by Structured Settlement Watchdog
Synergy Defendants Fail to Dismiss SEC Fraud Claims
Synergy Settlement Services, Inc., Jason D. Lazarus, Anthony F. Prieto, Jr. and Special Needs Law Firm, PLLC have had motions to strike and motions to dismiss denied in the SEC fraud case filed last year, according to a March 24, 2023 ruling.
In May 2022, the SEC brought an action to enjoin Synergy Defendants’ alleged fraudulent operation of two purportedly charitable pooled investment trusts with $46 million in assets and more than 380 trust members, most of whom are disabled recipients of Medicaid or Social Security Supplemental Security Income (“SSI”) benefits. Section 1917 of the Social Security Act, 42 U.S.C. § 1396p, allows Medicaid and SSI recipients to remain eligible for benefits despite receiving assets (such as awards or settlements in personal injury lawsuits) that would otherwise disqualify them from receiving that government assistance, as long as they place those assets in an irrevocable trust established and managed by a non-profit association.
My contemporaneous posts
Synergy Settlement Services Response to May 2 2022 SEC Press Release May 3, 2022
SEC Enforcement on Pooled SNT True Link Financial Advisors May 8, 2022
The SEC alleged in its Amended Complaint that from no later than May 2015 through the the date of the Complaint, the Defendants have marketed, sold investments in, and operated two pooled investment trusts purportedly established and managed by a non-profit entity as required by Section 1396p. In reality, however, the entity named as the trustee of the two trusts, Defendant Foundation for Those with Special Needs, Inc., (“Foundation”) is a shell corporation with no operations or employees.
The SEC further alleged that. Defendants Synergy Settlement Services, Inc. (“Synergy”), Jason D. Lazarus, and Anthony F. Prieto, Jr. installed the Foundation as a nominee trustee to attempt to hide the fact that Synergy, a for-profit corporation, Lazarus and Prieto perform all the trustee functions and profit from the trusts’ operations by collecting all fees and other funds stemming from operating the trusts.
The SEC further alleged that the Defendants’ operation of the pooled trusts has violated the antifraud and registration provisions of the federal securities laws in several ways. First they alleged, Synergy, Lazarus, Prieto, and Defendant Special Needs Law Firm, PLLC (“the Law Firm”) have misrepresented to potential trust beneficiaries that they would be joining a trust managed by a non-profit association under Section 1396p, and therefore would remain eligible for Medicaid and SSI benefits. To the contrary, because Synergy, Lazarus, andPrieto operated and managed the trusts for their own profit, they created a situation where the trust funds could count as beneficiaries’ assets and jeopardize their Medicaid and SSI benefits.
The SEC further alleged that Synergy, Lazarus, and Prieto have lied about the for-profit operation and management of the trusts to beneficiaries, the Internal Revenue Service, and the Social Security Administration (“SSA”), through emails, firm brochures, marketing materials, trust documents and operating agreements, among other documents.
In addition, the SEC further alleged, Synergy, Lazarus, and Prieto improperly diverted all trustee fees, which come directly from beneficiaries’ accounts, to Synergy. The SEC alleges that these Defendants also improperly used funds from deceased beneficiaries’ accounts to reimburse themselves for employee salaries and other expenses, as well as to make donations to trial lawyers’ and other organizations that violated their representations to the IRS and beneficiaries that they would only use such funds to further the trusts’ mission to help the disabled.
In addition the SEC further allegeds that Synergy, Lazarus, and Prieto have also misled beneficiaries with respect to the investment of the pooled trusts’ assets. From 2015 to 2017, the Defendants did not tell beneficiaries they were investing their money in a certain class of mutual fund that doubled the fees the Defendants told the beneficiaries they were paying. The trusts are invested in securities, and the trust instruments are securities the Defendants are offering and selling to beneficiaries says the SEC. Because the trusts are not operated and managed by a non-profit association, they do not qualify for exemptions from registration available to charitable organizations under the securities laws.
Synergy Principals lost appointments with Structured Settlement Annuity Issuers
Upon information and belief, Synergy, which was ranked 4,636 on the Inc. 5000 for 2022, lost its appointments with structured settlement annuity issuers shortly after the SEC action was filed last year. A number of its structured settlement producers/Partner Planners soon decoupled from Synergy and joined Synergy competitors.
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