by Structured Settlement Watchdog
Milestone Related Factoring Life BEFORE the Crow Flew
In a prior post of January 15, 2022, I brought readers' attention to a significant number of cases found in New York court records, where CrowFly, LLC, a self-described structured settlement transfer of payments originator and servicer of court approved structured settlement transfers, of which John T. Bair is the Managing Member and a principal owner (Source: Milestone Wealth Form ADV Part 2 Item 10, March 16, 2022), factored structured settlements placed by Mr. Bair.
It has since been discovered that long before establishment and active promotion of CrowFly, LLC, the structured settlement factoring origination firm and servicer in 2017 and joining the National Association of Settlement Purchasers in 2022, irrefutable evidence found in New York court records indicates that Milestone CEO John T. Bair displaying, used THREE RELATED ENTITIES to engage in the purchase (and/or attempts to purchase) MORE structured settlement payment rights from , clients sourced from the nation's trial lawyers at the same time he and/or Milestone maintained an insurance license and appointments with most structured settlement annuity issuers and placed similar annuitants into structured settlement annuities.
The Virgilio Case | Structured Settlement Established by Bair with MetLife in 2005
In 2005, John T. Bair was President and CEO of Forge Consulting, LLC. In one full page ad in the middle 2000s that was published in a state trial lawyers' publication which emphasized how much money his firm gave to the American Trial Lawyers Association (now AAJ), it's notable that buried in the ad is the statement that " Structured settlements provide the security that no lump sum can".
In 2005, John T Bair/Forge Consulting placed a structured settlement for Joseph N. Virgilio as part of the compensation for a wrongful death settlement. The structured settlement was funded with a structured settlement annuity issued by Metropolitan LIfe Insurance Company bearing MetLife certificate number 86291FOR.
As the result of the settlement of a claim against Wyeth Pharmaceuticals et al, the structured settlement was to pay Virgilio $11,250 per quarter, guaranteed for 10 years, beginning September 15, 2015, with a final quarterly payment due on June 15, 2015 of $1,000,000.00
The Virgilio Proposed Sale and Proposed Purchase by Seventh Amendment Holdings, LLC in June 2015
- Seventh Amendment Foldings, LLC (as of 1/11/2022 MIlestone & Co, LLC), the holding company for two other involved Bair related companies was to be the originating purchaser of Virgilio's structured settlement payment rights
- United States Periodic Payment Assignment Company (USPPAC) is an assignment company under the Seventh Amendment Holdings, LLC umbrella and it was to take part in the transaction. United States Periodic Payment Assignment Company (USPPAC) "is an independent assignment company formed in accordance with Section 18-201 of the Limited Liability Company Act of the State of Delaware", according to Milestone's marketing materials.
- Milestone Consulting, LLC, another company under the Seventh Amendment Holdings umbrella, a company in which Bair was CEO at the time was selected by Virgilio to represent him according to the June 14, 2015 Structured Annuity Purchase Agreement with Seventh Amendment Holdings, LLC that it entered into with Virgilio. It's obvious that Virgilio did not prepare the document. Virgilio waived independent professional advice according to the filed documents. An admission that Milestone's advice was not independent? Who submitted that to the court? Read on.
- On June 15, 2015 Seventh Amendment Holdings, LLC submitted a petition to the New York State Supreme Court in Erie County (Index 807286/2015) in a matter captioned " In the Matter of Seventh Amendment Holdings, LLC for Judicial Approval of the Sale and transfer of Structured Settlement Payment Rights", to buy the $1,000,000 lump sum from Mr. Virgilio in a sale and assignment of structured settlement payment rights.
- Seventh Amendment Holdings LLC was to pay Virgilio $300,000 in cash (SAH would receive the $1,000,000 transferred from MetLife instead of Virgilio) together a fresh monthly payment stream for another 10 years in approximately the amount of $7,090.10 each, guaranteed by Seventh Amendment Holdings for 10 years, beginning January 15, 2016. The terms of the deal as stated in the petition include "that the final monthly benefit amount will be predicated and finalized based on pricing available in the market at the time of puchase".
- using a combination of annuities and serviced structured settlement factoring payment streams (the latter from the structured settlement secondary market- servicing would not be necessary if it was a legitimate stuctured settlement annuity).
- The Petition includes the sworn statement of John Bair acting in the capacity as President of Seventh Amendment Holdings, LLC, dated June 15, 2015, that he read the Verified Petition, knows the contents thereof; and that the same is true to his own knowledge with the exception of what is denoted as upon information and belief.
- At all relevant times, Bair's Milestone Consulting was appointed with Metropolitan Life Insurance Company as an agency for the placement of structured settlement annuities.
The Virgilio Petition
The Virgilio Affidavit
The Virgilio Structured Annuity Payment Purchase Agreement
Can the Proceeds of a Structured Settlement Factoring Transaction be Used for a New Tax-Free Payment Stream?
For the Payee
From a tax perspective, this shouldn't affect the Payee. The payments received will still be made on the account of the physical injury. See IRS PLR 200918001.
For United States Periodic Payment Assignment Company (USPPAC)
But there's some concern that USPPAC would have significant and unexpected tax liability. Normally, in a qualified assigment, the assignment company doesn't owe any tax on the amount it receives and uses to buy an annuity. IRC Section 130. But here, the payment to be received by USPPAC isn't being used to buy an annuity. And the trarnsaction might not be treated as a "qualified assignment". That's because Seventh Amendment Holdings is assuming the liability from a party that probably wasn't "a person who is a party to the suit or agreement as required by IRC 130(1). I.R.C. To wit...§ 130 (c) (1) — if the assignee assumes such liability from a person who is a party to the suit or agreement, or the workmen's compensation claim
The above doesn't matter if United States Periodic Payment Assignment Company (USPPAC) was a foreign assignment company, But is it? It's a Domestic Limited Liability Company in the State of Delaware, according to Milestone's own marketing materials.
At the time of the Petition Bair had been in the structured settlement field for an estimated 17 years, yet the Petition includes the statement that 26 USC Section 103 is relevant to Met Life's responsibility to make payments provided for under the structured settlement that Seventh Amendment was seeking to purchase. [ Virgilio Petition #8] I happen to know that Bair is a pretty good golfer and won a longest drive contest or two, so it would not be apt to say it is "par for the course" but the fact remains that 26 U.S. Code § 103 refers to Interest on State and local bonds and is irrelevant as neither state and local bonds is an annuity or a serviced factored structured settlement payment right or a qualified funding asset.
To the extent that Virgilio's replacement payments are funded with factored structured settlement receivables (other people's structured settlement payments), he may not have any protection in the event the annuity issuer goes insolvent. 37 states, including Virgilio's resident state of Illinois leave investors S.O.L. in the event of insolvency following the state's adoption of the 2017 Revisions to the LIfe & Health Guaranty Association Model Act (#520). There's no grandfathering, the changes are retroactive upon the effective date of adoption by the state.
Who is Seventh Amendment Holdings, LLC
Before it was renamed recently, Seventh Amendment Holdings (SAH) was self-described" in MIlestone promotional materials as a suite of companies designed to provide guidance and support to plaintiffs and attorneys before, during, and after litigation". Through a range of entities that include a 501(c)(3) nonprofit organization, a settlement planning and consulting firm, a wealth management firm, and a financial tech start-up, SAH has said it is deeply committed to finding and providing the best financial solutions for individuals and families dealing with tragedy. Seventh Amendment Holdings LLC is a limited liability company (LLC) located at 737 Main St Ste 100 in Buffalo, New York Source: Cision Press Release attributed to Milestone October 21, 2021. Seventh Amendment Holdings, LLC was renamed Milestone & Co, Inc, effective April 1, 2022. Source: Open Corporates [ OpenGovus says the renaming was January 11, 2022, but who's counting?]
Who Owns Milestone & Co, LLC (f/k/a Seventh Amendment Holdings)
The Investment Adviser Public Disclosure for Milestone Wealth, LLC (f/k/a Monolith Advisors), states it is a registered investment adviser based in Buffalo, NY. Milestone has been offering advisory services since 2013. Milestone & Co., LLC is the sole owner of the firm. John Theodore Bair (John T. Bair) is the President and Chief Compliance Officer of the firm and the primary owner of Milestone & Co., LLC, according to the firm's most recent Form ADV Part 2, filed in March 2022. Source: Investment AFdviser Public Disclosure (IAPD)
Who Owns Crowfly, LLC, Bair's Current In House Structured Settlement Factoring Firm?
Bair is the majority owner of CrowFly, LLC according to the March 16, 2022 update of the Milestone Wealth Form Adv Part 2. [ Note added 10/14/2022 : In a late August 2022 Buffalo Business First article about the shuttering of CrowFly, Bair bemoaned the amount of money he plowed into the CrowFly until it reached the point where it had become unviable].
In addition to his responsibilities at Milestone, Wealth John T. Bair is the President and Chief Executive Officer of Milestone Consulting, LLC (“Milestone”), a consulting firm and insurance agency located in Buffalo, New York. A part of its services, Milestone provides clients with consultations regarding the appropriate investment options for court settlements resulting from personal injury and wrongful death lawsuits. Mr. Bair devotes approximately 60% of his time to his activities at Milestone and is directly compensated as an officer and employee of Milestone for his services. Ibid.
John T. Bair is the Managing Member and a principal owner Crowfly, LLC a structured settlement transfer of payments originator and servicer of court approved structured settlement transfers. Crowfly, LLC has developed an online platform directly connecting the sellers of annuities with qualified buyers. Occasionally, a seller of an annuity may invest the proceeds of the sale with Milestone. Additionally, in some instances, when a Milestone client is in need of a more secure income stream, Milestone may recommend an annuity that is listed through CrowFly to the client. Bair/Milestone admits in the Form ADV part 2, that these activities trigger a conflict of interest because Crowfly receives compensation for the transaction. Clients to whom the firm offers advisory services are informed that they are under no obligation to purchase annuities from Crowfly, LLC and may use the annuity brokerage firm of their choice. Client should also note that annuity guarantees are subject to the claims-paying ability of the issuing insurance company. Ibid.
The only thing is that factored structured settlement payments treams offered by CrowFly are not annuities. For example, under New York law, where Milestone & Co (Seventh Amendment Holdings) and CrowFly's main office is, "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" Source: New York Department of Financial Services"