by Structured Settlement Watchdog®
Terrence Taylor, the amputee burn victim, profiled in a March 2015 Wall Street Journal article by Leslie Scism, has filed an answer and counterclaims against STRUCTURED ASSET FUNDING, LLC d/b/a 123 LUMP SUM a/k/a 123 LUMP SUM, LLC, and iSETTLEMENTS LLC, d/b/a 123 LUMPSUM ("SAF Defendants"} in the Circuit Court of the City of Portsmouth, Virginia Case. No.15-3022. The SAF Defendants had filed in mid-August for breach of contract, seeking to recover legal fees against Taylor incurred in Taylor's Federal lawsuit that was withdrawn without prejudice on June 5, 2015. Taylor has also filed a third party complaint against New York Life Insurance and Annuity Corporation and New York Life Insurance Company, the qualified assignment company and annuity issuer respectively, or the periodic payments subject to the lawsuit [ostensibly an attempt to get jurisdiction over the payments to be able to effectuate the relief sought]
An incredible 11 transfer petitions to sell structured settlement payment rights were submitted and approved in the Portsmouth circuit within the space of two years (7 involving the SAF Defendants collectively) leaving Taylor destitute and with no money to support himself or his dependent child. From May 2012 to March 2014 Taylor contends that SAF Defendants "caused 7 petitions to be filed in Portsmouth Circuit Court seeking to purchase over $8,617, 464.00 in future payments from Mr. Taylor for pennies on the dollar". Taylor contends that at all relevant times to when the transfer agreements were executed, he was domiciled and resided in West Virginia.
Taylor's case is yet another national news story featuring an African American allegedly victimized by structured settlement buyers and raises huge doubts over the adequacy of the Virginia Structured Settlement Protection Act and enforcement of the best interest standard in the Portsmouth circuit. Similar to the Access Funding mess in Prince George's County Maryland, which made the front page of the Washington Post last month, which were filed by a single attorney, Anuj Sud, all of Taylor's transfer petitions were filed by the same attorney, Stephen E. Heretick, a local Portsmouth city councilman, in the Portsmouth Circuit, Virginia, where the alleged victim allegedly did not reside when the transfer applications were made.
The new state court venue is intriguing because it is the venue where somehow a judge or two approved 11 structured settlement factoring transactions in 2 years, as being in the best interest of Terrence Taylor and his dependent child. The questions raised by the suit focus on what information the judge had and what may have been concealed from the Court.
Taylor contends that the SAF transfers violated Virginia Code Section 59.1-476.3, were a fraud on the Court and thus constitute illegal contracts void ab initio.
Despite having "drafted all of the documents used in support of the subject Transfer Petitions and sent documents and notaries to Mr. Taylor's home in West Virginia". "Upon information and belief, on more than 20 occasions from April 2012 to November 2013, SAF sent a notary public commissioned in West Virginia to notarize documents related to 6 of the 7 transfers. SAF also faxed documentation to a mail and packaging store called Going Postal located at 736 Foxcroft Ave Martinsburg, WV. SAF would instruct Taylor to pickup the documents and sign them, have them notarized and faxed back to SAF for filing by Attorney Heretick". [ Counterclaims footnote 2 p 21]
All of the transfer petitions were submitted in the Portsmouth Circuit, in Virginia. Thus, Taylor contends that the SAF Defendants "knew the Transfer Petitions contained false , misleading and incomplete information about Mr. Taylor and the transactions themselves" [ Counterclaims para 86 p 14]
Plaintiffs contend that each of the transfer petitions violated the express terms of the December 19, 1989 Dismissal Order issued by Judge Albert V.Bryant Jr.,of the United States District Court which incorporated the terms of the Settlement Agreement in the Delonghi Matter (the original lawsuit, whose resolution led to the establishment Taylor's structured settlement) and states that the "Periodic Payments cannot be accelerated, deferred, increased or decreased by the Plaintiff or any payee; nor shall any Plaintiff or any Payee have the power to sell, mortgage, encumber, or anticipate the Periodic Payments, or any part thereof, by assignment or otherwise".
Taylor Allegations against structured settlement buyer Structured Asset Funding/123 Lump Sum
Taylor alleges that in order to induce Mr.Taylor to sell his receivables to SAF:
- SAF called Taylor more than 10 times a day
- SAF took Taylor on a trip to Florida and paid for all the expenses associated with that trip.
- SAF took Taylor to two strip clubs in Florida and encouraged him to spend lavishly
- SAF sent him stored value cards
- SAF purchased an" X-Box" and games for Mr.Taylor
- SAF purchased a cellphone for Mr.Taylor
- SAF paid Taylor approximately $250,000 in advances [Taylor Counterclaims para 97 p 18]
Taylor alleges that SAF knew that Taylor :
- Did not own or drive a car
- Had many physical disabilities, including missing limbs and visible scarring
- Had no financial experience,no credit cards and no job; and
- Depending Taylor depended on his structured settlement payments for daily living and medical expenses [ Taylor Counterclaims para 98 p 18]
SIDEBAR: These allegations highlight how the regulatory gap potentially harms structured settlement annuitants. I cover this in more detail in my white paper on the structured settlement secondary market None of the alleged activities described would be acceptable under insurance or securities licensing standards, of which there are none in the structured settlement secondary market. It is highly doubtful that the alleged facts in paragraph 98 would meet any suitability standard that I've encountered in 30 years in financial services.
Taylor contends that "each of the transfer petitions falsely represented to the court that the transfers did not contravene any federal or state statute or the order of any court or responsible administrative authority or government authority". Taylor contends that SAF had knowledge of the dismissal order in the DeLonghi case and concealed it from the court in all but the one transfer involving its subsidiary settlements.
Taylor contends that SAF prepared and filed false affidavits in support of the transfer petitions filed in Portsmouth and that attorney Heretick filed the false affidavits with each of the 7 transfer petitions filed with the court. Taylor contends that SAF knew the affidavits were false as to:
- Taylor's residence and domicile
- The reasons provided for the transfer
- Taylor's ability to support himself and his other sources of income,of which there were none; and the
- Economic impact of the transfers on Taylor and his dependent daughter.
Taylor also contends that in the iSettlements petition was drafted by counsel for New York Life purporting to indemnify the annuity issuer and assignee from liability arising out of the subject transfer petition. Drinker Biddle & Reath represented the New York Life entities and SAF was represented by Stephen Heretick. Taylor alleges that he was the only party to the complex agreement that was not represented by counsel.
Raises an important issue for consumers in cash now for structured settlement transactions. Who does the settlement purchaser represent? Does the settlement purchaser represent the seller or the investor? Who does the lawyer that engages with the seller represent? In my white paper I discuss the need for an industry standard "sellers guide". Perhaps the issue of legal representation in structured settlement factoring transactions needs to be included.
Taylor contends that he did not appear in any of the transfer proceedings in Portsmouth and he has never been to Portsmouth. Surely questions must now be asked and standards changed.
More to come on what should prove to be an interesting case.
Here is a copy of Terrence Taylor's Answer, Counterclaims and Third Party Complaint which I obtained from the Portsmouth Circuit Court this morning via American Legal Investigation & Support Services (ALIASS). Download Terrence Taylor Answer and Counterclaims v Structured Asset Funding/ 123 Lump Sum
Members of the structured settlement industry are encouraged to read over this document and gain an understanding of the Taylor case and recognize its significance to the horrendous and reckless regulatory gap plaguing the structured settlement secondary and tertiary market.