Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Equity Indexed Annuities | SEC Rule 151A Vacated By DC Circuit Court of Appeals!

by John Darer CLU ChFC CSSC RSP

The United States Court of Appeals for the District of Columbia has vacated SEC Rule 151A, the rule which would have treated fixed indexed annuities as securities for the purpose  of federal regulation effective January 12, 2011. As a result of the ruling licensed insurance agents may continue to offer and solicit the sale of fixed indexed annuity contracts without needing an active federal securities license.

Fixed indexed annuities are generally characterized by:

1. Minimum interest rate over time
2. Can be either immediate or deferred
3. Benefits that are linked to an external equity reference or an equity index. The value of
   the index might be tied to changes in a stock or other equity index such as the S&P 500. The value of any index varies from day to day  and thus not predictable

American Equity Investment Life Insurance Company , as Petitioner against the SEC, argued that Section 2(b) of The Securities Act of 1933 states that for every making of a new rule the SEC "is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the actions will promote  efficiency, competition and capital formation"

Despite efforts by the SEC, the Court rejected the SEC conclusions and stated that such conclusions were based significantly on a flawed presumption that enhanced investor protections under Rule 151A would increase market efficiency.

For further information on the case please refer to American Equity Investment Life Ins. Co. v. SEC, 572 F.3d 923 (D.C. Cir. 2009 Reissued July 12, 2010)

Comments

Many structured annuity issuers already manufacture fixed index annuities. Now that Rule 151A has been vacated, perhaps its time that such innovation already existing on their shelves be applied in a structured settlement scenario.

Scott Rothstein Sentenced To 50 Years in Slammer for $1.2B Pre Settlement Funding Ponzi Scheme

by Structured Settlement Watchdog

The shark infested waters in South Florida now have one less shyster as a Federal Judge sentenced former lawyer Scott Rothstein to 50 years in jail today. Mislabeled both as a mini-Madoff  and a purveyor of structured settlements, it seems unlikely that the cherubic Rothstein will achieve the cult like status in the slammer that the New York Post recently reported being conferred on Bernard Madoff in Butner, NC.

While Madoff will possibly be synonymous with Ponzi, Rothstein will simply be a footnote-another arrogant little prick who had it all and blew it.

 

"Structured Settlement Industry Seeking Distance From Rothstein"...Broward Palm Beach New Times

by John Darer® CLU ChFC CSSC RSP

The New Times of Broward Palm Beach published "Structured Settlement Industry Seeking Distance From (Scott) Rothstein; Crackdown Coming For "Cash Now" Outfits?  by Thomas Francis. The post title is self explanatory.

Thomas Francis' post cites information and structured settlement flow chart exhibit provided by this author, John Darer® and 4structures.com, LLC, to support the story.

Structured Settlements Industry 2009 | A Review of the Year's Impactful Stories

by John Darer CLU ChFC CSSC RSP

The Doom and Gloom concerning structured settlement annuity issuers of late 2008 has abated somewhat. At this time last year our industry was in the throes of significant     uncertainty created by the government bailout of AIG. the sudden withdrawal of Aviva from the structured settlement market and the media reports creating jitters about The Hartford and others and which weighed heavily on our minds. Other stories (not necessarily in chronological order)

1. From what we've been hearing, 2009 saw a number of industry producers taking meaningful hits to their production, particular in the early part of the year.Others saw flat to slight increases in production. Perhaps my experience is an anomaly, but I've noticed a meaningful increase in activity since July 2009.
2. Following the Madoff fraud exposed in late 2008 which had nothing to do with structured settlements, 2009 brought us $16.5B in fresh exposed frauds including two purportedly about structured settlements that weren't. Media characterization of Scott Rothstein as a "mini Madoff" added to the stigma.  The cherubic Rothstein didn't even come close. Credit to Mark Wahlstrom, Jan Schlictmann, Roger Bernstein, Peter Arnold. Bruce DeBacher, Matt Bracy and this author John Darer for their considerable collective efforts to diffuse and undo any damage done when former Elian Gonzalez' and U.S. attorney Kendall Coffey mislabeled structured settlements in a complaint against Rothstein which sparked a media mislabeling frenzy.
3. The "Connecticut Woman" factoring saga gave us a live case which underscored (1) the need for structured settlement consultants, settlement planners and plaintiff lawyers to ask more questions about, and do a better job of addressing plaintiffs' immediate liquidity needs; (2) the fact that fast cash now (for structured settlements) is a load io B.S.; (3) the need for regulation of the advertising practices of factoring companies; (4) the potential exposure to the settlement consultant and attorney for failing to address the aforementioned need that resulted in a loss of principal in line with stock market losses, from a safe investment. To remind everyone the woman took an estimated 30% hit to principal to sell the payment rights and had to wait 6 months to get the money to address her immediate cash needs.
4. The issue of Structured Settlement Servicing was brought to the forefront. Allegations that certain structured settlement annuity issuers were not slicing or dicing structured settlement payments to multiple payees when an annuitant only wanted to sell part of their structured settlements to meet emergency liquidity needs. The result is a structured settlement servicing agreement in which all of the payments, not just the sold payments, are paid to the servicing company (the factoring company, Structured Asset Funding in the CT Woman case), which then takes its cut and passes the balance of the payment to the annuitant. This raised the issue of what happens to the annuitant's payments in the event of Chapter 7 bankruptcy of the servicing factoring company? In a series of pod casts John Darer addressed the structured settlement servicing issue together with guest, Houston attorney Bruce Akerly.
5. The issue of credential puffery in the structured settlement industry was brought to the forefront and substantially improved. Through the considerable public efforts of this author NSSTA has now published guidelines on promoting the Certified Structured Settlement Consultant certification. It's only too bad it took so long and required extreme peer pressure to get it right.
6. Prudential's decision to withdraw from the non qualified structured settlement market was a biggy. The market has not quite filled the void.  As other industry commentators have noted, there are considerable opportunities in this area for insurers and settlement professionals.
7. JG Wentworth Chapter 11 Bankruptcy.  Call it shadenfreude, but I consider this one of the best things to happen for the industry in 2009. (1) These guys really needed some humility; (2) The bankruptcy disclosure made by JG Wentworth coughed up some useful information supplying proof that the size of factored structured settlements does not match up against the perception by plaintiff attorneys created by the advertising noise;  (3)The continuous bombardment of false advertising "cash now" that $40 million will buy you was tempered dramatically.
8. The withdrawal of Hartford from the structured settlement market place was not unexpected. The parent company suffered jitters for almost 12 month before the life company withdrawal,  due to fears over its exposure to credit default swaps and variable annuity guarantees. During those months the companies structured annuity rates were rarely competitive. Hartford Financial services Group, Inc. stock has rebounded from its 52 week lows of 3.33 over 7 fold.  It was sad to see some long time industry colleagues lose their jobs but many of them have landed on their feet. Industry veteran Mal Deener has landed at Symetra and John Meaney is trying his hand at settlement planning with Delta.
9. In a number of published legal decisions, the United States continued to render useless, the attempts to factor annuities placed as part of Federal Tort Claims Act settlements. 
10. One can observe that more settlement firms are making an Investment in websites and other web 2.0 technology. This blog has highlighted the information on static content websites are boring, neither attract or retain traffic and sometimes embarrassing when failure to update outdated information comes to light. Industry members caught in the headlights have simply had to put up with the minor annoyance of peer pressure for the greater good.
11. The nation's first Registered Settlement Planners (RSP) rolled off the assembly line. This author was among the first in the United States to earn the designation. Kudos to the leadership of the Society of Settlement Planners for laying the foundation, and to Joe Tombs and his crew at Texas Tech for the delivery. The RSP designation has a lot of promise, yet it faces significant challenges to become a force which will be covered in a separate post. 
12. Priority guidance for single claimant qualified settlement funds has been removed from the 2009-2010 United States Treasury Priority guidance list
13. Jeremy Babener, a 3rd year law student at NYU challenged a statistic that alleged basis of the structured settlement tax subsidy in a white paper. Babener was "pimped" all over by Patrick Hindert as if he was the "Elvis Presley of structured settlements".  The "Dissipation Myth Bab-oon" road show hit a new low at the annual meeting of the National Association of Settlement Purchasers in November.
14. While Hindert, in his annual summary, places the take over of The Settlement Services Group by Forge as a seminal event, we simply see it as a way for Forge to justify having defense brokers in an organization that markets itself as plaintiff exclusive. The timing of the announcement suspiciously followed our September post about an anonymous plaintiff exclusive organization that had defense brokers.
15. In 2009 the industry lost some good people due to cancer, Mary Lynn Izzo and Richard G. Halpern. Most people loved Mary Lynn. While the brilliant and innovative Richard Halpern was not universally loved by the industry, he was an important force in the history of the structured settlement industry,  who challenged the status quo and succeeded (by a wide margin). I was sad to lose both of these friends this year. 
16. After extended period of reductions, the 10 year bond is again approaching 4% and the 30 year bond approaching 5% as I type. It is my prediction and others that by end of 2010 we may see 10 year bonds in the 5.5% range with a meaningful increase in the long bond. 
17. As an aside and some industry news just "sliding in the door" at year's end, the popular Jeanne Ragusa, formerly at Aviva, has joined John Hancock as Internal Sale Manager.

Concluding with a light hearted summary of the events of 2009, courtesy of JIb Jab...

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Scott Rothstein Criminal Complaint Contains NOTHING About Structured Settlements!

by John Darer CLU ChFC CSSC RSP

Following is the Scott Rothstein charging document. As you can see there is no place in the Scott Rothstein charging document that refers to "structured settlements". And that's that! Scott Rothstein Charging Document Perhaps Kendall Coffey and the others who have unfairly mislabeled structured settlements in legal pleadings or the press can finally get it together.

Scott Rothstein "Structured Settlements" ALM Media Should Live Up To Its Mission

by Structured Settlement Watchdog

American Lawyer Media (ALM) Claimed Mission Statement

"We aim to deliver the highest standards of integrity, fair-dealing and quality in the services we provide"

So why, in announcing the Snyder complaint against Scott Rothstein, does reporter John Pacenti speak of investors who lost money investing in structured settlements? On the day Pacenti wrote this piece there was material galore out there which details how what Rothstein was peddling were not structured settlements and exhibited characteristics of pre settlement funding. The two are not even close!

The PR director for NSSTA assures me that he has spoken to Pacenti and that "he NOW gets it". Unfortunately that is not good enough when the deed has been done. One can certainly question the allegiance of Pacenti's editor at American Lawyer Media to the mission statement.

How is putting a news story out there that contains information of questionable veracity consistent with "delivering the highest standards of integrity, fair-dealing and quality"?

Rothstein Fraud Update: Structured Settlement Mislabeler Kendall Coffey Should Put A "Sak" In It !

by Structured Settlement Watchdog

STATEMENT BY MIAMI ATTORNEY AND REAL ESTATE DEVELOPER ALAN SAKOWITZ CONCERNING THE ALLEGED SCOTT ROTHSTEIN FRAUD

"During August and September 2009, I met with Scott Rothstein three times at his office to discuss whether his investments were suitable for my investors. Each time, we met for between an hour and two. Rothstein refused to allow me to meet the attorneys in his firm or to see any actual settlement documents other than his 'confidential' business plan dated April 21, 2009. At no time did Rothstein suggest that this investment scheme involved structured settlements. In fact, he was very clear both verbally and in his business plan that these were not structured settlements since Florida has a law requiring court approval for any transfer of future structured settlement payments. Alan Sakowitz said...

"It is possible that Rothstein told other potential investors something different but based on all my conversations with him, any linkage between Rothstein's alleged fraud and structured settlements is incorrect and unfair".

"Scott Rothstein called the agreements he was peddling 'Confidential settlements of sexual harassment cases and whistle blower cases.  He never used the term 'structured settlements.'"  Source: NSSTA website

Former United States Attorney Kendall Coffey's Rothstein Blunder Led to Media Misinformation

Kendall Coffey mischaracterized what Rothstein was selling

Former US Attorney Kendall Coffey, who represents Scott Rothstein's former law partners apparently mischaracterized the term "structured settlements" in pleading filed at the beginning of the month. The apparent mischaracterization by Coffey was unfortunately picked up by the local and national press necessitating a massive and ongoing blog, podcast and phone campaign blitz to defuse.

In a news article on November 16, 2009 AmLaw Daily journalist Brian Baxter reported that " Coffey explains that Rothstein sold structured settlements in sexual harassment and qui tam/whistleblower suits to investors, some of them hedge funds". "Rothstein promised people double their money back or something like a double-digit return in a finite timeframe," Coffey says. The finite time frame was under 6 months, returns impossible with legitimate structured settlements.

______________________________________________________________

SIDE BAR

Here is What a Structured Settlement Really Is Structured Settlements | What Is a Structured Settlement? (4structures.com)

_______________________________________________________________

On November 8, 2009, Mr. Sakowitz appeared on WPLG-TV to discuss the Rothstein case with Kendall Coffey, attorney for Rothstein’s former law partners, and reporter Michael Putney. During the discussion, when attorney Coffey suggested that Rothstein was selling “structured settlements,” Sakowitz corrected him, noting that the legal settlements in question could not have been structured settlements.

How could a distinguished attorney like Kendall Coffey apparently make such a terrible mistake?

Alan Sakowitz is to be thanked in advance for helping to clarify the wrong against the structured settlement industry perpetrated and/or shepherded by Mr. Coffey's purported statements in the rush to protect his clients from the alleged actions of Rothstein.

As I said in my criticism of various reporters in the past few weeks, a modicum of effort to research the issue by Coffey , Baxter and others would have shown that these were not structured settlements.  

John Darer's Scott Rothstein Fraud Commentary on Legal Broadcast Network

by John Darer CLU ChFC CSSC RSP

Watch the latest segment of my commentary on the Scott Rothstein fraud which continues an assault on the misinformation and the mischaracterization of Rothstein's bad fraud as being about structured settlements

The following was recorded on November 16, 2009 and appeared on Legal  Broadcast Network

The alleged investment scam by Fort Lauderdale attorney Scott Rothstein could top $1 billion, making it one of the biggest fraud cases in South Florida history, the head of the FBI in Miami said Thursday morning at a news conference. ``When it's all said and done, I estimate that this scheme could well exceed one billion dollars,'' said FBI Special Agent in Charge John Gillies. He would not talk about whether others may have been involved with the lawyer's alleged Ponzi scheme, but said ``I do not believe this was a one-man show.'' His remarks came as the FBI and IRS sought the help of possible victims of Rothstein's alleged scam. They are urging investors of any kind to contact the FBI by telephone or e-mail with information about their investments, verification of those investments and other details. Agents will then pore over the information and first respond to the biggest victims -- a process that could take weeks. Asked why the FBI had not yet arrested Rothstein, Gillies responded: ``We are conducting this investigation in a timely manner, but we will not be rushed. We will be thorough, and we are far from over . . . I'd like to let the public know this case is going to take time.'' For more information contact John Darer at 203-325-8640 or via email to [email protected]

Martindale Hubbell Rated Ponzi Schemer Scott Rothstein AV

by Structured Settlement Watchdog

Buddy Nevins' BrowardBeat.com carries an interesting story about Martindale Hubbell's Peer Review ratings (One Tampa law firm calls  Martindale-Hubbell, "the leading evaluator of lawyers in the U.S. and Canada").

He says "For years I’ve seen judicial candidates brag about their high Martindale-Hubbell Peer Review Ratings as lawyers. Brochures proudly proclaim the candidate is “AV Rated.”

Nevins always wondered whether such ratings were valid.

 He observes that Martindale Hubbell brags that the ratings  “serve as an objective indicator that a lawyer has the highest ethical standards and professional ability and are used by buyers of legal services to justify their hiring decision.”

Accused Ponzi scammer Scott Rothstein got the highest possible rating! Didn't convicted felon Marc Stuart Dreier also have an AV rating before he was "pinched"?

Those lawyers who have rightly criticized Standard & Poors, Moodys, A.M. Best and others shouldn't throw stones. How Martindale Hubbell rates lawyers click here

Comment

Scott Rothstein is a Fort Lauderdale lawyer who allegedly bilked investors in pre-settlement financing as part of an alleged Ponzi scheme that by some accounts could total $1 billion. Various published news reports, including a news release by the FBI and IRS have mischaracterized the nature of structured settlements. Published information suggests Rothstein mischaracterized or misrepresented pre settlement financing as structured settlements in his offerings. The Structured Settlement Watchdog John Darer, and others, seek to correct this mischaracterization for the benefit of injury victims nationwide.

 

 

Rothstein Fraud: AmLaw Daily Needs A Kick in The Baxter For Shoddy Reporting

by John Darer® CLU ChFC MSSC RSP CLTC

Brian Baxter of American Lawyer Daily is just mailing it in on the Scott Rothstein Fraud.

In an article published Friday the 13th Baxter states "The unfolding fraud scandal involving high-rolling South Florida lawyer Scott Rothstein raises questions about the nature of structured settlements. Did Rothstein manipulate these financial arrangements to his advantage or concoct something else entirely?

Baxter includes the link to the Wikipedia entry for structured settlements and if he actually read the entry that is connected to the link he'd see that what Rothstein concocted was something else entirely.

Furthermore, given what we know so far is there any reason to believe anything that Scott Rothstein has said?

For anyone researching structured settlements that is writing stories about Scott Rothstein please review the following flow chart which accurately describes what happens in a REAL structured settlement transaction.

If any reporter reviews this chart and THEN goes back and reads every account of the purported money flow in the Rothstein scam it is patently obvious that it is a label that is being used to mischaracterize what really happened.

Baxter's ill informed article states "the traditional structured settlement is essentially an annuity. If, for example, a law firm were to settle a major case with the City of Miami that would pay out over one year, the firm might go to its lender bank and ask to borrow against the settlement. But when a settling party has a sketchier track record of creditworthiness, plaintiffs can sell their settlement stake to investors who assume the risk at a premium"

Fact:  A structured settlement is not a product, it is a method for paying damages that has its foundation in various sections of the Internal Revenue Code

Fact:  A structured settlement can be funded with annuities or obligations of the United States government. Source: IRC 130(d)

Fact: The "structured settlement" example used by Baxter describes a legal financing transaction for lawyers.

Edward H. Davis , Jr.(pictured above), a Miami lawyer with Astigarraga Davis who specializes in asset recovery is asked to weigh in.  Davis was cited to have said "Structured settlements are basically people buying annuities at a discount, but they come with a risk, because presumably the person or entity that owes the money could default."

Fact: Edward H. Davis, Jr. has no bona fides on the subject of structured settlements. Click here for his professional biography as it appears on his firm's web site.

Fact: Structured settlements are not "basically people buying annuities at a discount".

Comment: By publishing Edward Davis ' quote Baxter simply makes himself and AmLaw look like a horse's ass. Consider that Baxter and AmLaw link to the definition of structured settlement in Wikipedia and then quote a lawyer, who has no bona fides on the subject, who says something that conflicts with the Wikipedia definition and the structured settlement definition that one can find in the Internal Revenue Code.

Baxter steps on his own tail again when he states  "Lending money to litigants isn't new. People who are caught up in costly civil suits and in need of financial help to fund those suits are willing to pay high yields to borrow money. Rothstein, lawyers say, likely saw a way to cash in on this by acting as the middleman who found investors to advance reduced settlement funds to plaintiffs".  That's pre-settlement financing dude, NOT structured settlements!

In a response to LBN colleague Mark Wahlstrom who expressed similar concerns to mine in comments on the AMLaw blog, Baxter says "thanks for the feedback. I understand the sensitivity to the linkage between Rothstein and structured settlements, but the fact remains that this is what the lawyers closest to the situation are saying at the moment.

I tried to show in the post above how Rothstein allegedly warped the template of structured settlements to suit his own needs, not cast aspersions on the nature of those settlements themselves. The fact is that Rothstein is raising these questions himself by beating the structured settlement drum.

Until prosecutors file charges against Rothstein I think we'll all be pretty much in the dark as to what exactly transpired here".

Baxter's response to Wahlstrom is a cop out to cover up poor research. Nevertheless I do encourage him and other reporters to keep digging and look to informed sources with bonas fides on the topic of structured settlements.

Just a week ago weren't we reading an article from Harriet Bracky's column in the FL Sun-Sentinel:

 

The August circular says the investment strategy is to buy into a settlement that occurs before a trial begins, “in a manner that does not qualify as a structured settlement, therefore not being subject to court approval.”

The Toe bone's connected to the foot bone

The Foot bone's connected to the leg bone

The Leg bone's connected to the knee bone... and so the story goes