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Client First Funding | Business Listing Says Permanently Closed | What If You Have Payments?

by Structured Settlement Watchdog

What is going on with Client First Settlement Funding of Boca Raton Florida? 

 As you can see from the photo below, the Google Business listing for Client First Settlement Funding states that Client First Settlement Funding is Permanently Closed.

Client First Google My Business Listing 5/19/2022

Client First of Georgia LLC however, is still listed as a "Registered Structured Settlement Purchasing Company" by the Georgia Secretary of State Corporations Divisions with an expiration date in July 2022. The term Structured Settlement Purchasing Company is a bit of a misnomer in that none of the listed companies purchases a structured settlement or a structured settlement annuity. They purchase structured settlement payment rights, which are defined at 26 U.S. Code § 5891(c)(2).

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To better protect structured settlement consumers (including investors) and to avoid initial interest confusion, some thought should go into terminology used when drafting or updating structured settlement protection laws. Maryland refers to buyers of structured settlement payment rights as "transferees" which is accurate, but Georgia refers to them as structured settlement purchasers, which is not accurate. The Georgia language is technically illegitimate because nobody is purchasing the structured settlement. It is a transfer of structured settlement payment rights.  A transfer of structured settlement payment rights could be in whole or in part.

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I was recently contacted by a senior investor who has payments are alleged to be past due from a purchase of structured settlement payment rights, that was originated (and apparently serviced) by Client First. The underlying annuity issuer is Symetra and (according to the investor) Symetra is waiting for a proof of living from Client First, because the payments are life contingent.  No answers from Client First at the time of posting.

When the payee sought me out as the Structured Settlement Watchdog, I reached out to Brian Dear, of the Addison TX law firm of Vassar McCown Dear & Sicotte, LLP, who is the Executive Director and General Counsel of the National Association of Settlement Purchasers. Brian kindly provided last known contact details for Burt Kroner (Owner & CEO) and Lisa Shapiro (Processing Manager) on Thursday May 12, 2022 and he indicated that he "emailed both Burt and Lisa to relay your message and Mr. redacted’s phone number and asked that they contact him as soon as possible". Seven days later crickets. The investor has left messages on both of the numbers kindly provided by Brian Dear. It should be noted that Client First Settlement Funding is no longer a member of the National Association of Settlement Purchasers.

Burt Kroner's appeal of an unfavorable June 1, 2020 tax decision remains pending.  See Burt Kroner v Commissioner of Internal Revenue 11th Circuit Court of Appeals 20-13902. Also see my June 7, 2020 post Client First Settlement Funding CEO Loses "KronerIRS" Re $24.77M Transfers But Avoids Penalties

In an effort to assist the investor in tracking down Mr. Kroner, I located Kroner's attorney from the Appellate documents in the publicly available court records. There have been recent filings in the Appellate matter so presumably Burt Kroner's counsel is in touch with Burt Kroner. I understand from speaking with the investor this evening that Mr. Kroner' tax counsel has now been contacted by the investor. Hopefully Mr. Kroner or Lisa Shapiro will contact the investor ASAP.

 

 

 

 

 

 

Genex Capital Corporation Issues "Recall Notices" on Certain Pre-2015 Genex Capital Receivables

by Structured Settlement Watchdog

What are the duties of a structured settlement factoring companies to their investors?

Genex Capital Corporation recently issued "recall notices" to investors in structured settlement payment rights where payments are being serviced. The notice headline is "RECALL FIRST NOTICE---ACTION REQUIRED"

""As a valued client, we believe it is our duty to continually evaluate your holdings, consider whatever external risks may be developing and make recommendations in an effort to protect your investments with us" signed Genex Capital Corporation, Per Roger Proctor President and General Counsel

One of the notices says RE: GENEX CAPITAL RECEIVABLE---GABC-SAF -LC/ Original Purchase Date 6/12/2015

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SIDE BAR

What is GABC?

On April 19, 2012, the Supreme Court of the State of New York, Nassau County (“Receivership Court”) entered an Order finding Executive Life Insurance Company of New York (“ELNY”) to be insolvent and approved a Restructuring Agreement in connection with the liquidation and restructuring of ELNY.  By Order of the Receivership Court, the Superintendent of Financial Services of the State of New York, as Receiver, was directed to liquidate ELNY’s business and affairs in accordance with New York Insurance Law and in substantially the manner provided in the Restructuring Agreement.  The Liquidation Date of ELNY was the closing date of the Restructuring Agreement, which occurred on August 8, 2013.

Substantially all of ELNY’s remaining assets have been transferred to Guaranty Association Benefits Company (“GABC”), then a newly created not-for-profit captive insurance company owned by the Participating Guaranty Associations that is referred to as “NEWCO” in the Restructuring Agreement.  Since the Liquidation Date, GABC has been responsible for managing such assets and making payments to contract owners, payees and beneficiaries.  Source: New York Liquidation Bureau

What about the other acronyms?

SAF is presumably Structured Asset Funding and based on the content of the notice, LC stands for Loan Care, a company that is involved with payment servicing.

Receivables v Annuity

It is worth noting that in this "recall notice", Genex Capital refers to the investment as a receivable not an annuity. On the other hand, since late 2013, Genex Capital has operated a website called Assured Annuity which it describes on that brand's website as its "retail arm" It has been my long-standing position that what is being sold are not annuities but factored structured settlement payment rights.

In January 2022, in litigation pending in Arizona, Proctor issued a declaration in which he eloquently described what investors who chose payment servicing (instead of direct assignment), were buying were "subsets" of structured settlement payment rights. In my opinion, consistent with my long term documented beliefs, it's the perfect way to describe them as opposed to the inaccurate "annuity". 

To wit "Each of the Defaulting Investors in this litigation chose payment servicing over taking a direct assignment to the payments. As such they voluntarily elected to take the lesser subset of rights associated with the Receivables with all of the corresponding benefits and restrictions associated therewith rather than choosing to become the direct designated payee in the respective court orders. By this election the Defaulting Investors avoided having to, among other things, indemnify the Annuity Issuers and Annuity Owners".

[from 1/3/2022 Decl. of Roger Proctor in Response to Seeley Defendants' Motion for Partial Summary Judgment (at #56) IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA

GENEX CAPITAL CORPORATION, a Delaware corporation; Plaintiff, vs. SEELEY CAPITAL MANAGEMENT, INC., a Massachusetts corporation; et al., Defendants. AND RELATED COUNTERCLAIM; RICHARD L. KEEFER and VICKI L. KEEFER, husband and wife; et al., Plaintiffs,vs. GENEX CAPITAL CORPORATION, a Delaware corporation; et al., Defendants.  Case Nos: CV2020-004958 CV2020-013796 (Consolidated) at #1]

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In a recent letter to a structured settlement investor:

"Our records indicate that you purchased a Genex Capital Corporation ("Genex") Receivable paid by___________. You selected the servicing option with Security Title Agency ("STA"). At the time you purchased this investment, STA was the premier payment servicing company. Genex prepaid the fees for STA's services for the duration of the term of your Receivable.

Recently, STA has undergone a number of ownership changes. In 2018 STA was sold to LoanCare, LLC and then on December 1, 2021 LoanCare resold STA's payment servicing portfolio to Sutton Park Capital, LLC ("SuttonPark"), all without Genex's prior knowledge or consent. Sutton Park is a reputable company with whom we have a good relationship, but the series of sale transactions and poor state of STA historical recordkeeping have resulted in significant and chronic payment delays being experienced by our valued clients. In short,  Genex no longer has confidence in the servicing arrangement originally attached to your investment. Many of you have contacted us over the past several months expressing concern and seeking our assistance in obtaining your missing payments. The situation is not acceptable.

To keep our clients out of harm's way, we considered three potential options:

1. Commence litigation against STA and Loancare seeking damages for breach of contract on your behalf (Downside-potential aggravated payment delays and costly protracted litigation)
2. Transfer the more than 478 active STA accounts to another Genex approved servicing company(Downside-potential further payment disruption while Genex obtains amended court orders naming a replacement servicing entity.)
3. Offer our value (sic) clients a one-time Genex subsidized Recall/Repurchase option to permanently eliminate this unforeseen risk and provide liquidity to you.

After consideration, we decided to proceed with Option 3 as it is the most effective, efficient, and certain option that maximizes your protection. Upon repurchase, Genex will be taking these Receivables out of circulation so as to safeguard the continued integrity of Genex's Receivable products.

This offer is open for acceptance until April 30, 2022. If you choose to not accept this offer, Genex shall no longer oversee the timely remittance 'of your payments as we have no contractual relationship with SuttonPark. However, reassignment restrictions shall continue to be in effect to protect the integrity of Genex's Receivable products.

WHETHER YOU CHOOSE TO ACCEPT THIS OFFER OR NOT, YOU MUST CONTACT US IMMEDIATELY TO UPDATE YOUR CONTACT INFORMATION ANO CONFIRM THAT YOU ARE STILL THE RECIPIENT OF THIS RECEIVABLE. FAILURE TO PROVIDED (sic) UPDATED INFORMATION BY APRIL 30, 2022, SHALL BE CONSIDERED AN EVENT OF DEFAULT RESULTING IN THE AUTOMATIC SUSPENSION OF YOUR RECEIVABLE PAYMENTS UNTIL SUCH TIME AS YOU RESPOND TO THIS REQUIREMENT.

For further information (about their recall notice), Genex Capital asks to direct your inquires "to Kevin Lowe or Linda Holland at 1- 800-348-3098. Please note, Genex Receivables purchased after 2015 were never serviced by STA and, therefore, remain unaffected by this unfortunate situation".

In an excerpt of another similar letter, the last sentence said:

“Please note, Genex Receivables purchased using Allied Servicing Corporation or Goldstar Trust Company remain unaffected by this unfortunate situation”.  That letter had a response date in May 2022.

Commentary

1. What is the significance of the Genex Capital use of the term "duty" as set forth in Proctor's letter?  What type of duty is it?  Is it a fiduciary duty, a moral obligation? Again they say, "As a valued client, we believe it is our duty to continually evaluate your holdings, consider whatever external risks may be developing and make recommendations in an effort to protect your investments with us?"
2. In view of Proctor's 1/3/2022 declaration and these letters, together with NAIC Statutory Issue Paper No. 160, the definitions of annuity under state insurance departments and the granular differences between annuities and receivables, and a fundamental fallacy that any structured settlement factoring company is actually buying a structured settlement annuity, can Genex Capital, or any other company justify the use of the term annuity to describe receivables they make available to investors. Roger Proctor deserves partial credit by his recent actions, for helping to reverse an inaccurate definition of what investors are buying when they buy factored structured settlement payment rights, or subsets of structured settlement payment rights. Thank you.
3. Whether or not it makes sense to proceed depends on an individual's facts and circumstances. If you don't need liquidity and are satisfied with the security of your cash flow, is there a need to sell, if you must sell at a discount?   As is clear from the Genex Recall Notice, there is a cost to selling. The investor must give up some of their contracted-for gains. One of the excerpts reviewed involving a $120,000 receivable from an Allstate structured settlement due in October 2024.  While the investor, in one example, would end up with a 43% gain on their original investment, the investor would have to forego about $16,389.13 ($120,000.00- $103,610.87).  The cost of doing business.
4. With respect to #3, Allstate Life Insurance Company spun off its non-New York life insurance and annuity business (including structured settlements to Everlake Life Insurnace Company. On March 4, 2022, AM Best affirmed the A+ (Superior) Financial Strength Rating and the aa- (Superior) Long-Term Issuer Credit Rating for Everlake Life insurance Company and Everlake Assurance Company. in A.M. Best opinion, these ratings reflect Everlake’s balance sheet strength, which was assessed as “very strong”, as well as its “strong operating performance, favorable business profile and appropriate enterprise risk management.”
5. Pay attention to the deadline in the letter regardless of whether you are going sell. 

Recalls.gov is a resource for recall notices from 6 government agencies

Last updated April 14, 2022

It's Just Not an Annuity | Buying and Selling Structured Settlement Payments as an Investment

by Structured Settlement Watchdog

Here are fast facts and statements to set you straight on some of the dubious claims made by individuals and companies to investors in structured settlement payment rights (also known as structured settlement receivables).

Seven Facts about Structured Settlement Receivables

1. Buying structured settlement annuity payments (receivables)is not the same as buying an annuity policy
   
2. Selling structured settlement annuity payments (receivables) is not the same as selling an annuity policy
3. Buying structured settlement payment rights (receivables) is not buying an annuity policy
4. Selling structured settlement payment rights (receivables) is not selling an annuity policy
5. Buying a subset of assigned structured settlement payments rights (receivables) is not buying an annuity policy
6. Selling a subset of structured settlement payment rights (receivables) is not selling an annuity policy
7. A structured settlement transfer is not a transfer of an annuity policy

Just because they say it doesn't make it so

• Something the insurance agent calls a "secondary market annuity", if it originated from someone else's structured settlement or lottery winnings is not an annuity policy
• Something the financial adviser calls a "secondary market annuity", if it originated from someone else's structured settlement or lottery winnings is not an annuity policy
• Something the settlement planner calls a "secondary market annuity", if it originated from someone else's structured settlement or lottery winnings, is not an annuity policy
• What somebody who gives a lot of money to be a partner of your trial lawyer association calls a "secondary market annuity" or " SMIA", if it originated from someone else's structured settlement or lottery winnings, is not an annuity policy
• What someone at your country club calls a secondary market annuity is not an annuity if it originated from someone else's structured settlement or lottery winnings.
• If your accountant tells you to buy what they call a secondary market annuity, be forewarned that it's not an annuity policy
• An annuity is not a transaction
• Selling structured settlement payments is not restructuring your settlement. The settlement agreement does not change.

Verify Insurance Coverage

If you decide to buy structured settlement payment rights, you should confirm the existence of errors & omissions insurance that expressly includes factored structured settlement investments as a covered product.

1. Be sure to get evidence from the policy form. It is possible that the settlement planner or financial adviser will try to claim that their advice on the specific product is covered under their policy, pointing to annuities as a covered product.
2. Since investments in structured settlement payment rights are not investments in annuities there may in fact be no insurance coverage at all.
3. Even where they are covered products, errors & omissions policies generally do not cover insolvencies.  

Don't count on state insolvency schemes to provide a safety net either as 40/50 states at time of this post's latest update, expressly exclude such investments with 2 states having such exclusions under consideration. The National Association of Insurance Commissioners is aggressively encouraging its members to adopt the 2017 revisions to the Life & Health Guaranty Associations Model Act (#520), which provides for a retroactive exclusion. In plain words, you're not safe if you acquired one of the investments prior to your state's adoption of the revisions.

E&O Insurance Policies May Exclude Annuities Below a Certain A.M. Best rating

Many E&O policies require a minimum A.M. Best rating.  A credit rating agency assesses the creditworthiness of an obligor as an entity or with respect to specific securities or money market instruments. A credit rating agency may apply to the SEC for registration as a nationally recognized statistical rating organization ("NRSRO"). While a securitization from JG Wentworth may be rated, random factored structured settlement payments are unlikely to have such a rating.

Last updated February 8, 2024

 

 

CrowFly Positioned Factored Structured Settlements as Settlement Annuities to Solicit Investors

by Structured Settlement Watchdog

Factored structured settlement payments are not annuities or insurance products

So, what is the rationale for a factoring origination company co-founded and directed by a successful licensed insurance agent of more than 23 years, to have marketed and continue to market factored structured settlement payment streams (structured settlement receivables) as structured settlement annuities to investors?  Here is a CrowFly Google Ad that appeared on March 12, 2022:

 CrowFly falsely portayed structured settlment receiuables as annuities in this March 12, 2022 retrieved Google paid ad.

HOW STATE INSURANCE LAWS DEFINE ANNUITY

New York Department of Financial Services

An annuity is a contract between a purchaser and an insurance company in which the purchaser agrees to make a lump sum payment or series of payments in return for regular disbursements, beginning either immediately (within 12 months) or at some future date.

Maryland Insurance Administration

Title 31 MARYLAND INSURANCE ADMINISTRATION Subtitle 09 LIFE INSURANCE AND ANNUITIES Chapter 12 Suitability in Annuity Transactions
.03 Definitions.
B. Terms Defined:
(1) “Annuity” means an annuity that is an insurance product under State law that is individually solicited, whether the product is classified as an individual or group annuity

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC)

Buyer's Guide      " An annuity is a contract with an insurance company"

Statutory Issue Paper No. 160, finalized April 6, 2019 p 6 footnote 1

"This guidance is specific to acquired structured settlement income streams (legal right to receive future payments from a structured settlement) and does not capture accounting and reporting guidance for the acquisition of any insurance product (e.g., life settlement, annuities, etc.).

New Footnote 2: Reporting entities that hold qualifying structured settlement payment rights shall report the security on Schedule BA either as an “any other class of asset” or as a “fixed or variable interest rate investment with underlying characteristics of other fixed income instruments” if the structured settlement payment right qualifies for reporting within that reporting line (e.g., NAIC designation).

FINRA

An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums.

Annuities are often products investors consider when they plan for retirement—so it pays to understand them. 

SEC

An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time.

HOW CROWFLY DEFINED ANNUITY

Cites Merriam-Webster "The dictionary definition of "Annuity", from Merriam Webster, is: “a sum of money payable yearly or at other regular intervals” June 16, 2020  CrowFly blog " What is an Annuity Anyway?"

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ProTip:  Don't rely on "Aunt Merriam's" definition of annuity for your state insurance exam, or your investment.  

And if you need further proof of why a question should be raised concerning their use of Aunt Merriam, simply look at this document retrieved from the New York Court system, among the sampling of cases where CrowFly factored structured settlement payments from a structured settlement placed by its co-Founder, Director and former CEO.  See Court Records Prove CrowFly Factored Structured Settlements Written by John Bair Structured Settlements 4Real blog 1/15/2022

This link  Download 89967_CROWFLY_LLC_V_ROBERT_DUNGAN_ET_AL_EXHIBIT_S__3. takes you to the qualified assignment executed when Robert Dungan's structured settlement was established. All you need to do is have a look at paragraph 4 to see that the annuitant has no ownership rights in the annuity. Paragraph 7 refers to " payment rights".  This is structured settlement factoring 101 folks.  

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"At their core, Annuities are all contracts providing for the payment of specific amounts of money in the future. A consumer deposits a specific amount of money with an insurance company (the price of the annuity). The insurance company then invests that money in safe, predictable investments like bonds that will support specifically defined payments back to the consumer, while providing enough excess earnings for processing overhead and profit (as an incentive for the insurance company)." June 16, 2020  CrowFly blog " What is an Annuity Anyway?"

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Pro Tip: What is the name of the payee on the check that CrowFly or any other buyer/seller of structured settlement payment rights asks you to write to pay for the investment?

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"A note for buyers of structured settlement payment rights. CrowFly does not sell insurance products and should not be relied on for advice regarding tax implications of any products " Ibid.

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However, CrowFly's Co-Founder, Director and former CEO is a licensed insurance agent in all 50 states.  To wit "He frequently advises attorneys on the complexities of closing a settlement and is licensed in all 50 states"   Injury Board Directory Listing for John Bair, Milestone Consulting, co-Founder and Director of CrowFly, retrieved February 22, 2022.

CrowFly has said this in a published pitches to prospective investors in Structured Settlement Payment Rights

"Consider a discounted annuity from crowfly(dot)com, as the yields of 4% to 5% are attractive and are from some of the most highly rated insurers. Buying a secondary market annuity also helps out another person who is in need or has fallen on tough times. There is a strong social impact of buying an annuity from someone else.  " How to Buy an Annuity" April 20, 2020 Blog on Crowfly, LLC Legal Examiner. Bair is a Founder and Director of CrowFly, LLC 

"Structured settlement annuities have yields as high as five percent and are backed by insurance companies generally rated Superior (A+) or better. Risk profiles are aligned with—or sometimes better than—treasuries or other fixed-income assets."   Should an Annuity Be Part of Your Retirement Portfolio?  CrowFly Blog July 19, 2021

"Structured settlement annuities are especially attractive to individuals headed into retirement who are looking for a great yield. Through CrowFly, they also come with no sales commission, which means investors buy the asset directly. What you see is what you get on our platform".  Ibid.

"Historically, everyday investors did not have access to structured settlement payment streams available for purchase; those assets were only reserved for institutions. But CrowFly’s proprietary platform makes purchasing these assets possible for individuals as well. In addition, CrowFly aims to get both buyers and sellers the most money possible from the transaction by simplifying the transaction and reducing overhead costs".  Ibid.

Here CrowFly lists "sample annuities available for purchase"   Ibid.

"Taking some risk out of your portfolio after retirement makes sense. However, current interest rates make new annuities a tough sell. Structured settlement annuities are akin to high-yield instruments without as much risk". Ibid.

If you’re interested in joining ....platform and browsing structured settlement annuities available for purchase..."  Ibid.

In John T. Bair's March 12, 2020 published claim, with his Director of CrowFly, LLC factoring origination hat on, " Can Recycled Structured Settlement Annuities Replace U.S. Treasuries in Your Portfolio?", Bair recklessly claimed "These assets are life insurance products, guaranteed by the issuer, and in most states by the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). Are these regulatory safety nets as good as Uncle Sam?"

Are we to assume that there is some special dispensation by the 50 states' insurance departments that to make it kosher to make that statement? That is if the states are even aware that such claims are being made?

In closing, neither CrowFly nor any other entity acting as an intermediary and/or selling structured settlement payment rights to investors should be representing the investment as an annuity because it is not. 

Postscript  March 18, 2022

Will this ongoing misrepresentation in the CrowFly Google ad sales pitch to investors catch up with CrowFly?  On March 18, 2022, CrowFly can again be seen soliciting investors with "Purchase Settlement Annuities" and "Want to buy a structured settlement annuity?" despite admitting that it has no insurance license. It goes further to call them "CrowFly structured settlements". So now they issue annuities? I believe that requires a license too. And, their ad says"its' a Buyer's Market".  Ironically the CrowFly misrepresentation appears above an ad for legitimate structured settlement annuities from MetLife, a company, which ironically contracts Milestone Consulting, a company with a common co-founder and director to CrowFly that operates out of the same address in Buffalo New York.

 

 

Buffalo Firm Advertising | "Financial Advising" in Advertisement but Admits has no License

by Structured Settlement Watchdog

Summoning up the words of the late Billy Preston, one might ask these questions about Buffalo's CrowFly to address its self-contradiction:

"Will it go round in circles?
Will it fly high like a bird up in the sky?
Will it go round in circles?
Will it fly high like a bird up in the sky?"  [from Billy Preston Will It Go Round in Circles A&M Records (1973)]

On the one hand

CrowFly Buffalo Bing listing 3-7-2022

But on the other hand, its website says:

"CrowFly does not provide legal, financial or tax advice. CrowFly is not registered with the Securities Exchange Commission and is not licensed to sell insurance in any state. Please consult with an attorney, accountant, tax advisor, and/or licensed financial planner for advice concerning your particular circumstances".

How can this self-contradiction be?  I thought they were a fintech platform.

Oy, End Distracted Advertising!

 

Genex Capital Corporation v Seeley Capital Management et al. Update

by Structured Settlement Watchdog

As part our ongoing commentary about the structured settlement secondary and tertiary markets and in particular structured settlement investments, it's time for an update on the Genex Capital v Seeley Capital litigation, and counterclaims by a group of investors against Genex Capital and its CEO Roger Proctor. This highly contentious and expensive litigation is an important one to follow to help investors, financial advisors (including settlement planners) appreciate the critical differences between buying an annuity and investing in structured settlement payment rights.  

Mr. Proctor has already eloquently described in this litigation what investors buy, as "subsets" of payment rights. That's a completely different thing than "an annuity", how it is often advertised and/or used in sale pitches by those who hock structured settlement payment rights to investors. 

More Investors Sue Genex Capital Corporation and Its CEO

On February 23, 2022, what appears to be a new set of investors have filed suit against Genex Capital Corporation and its CEO in Arizona Superior Court in Maricopa County Arizona. The matter is captioned Barry Beitman, Bruce Sweeney, Weill Guo, Quingling Zhang and Sandi Haskell, Plaintiffs v Genex Capital Corporation, Roger Proctor, Happy State Bank & Trust Company and Security Title Agency Inc.CV 2022-002266. A Certificate of Compulsory Arbitration was docketed on February 26, 2022

Plaintiffs are represented by Phoenix lawyer Devin Sreecherana of May Potenza Barran & Gillespie, the same lawyer who represents other investors against Genex Capital in a separate action filed in a November 2020 Complaint and Amended Complaint December 2020-CV-131796, which was subsequently consolidated with an action brought by Genex Capital Corporation against Seeley Capital Management, John M. Bulbrook Insurance Agency Inc., New England Annuity Associates LLC, Security Title Agency Inc and Loancare LLC  CV2020-004958

In support of the Genex Capital response to Seeley Defendants' Motion for Partial Summary Judgment, Genex Capital Corporation CEO Roger Proctor submitted a Declaration on January 3, 2022.  Here are some of the points made by Proctor and my commentary (highlights/emphasis ours for commentary):

Point #1

"Each of the Defaulting Investors in this litigation chose payment servicing over taking a direct assignment to the payments. As such they voluntarily elected to take the lesser subset of rights associated with the Receivables with all of the corresponding benefits and restrictions associated therewith rather than choosing to become the direct designated payee in the respective court orders. By this election the Defaulting Investors avoided having to, among other things, indemnify the Annuity Issuers and Annuity Owners."  [ Decl. of Roger Proctor 1/3/2022 at 1]

What is payment servicing with respect to structured settlement factoring?

Over the last 13 years I've addressed structured settlement payment servicing in numerous blog posts as well as a 2009 video with Dallas bankruptcy attorney Bruce Akerly.

A payment servicing agreement is only necessary when a person sells part of their structured settlement, and the annuity issuer will not "dice" payments. For example, the annuitant contracted to receive $1,000 per month when they settled their personal injury case. The structured settlement was funded with an annuity issued by a life insurer that will not "dice" payments. Some years down the road, the annuitant sold the rights to $500 per month of their $1,000 per month payments, but because the insurer would not dice payments, the full $1,000 per month had to go to the servicing company each month, where it would be "diced" and then distributed $500 to the annuitant and $500 to the investor in the structured settlement payment rights.

A payment servicing agreement may also be necessary at the discretion of the originating structured settlement factoring company, or a tertiary market company, if there is a large sale of structured settlement payment rights. The use of a servicer to dice up the larger deal into smaller subsets to make it easier to move the payment rights to investors.

Sometimes the settlement purchaser (or a related company) is the servicer. But things may get more complicated if the structured settlement payment rights are securitized or sold on.  It is then possible, yet another company could be the servicer!

In his declaration of 1/3/2022 Roger Proctor states that "Genex purchased Structured Settlement Quotes" (website at Structuredsettlement-quotes.com) "in March 2012... to support its search engine optimization for marketing of its annuity purchase services" {Decl. of Roger Proctor at 56].  It's notable that the Genex Capital owned website states "The servicing of structured settlement payments occurs when an annuitant enters into a structured settlement factoring agreement in which the annuitant chooses to split one or more payments and the factoring company becomes the payee of the entire payment. Once the factoring company receives the entire payment from the insurance company, they keep their agreed upon amount and pay the annuitant their portion".

Here are some concerns that the Genex Capital owned website makes regarding servicing of structured settlement payments

1. "Certain structured settlement factoring companies were using this scenario as an excuse to service annuities that did not need to be serviced. In other words, an annuitant would decide to sell their payments, the insurance company would agree to this, but the factoring company would still service the payments. The reason for this is because the factoring company is securing future deals by owning the rights to all of the future payments. Many annuitants would not understand this process and would think this is the norm for this type of transaction. That is false and has many implications.
2. The annuitant no longer owns the rights to their future payments. If they need help with anything regarding their annuity, they can no longer simply call the insurance company and speak to a licensed representative, instead they have to call the structured settlement factoring company to ask their question.
3. If the annuitant was ever in a situation where they needed to sell more payments, the structured settlement factoring company who completed their last transaction is the only company that is able to complete any future transactions for that individual.
4. Since the Chapter 11 Bankruptcy filing by JG Wentworth, investors are not interested in purchasing the rights to structured settlement payments serviced by other factoring companies. This means that any annuitant who has their payments serviced by a structured settlement factoring company will most likely be price gouged if they decide to sell more payments.
5. Structured Settlements 4 Real reported a story where Structured Asset Funding serviced a tort victim's payments but failed to mail the check on time. This should not happen but can happen because these types of companies are not geared to service annuity payments."   [reference to one of my blogs from 2009]

Point #2

Proctor declares that "Structured settlement annuities are contractual arrangements in which an annuitant or payee (“Original Annuitant” or “Annuitant”) receives future payments as part of a settlement or judgment in connection with a tort claim. Typically, an Annuitant cannot transfer or assign its interest in the annuity without express judicial approval that is confirmed through a final order. Genex’s business model is based on providing Annuitants with an opportunity to sell all or a portion of their annuities for a present-day cash value."  [Decl. of Roger Proctor 1/3/2022 at 9-11]

Comment: Annuitants cannot sell structured settlement annuities. They can only sell structured settlement payment rights. Structured settlement annuitants do not own the annuity or annuities funding the structured settlement payment obligation established when their legal case was settled. Thus, structured settlement annuitants cannot sell the annuities.

Assured Annuity is self-described by Genex as its retail arm. It is believed to have been established after the Genex relationship with the Seeley Defendants had terminated September 9, 2013.  I've long questioned the use of the term annuity by Genex in this context [see Is The Assured Annuity Really an Annuity?  November 19, 2013]. I do not believe that if put to the test that Genex Capital, could supply proof of any structured settlement annuity contract it has purchased from an annuitant for whom the structured settlement was established. Indeed, Proctor himself admits that "Once judicial approval of the sale is obtained, Genex receives assignment of the annuity payments in exchange for an agreed-upon monetary lump-sum amount. [ Declaration of Roger Proctor 1/3/2022 at #13]. On the Assured Annuity website (located at assuredannuity.com) at time of publishing, it states "We buy structured settlement payment rights and other annuity payments.

Point #3

As a critical part of its business, Proctor states that "Genex must review the background and suitability of all prospective investors to ensure compliance with a plethora of laws and regulations, including anti-money laundering laws, financial-disclosure requirements, and other rules that prevent unlawful financial transactions

Genex also must determine investor suitability in accordance with its “know your client” protocols, consistent with, among other rules, Financial Industry Regulatory Authority Rule 2090 and Rule 2011"

FINRA Rule 2090 mandates that member firms must “use reasonable diligence, in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer.”

FINRA Rule 2111 requires that a broker have a "reasonable basis" to believe that a recommended transaction or investment strategy is "suitable for the customer" based on facts obtained through "reasonable diligence." This rule is aimed at remedying past abuses and "yield-chasing" behavior in brokers at a client's expense

Then there is FINRA 2210 which covers advertising. 

Who is Covered by FINRA Rules?

Because FINRA oversees workers within the financial industry, its rules primarily apply to brokers and financial advisors. Anyone who buys or sells stocks or securities on behalf of clients is required to get certification, register their name and address, and follow other requirements. To follow these requirements, these professionals must go through FINRA, which means putting nearly every stockbroker or financial advisor under FINRA’s authority.

Specifically, FINRA’s regulations govern “broker-dealers.” This is a broad term used to encompass both agents of financial transactions as well as those who trade for themselves or their firm. For instance, if your stockbroker buys stocks for you, they would be acting as a broker, but if they perform transactions for their brokerage firm’s own accounts, they function as a dealer instead. Regardless, FINRA covers both of these types of professionals, creating rules and regulations to govern their actions.

Under the terms of the agreement between Genex and Seeley and Bulbrook, which Genex acknowledges was consummated on an oral agreement and
handshake and not a written contract, in every instance where a new investor sought to purchase a Genex Receivable, Seeley and Bulbrook were responsible for completing the “know your client” protocols approved by Genex, facilitating the completion of an investor suitability form, providing a copy of the Bulbrook Buyer’s Guide approved by Genex, and obtaining required signatures on the RPA, all of which documents were either drafted by Genex or approved by Genex. From time to time, Genex sought proof that these requirements were being satisfied and at no time during the relationship did
Genex have concerns about same.

While I was unable to locate the name of Genex Capital Corporation, Genex Strategies or Roger Proctor on FINRA Broker Check or the IAPD database, it is good to see that the Genex Capital CEO aspires to FINRA standards.  Did/Does Genex consider the products it offers/distributes to be securities? It sure would be great to see them regulated.

POINT #4

Proctor states that "Genex owes obligations to the Annuity Issuers, and to Annuity Owners/Obligors throughout the term of each Receivable transaction as specified in each court order. In light of these obligations, it is a critical to Genex that it understand the transaction history for all Receivables, ensure that its records are complete and accurate, control downstream further assignments, and know at all times the identity of the legitimate end Payee".  [ Decl. of Roger Proctor January 3, 2022, at 24] He states that "Uncontrolled, unapproved, or secret transactions bypassing Genex’s oversight puts Genex at risk of possibly directing payment to the wrong person, double payments, fraud and confusion".  [Decl of Roger Proctor 1/3/2022 at 25]

 

IN THE SUPERIOR COURT OF THE STATE OF ARIZONA
IN AND FOR THE COUNTY OF MARICOPA
GENEX CAPITAL CORPORATION, a Delaware corporation; Plaintiff,
vs.
SEELEY CAPITAL MANAGEMENT, INC., a Massachusetts corporation; et al.,Defendants.
Case Nos: CV2020-004958 CV2020-013796 (Consolidated)
DECLARATION OF ROGER PROCTOR IN SUPPORT OF GENEX’S RESPONSE TO SEELEY DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
AND RELATED COUNTERCLAIM. RICHARD L. KEEFER and VICKI L. KEEFER, husband and wife; et al., Plaintiffs,
vs.
GENEX CAPITAL CORPORATION, a Delaware corporation; et al., Defendants.

 

Let's go back to Genex Capital CEO Roger Proctor's declaration of 1/3/2022, wherein Roger Proctor states that "Genex purchased Structured Settlement Quotes" (website at Structuredsettlement-quotes.com) "in March 2012... to support its search engine optimization for marketing of its annuity purchase services" [Decl. of Roger Proctor at 56].

Exactly what kind of strategy was employed in doing so?  In my opinion, at its apex, the SSQ website was a massive brandjacking engine. I've followed and chronicled my observations about SSQ in this forum from time to time for more than a decade. Some important observations:

One of the first moves after acquiring the site from Andrew Cravenho was to change the name from Settlement Quotes to Structured Settlement Quotes ("SSQ") and to make over the site. The makeover was published on or about July 17, 2012. Among its features were A to Z directory and review pages for more than a hundred insurers and structured settlement factoring firms like JG Wentworth and Peachtree that were and still are competitors to Genex Capital. If one were to enter a search for an insurance company name and quotes or structured settlement quotes the search engine results pages (SERPS) would invariably come up with SSQ web page for that insurer at or about the top results.

On February 5, 2013, I created the following screenshot which is an example of how New York Life was brandjacked

Download New york life structured settlement quotes - Google Search SSQ Brand Jack example 2-5-2013 

In the above document you will see that the title of the search engine result has been purposely aligned to show the name of the insurance company and structured settlement quotes. Titles, meta tags and descriptions that appear in search results can easily be controlled by the domain owner, or someone working on their behalf.

As of March 1, 2022, the SSQ website shows a copyright date of 2015.  Standard & Poor's credit ratings for insurers show ratings from 2011. It's clear that the insurers have not been updated since 2012. Res Ipsa Loquitur.

Contemporaneous Observations about SSQ

Structured Settlement Quotes (SSQ) Offers Payoff To Insurance Company Executive for Confidential Information  July 17, 2012

SSQ Settlement Quotes Engaged in SEO Madness- 843 Steps Beyond  January 15, 2013

SSQ Structured Settlement Factoring Company Reviews April 2, 2013

SSQ Structured Settlement Quotes Spam Links JG Wentworth "Review" Page.  December 2, 2013

 

 

 

 

 

 

 

SMA | It Isn't This Convoluted If You Buy a Legitimate Annuity

by Structured Settlement Watchdog

My word! 

There are many more steps to creating an intellectually dishonest Secondary Market "Annuity" than applying for a legitimate annuity. 

Setting aside the immutable fact that the National Association of Insurance Commissioners (NAIC) does not recognize acquired structured settlement payment rights (structured settlement receivables) as an annuity or insurance product [see Statutory Issue Paper No. 160, finalized April 6, 2019], the fact that the following chart (sourced from EquityNet for critical commentary 2/16/2022) shows 13 steps for a single deal, should erase any lingering doubts.

If you are a financial planner or settlement planner who recommended that your client buy and you subsequently sold them structured settlement receivables that you told them was an annuity, you may want to change your underwear now. 

When the layers of the onion are eventually pulled back you may find that many who advised investors to buy these instruments did not fully understand the product they recommended and/or sold to their clients.  Did they do enough?

One wonders what a similar chart for the DeAngelo Simmons/Paul Millsap, Atlantic Solutions,  and Michael Vick deals would look like, and whether or not investors would have still gone through with the transactions they did, or would have taken a pass.

Buying a Legitimate Annuity is Much Simpler Than This    

 

 

If There's No 1099 Do You Still Have to Pay Tax on Your Structured Settlement Receivables?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Investors in structured settlement payment receivables may not receive an IRS Form 1099 from the life insurance company that issued the underlying annuity, even though there has been a direct assignment of structured settlement payment rights. This does not mean that no taxes are due.

The question arose when an investor contacted New York Life and was told that they would not receive a 1099, by a representative in the New York Life customer service department. The underlying structured settlement payments were (1) payments for worker's compensation under IRC 104(a)(1) payments, or (2) for damages on the account of personal physical injury or physical sickness. However, the income tax exclusion under IRC 104(a)(1) or IRC 104(a)(2) would only apply to the initial payee and their named beneficiary. It does not apply to the investor.

Despite the sometimes intellectually dishonest marketing by firms selling assigned structured settlement payments (or subsets of those rights) to investors as annuities, be forewarned that acquired structured settlement payments rights (properly termed "structured settlement receivables") are not recognized as annuities or insurance products by the National Association of Insurance Commissioners(NAIC).

26 U.S. Code § 61 - Gross income defined

(a)General definition Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;

(2) Gross income derived from business;

(3)Gains derived from dealings in property;

(4)Interest;

(5)Rents;

(6)Royalties;

(7)Dividends;

(8)Annuities;

(9)Income from life insurance and endowment contracts;

(10)Pensions;

(11)Income from discharge of indebtedness;

(12)Distributive share of partnership gross income;

(13)Income in respect of a decedent; and

(14)Income from an interest in an estate or trust.

Outright investment made with after tax dollars

If you simply paid $100,000 in 2012 to buy someone else's $198,200 lump sum structured settlement payment due in 2022, you will have to declare the $98,200 difference whether or not you received a 1099.

If you receive a 1099 it may come from the life insurance company if you have a direct assignment of structured settlement payment rights by court order, or it may come from a third-party payment servicer if you invested in a subset of an assignment of structured settlement payment rights.

What if the Structured Settlement Investment Was Purchased in a Roth IRA?

Note however, if the purchase of structured settlement payment rights was made with funds in your Roth IRA, are an asset of your Roth IRA, and the distribution is made after the account has been open at least 5 years, you may qualify for tax-free withdrawals of both Roth IRA contributions and any accumulated earnings.

What is a Roth Conversion?

A Roth conversion is a strategy that allows you to pay income taxes on some or all of your retirement assets today, rather than when you withdraw them in retirement. Certain financial advisers were advising clients to do a Roth Conversion and to use the proceeds to buy factored structured settlement payment rights held in the Roth IRA.

Your eligibility to contribute to a Roth IRA is subject to your level of income. If you file taxes as a single person, you can contribute to a Roth IRA only if your Modified Adjusted Gross Income (MAGI) is less than $161,000 for the tax year 2022. If you are married and file taxes jointly, the IRS allows you to contribute to a Roth IRA only if your MAGI is under $240,000 for the tax year 2024.   

26 U.S. Code § 408A - Roth IRAs

Last updated May 6, 2024

 

 

CrowFly's Astonishing Claim That It's the Only One That Works with Real People

by Structured Settlement Watchdog

In describing how it's structured settlement buyer network works, CrowFly, LLC of Buffalo NY, has made the astonishing claim in its blog that it is the only company that provides individual investors (described as real, everyday people) with access to purchase the rights to seller's future payments."

Here is the citation:

"We’re also the only company that provides individual investors (read: real, everyday people) with access to purchase the rights to sellers’ future payments. Other companies rely on big institutions to purchase them, but we saw there was an opportunity to empower people who are planning for retirement or working to build their portfolios to purchase structured settlement payments as an investment. More buyers = more competitive offers for sellers = you get more value for your future payments". 

When Reached For Comment..In Full Deadpan Crow...

When reached for comment, Ross Pearlstone of DCF Exchange's acerbic response was that DCF Exchange "provides real people with the access to purchase rights to seller's future payments", adding in full dead pan crow "but we have (on occasion) worked with farm animals and aliens and lately business has been rather brisk". 

DCF Exchange has been in business longer than CrowFly and it seems a silly claim for CrowFly to make given its co-Founder and Director John T. Bair's prior communication with an officer of DCF.  

A spring lamb crows Sly and the Family Stone

 

 

Individuals Don't Own Structured Settlement Annuities. You Can't Sell What You Don't Own

by Structured Settlement Watchdog

CrowFly, LLC of Buffalo claims that you can "purchase structured settlement annuities from individuals" (see below).  Now that would be a neat party trick!

Excerpt of CrowFly LLC Paid Google Ad 2/13/2022

Before you "invest in social good", consider that in the majority of cases, structured settlement annuities are purchased by a qualified assignment company or a non-qualified assignment company.

Structured settlement annuities are not owned by individuals

Individuals can't sell them and therefore you can't buy them from individuals. This is really basic Structured Settlements 101.  Here is the typical language found in settlement documents:

"Neither the Plaintiff, nor the Payee, nor anyone acting on Plaintiff's or Payee’s behalf: shall have any right of or incidence of ownership whatsoever in the annuity policy; shall have any right to accelerate or defer payments due from the Assignee; shall have any right to increase or decrease any payments due from the Assignee; shall have any other right of dominion or control of or over any annuity policy, which shall be owned exclusively by the Assignee.  

Acquired Structured Settlement Payment Rights (Structured Settlement Receivables) are an Annuity or Insurance Product

The National Association of Insurance Commissioners has expressly stated in Statutory Issue Paper No. 160 (issued April 6, 2019) that acquired structured settlement payment rights are not an annuity or an insurance product (i.e., you're not buying an annuity). 

So why would CrowFly pay to advertise that you can purchase structured settlement annuities directly from individuals when you can't?