikin, PLLC, which it retained to seek court approvals for structured settlement transfers, claiming the firm gave them 76 fake judicial orders. [ see Stone Street Capital, LLC v Paris & Chaikin PLLC, Ian M. Chaikin, Jason Paris and Thomas Rubino New York State Supreme Court New York County Index 652434/2015]
Stone Street Capital, LLC is a Delaware limited liability company operating out of a principal office in Bethesda Maryland, which purchases structured settlement payment rights from annuitants in exchange for a lump-sum payment, which are often mischaracterized throughout the industry as "cash now" in ads. Patricia Laborde, it's Senior VP and Division Counsel, is the President of the National Association of Settlement Purchasers (NASP).
Paris & Chaikin is a New York City personal injury law firm which has also appeared on behalf of structured settlement buyers such as Stone Street Capital and JG Wentworth.
The transfer of structured settlement payment rights is subject to the New York Structured Settlement Protection Act and rules set forth in 26 U.S. Code § 5891 Structured Settlement.
- IRC 5891 (a) imposes on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.
- IRC 5891(b)(1) provides that the excise tax under IRC 5891(a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured
settlement payment rights is approved in advance in a qualified order. It is these orders that Paris & Chaikin is alleged to have falsified.
Stone Street Capital LLC hired Paris & Chaikin PLLC to file the structured settlement transfer papers in state courts in New York seeking approval of the sales of structured settlement payment on more than 100 files between 2009 and 2013. Thomas Rubino, a paralegal then working at Paris & Chaiken was the point person and the individual who would send the stamped order from the court approving the transfer. Partners Jason Paris & Ian Chaikin were also named defendants in the suit. The law firm was to be paid a flat fee regardless of the outcome.
When it disclosed the problems to the insurance companies, they stopped making payments to Stone Street and institutional investors (in structured settlement payment rights acquired by Stone Street) [ Complaint para 16]
By failing to properly supervise Thomas Rubino, defendants, Stone Street alleges that they “failed to exercise the care, skill and diligence commonly possessed” by the legal profession. Stone Street contends that the Defendants admitted the fraudulent activities of Thomas Rubino, in open court (Complaint para. 20].
In my February 4, 2014 blog Falsified New York Structured Settlement Transfer Orders | Who's To Blame?, I questioned the judicial system and its "enforcement of the amended New York General Obligations Law § 5-1705 tincludes this:
At this hearing, the payee shall attend before the Court unless attendance is excused for good cause.
I stated "I understand that petitions in some of the matters in which transfer orders were falsified were actually filed with Courts in New York state. For those where petitions were filed, why weren't there any hearings noticed or scheduled, or any follow up that would have triggered an investigation that would have stopped this "phoney baloney" stuff?" Not enforcing the law and not having in person hearing is a recipe for helpless victims to get royally screwed, in my opinion".
While it's not unrealistic to expect supervision of paralegals, will discovery prove that in some cases communications were sent directly to the paralegal Mr. Rubino, without an copy to the name partners and defendants?
In late 2014, S2KM also reported an ongoing investigation of these fraudulent transfers were being conducted by the New York State Courts and the New York County District Attorney's Office. Primary and secondary market representatives with whom S2KM has discussed these fraudulent transfers disagree on how they are impacting judicial attitudes toward structured settlement factoring transactions and factoring companies in New York.
J.G. Wentworth filed a similar lawsuit against the Defendants in June 2015 and my sources also say that Woodbridge is also filing suit.
Kevin D. Sczepanski, of the Buffalo and New York City law firm Hodgson Russ, LLP, represents Stone Street in the action filed July 9, 2015.