by Structured Settlement Watchdog
While the settlement industry may be grateful to Patrick Hindert's calls for change his track record on historical accuracy is again called into question.
In his attacks on the National Structured Settlement Trade Association on November 9th, Patrick Hindert of S2KM and The Settlement Services Group (TSSG), incorporates a time line as part of his cynical analysis of "what NSSTA wants to "protect and preserve" (to the extent possible) are business models and business practices ("good old days") that existed prior to:
1986 - Jim Lokey completed the first structured settlement transfer;
- 1991 - Executive Life insolvency;
- 1993 - Congress enacted IRC 468B and introduced qualified settlement funds;
- 1994 - Weil lawsuit settlement permitting structured settlement agents to work directly with claimants and plaintiff attorneys;
- 2001 - Congress adopted IRC 5891 and defined "structured settlement" as well as rules for structured settlement transfers;
- 2010 - Hartford settled the Spencer class action lawsuit (and departed the structured settlement business) following allegations of civil RICO and state fraud violations by Hartford, its agents, brokers and attorneys".
- Legislation adding Section 468B to the Internal Revenue Code was passed as part of the Tax Reform Act of 1986 (see Tax Reform Act of 1986 Public Law 99-514 Section 1807(a)(7)(A) 100 Stat.2814(1986)
- The purpose of 468B under the Tax Reform Act of 1986 was to permit "economic perfomance" under IRC 461(h) and the certainty of a tax deduction for Defendants who paid money into such funds.
- The term "designated settlement fund "is limited for use with claims 'arising out of personal injury, wrongful death and property damage' " (see Structured Settlements and Periodic Payment Judgments Section 3:08B 468B Settlement Funds, a treatise co-authored by Hindert).
- The term "qualified settlement fund" WAS introduced in January 1, 1993 and merely expanded the types of claims eligible for the use of 468B Settlement Funds. Rev Proc. 93-34 (see link at bottom of this page) was the relevant cite for the structured settlement industry as speaks to the ability of the 468B Fund to enter into qualified asignments.
- The definition of structured settlement at IRC 5891(c)(1) is immediately preceded by language that expressly states that the definition is solely for that section of the Internal Reveneue Code. IRC 5891 deals with the imposition of an excise tax on the factoriong discount on a purchaser of structured settlement payment rights, if certain procedures are not followed.
- The Hartford settled the Spencer class action lawsuit in 2010, however Hartford Life Insurance Company withdrew from the structured settlement annuity market effective November 1, 2009 Dick Risk, one of the lawyers prosecuting the class action, has claimed by implication that such lawsuit was the cause of the withdrawal.
- Yet 6 months prior to the withdrawal of Hartford Life Insurance Company from the structured settlement annuity market, The Hartford had suffered significant financial pressure as this May 18, 2009 release to its stakeholders shows. To wit "The Hartford's recent overall financial performance has been disappointing and the difficult economic environment has placed significant pressures on some of our businesses. While many of our underlying operations are performing well, The Hartford was more affected by the market volatility than some of our peers, given the issues in our investment portfolio and the size of our variable annuities businesses**. In response, the company's Board and senior management have been engaged in an in-depth evaluation of The Hartford's business model and strategy, with the goals of building shareholder value, reducing risk and preserving capital".
- As an aside, in Spencer v Hartford-3 (April 18, 2009) Hindert asked "if Federal officials should consider Spencer v Hartford if and when Hartford applies for TARP funds?" In "deference" to Hindert The Hartford received $3.4B in TARP Funds in May 2009, a move applauded by financial analysts. Hartford repaid the TARP in less than a year as the Wall Street Journal reported on April 1, 2010.
- The problem with Hindert as historian is that he is like a seagull. He flies in, poops all over everything and then flies way. You have to call him out. In 2008 he developed an AIG time line that was left wanting for its glaring gaps. Hindert never really updated the timeline and thus has missed important milestones that have occurred since..
After you've finished unwrapping your gifts and feeling "fat and happy" from a sumptuous Christmas dinner, or "movies and Chinese food" you too can be "Patrick Hindert Seagull" for a day. Simply click this link to "The Seagull Strikes Back" and you can "do the seagull" and poop all over everyone to your hearts content with the tap of the space bar on your keyboard. Can YOU "poop" better than Hindert? We want to know!
**Like many insurers issuing variable annuities, The Hartford's product had guaranteed retirement income riders that assured a fixed percent regardless of investment performance. By most accounts, the actuarial assumptions did not foresee the swift market downswing in late 2008 to devastating effect.