The Next Time You See One Of Those Opera Commercials About Selling Structured Settlements, Think About “Rose”

Rose

Because I worked as the general counsel for the late Richard Halpern, a kind and brilliant man, I know a lot about structured settlement, and also about the slimy businesses that conspire to destroy them. Richard’s company, The Halpern Group, worked with trial lawyers to develop structured settlements for successful plaintiffs who had won long-term damages for catastrophic injuries due to medical negligence, product liability or other torts. Most of these clients were poor, and if their millions in damages, designed to help them survive the rest of their lives, were awarded in lump sums, the result would almost always be catastrophic. These were poor people, for the most part, with poor families and poor friends and neighbors, none of whom had any experience or success managing money.  Drop millions on someone who has never had luxuries of any kind, and a spending spree as well and handouts to needy or greedy friends and acquaintances were sure to follow. For their own protection (or the protection of minors needing lifetime medical care), these plaintiffs of Rich’s lawyer clients were advised to forgo a big lump sum in favor of an annuity which would pay out regular amounts over time.

The plaintiffs own the income stream, but not the annuity itself. With assured income developed according to projected needs, the plaintiffs and their families could be assured of security and relative comfort and well-being—relative, because damages can seldom make up for broken bodies, minds and lives. Let me take over for myself here, from a post I wrote on this topic almost exactly six years ago.

Once they are on their own, however, the compensated victims are targeted by viatical settlement companies, both those with cute opera-singing commercials and those without. They undermine the sound advice of the attorneys with slogans like “It’s your money!” and try to persuade the former plaintiffs to unstructure the structured settlement by selling the annuity’s income stream to the viatical settlement company at a deep discount. Result: the annuity company gets the regular income at bargain rates, and the victims get a new, smaller lump sum to dissipate in exchange. The statistics say that the customer of the viatical settlement company will run out of cash long before he or she runs out of the need for it. But for the company, it’s a sweet deal.

It’s also despicable. The viatical settlement industry like to use lottery winnings, which are usually paid out in annuities like structured settlements, to justify their business. Lottery winning are windfall funds; while the same dissipation  hold for those lump sums (most multi-million dollar lottery winners have no money left after five years), the winners are usually no worse of after the money has been blown than they were before their number came up. When the money is a settlement for an injury, however, losing it is calamity. I would consider a viatical settlement company that only bought the income stream from lottery annuities ethical. There is no such company, however. The victims with structured settlements are a much larger and more lucrative market.

I have written about these legal but unethical businesses more than once. The first time, on The Ethics Scoreboard, I described a viatical settlement company only by using quotes from its own website, and explained what it meant, accurately. The company’s lawyers demanded that I take down the post, claiming that I had disparaged them (by using their own words and making it clear how they made their money.) I was in no position, with a family, a struggling business and aging parents, to engage in a legal battle of principle (though I suspected the company was bluffing, and I didn’t know Ken White and Marc Randazza then, both courageous blogging lawyers who assist bloggers who are threatened, like I was being threatened, to silence them. I took down the post.

The Washington Post has a story about how these companies work that is quite sickening, but as far as the conduct of the viatical settlement sharks, quite accurate. It tells the tale of “Rose,” a brain-damaged victim of lead paint poisoning, who was persuaded by a salesman and a lawyer working for one of these companies to sell her income stream from her hard won legal damages distributed through a structured settlement—after all, it’s her money!—set up—who knows, maybe by Richard Halpern—to provide for her until the end of her life, for a pittance. The company got her projected income of almost $574,000 for a lump sum payment of  $62, 876. Now, Rose’ s future is bleak. She can’t work, can barely read or write, and the annuity set up to compensate her now belongs to a corporation. The company points out that they did nothing illegal, and that is true.

Read the story. Think about it every time you see a viatical settlement company’s commercial on TV.

I’ll repeat my conclusion from the last time I wrote about this. Nothing has changed. These predators operate one of the most cruel and unethical legal businesses in the world.

____________________

Pointer: Fred

 

 

24 thoughts on “The Next Time You See One Of Those Opera Commercials About Selling Structured Settlements, Think About “Rose”

      • I don’t know if this is a Canadian thing, but I was under the impression that any contract signed by a minor or someone with severely retarded mental development was voidable. Am I to understand that the law normally allows and enforces contracts signed by kids and clinically mentally handicapped people worth six figures or more?

  1. But you know, I’m hearing that more and more…”We/I did nothing illegal.” How does that stop “WE/I” from being an unethical slimeball? It doesn’t. It just means they aren’t going to jail for it.

  2. Money changers of Biblical proportions. Sharp business practices are sharp business practices. And liberals think humanity is improvable and improving in a straight line. Hah.

    877 Cash now.

    (I’m amazed advertisers don’t use jingles any more these days, hardly. They are so powerful.)

  3. Barely-legal scams are incredibly common now and they are so accepted that you’d be considered out of line for just calling them scams. Apparently nothing is a scam as long as the FTC hasn’t shut it down. Not even an obvious scam.

    Even if you have mountains of evidence showing the scam-nature of their business model, and can prove that nearly 100% of the scam victims lose money. The scammers have just evolved so far past the regulators/laws at this point, that the government will never catch up. The machine moves too slowly and the scam-companies can adjust their business model to stay ahead of the law.

    Consider Herbalife and other “direct marketing” or “multilevel marketing” ploys, and how they drain money and waste lives for nearly every single “investor.” They are so good at it that most of their marks won’t admit it was a scam, even after losing thousands of dollars, because scam-companies know exactly how to exploit the sunk-cost fallacy.

    • Consider Herbalife and other “direct marketing” or “multilevel marketing” ploys, and how they drain money and waste lives for nearly every single “investor.” They are so good at it that most of their marks won’t admit it was a scam, even after losing thousands of dollars, because scam-companies know exactly how to exploit the sunk-cost fallacy.

      How do they drain money from investors?

      • Sorry if that was confusing, I don’t mean their stockholders. I mean distributors who invest in the “business opportunity.” Nearly 100% of those people will lose money, probably a lot of money, because the business model is not viable. When a market is oversaturated with dupes hoping to get rich selling the same dream of getting rich to all of their friends…Herbalife expands into new markets, including 3rd world countries. Nearly 100% of those people lose lots of money too.

        It’s legal (Herbalife adjusted to dodge the new and very lax legal definition of a “pyramid scheme” simply by requiring distributors to buy lots of product instead of simply requiring them to pay Herbalife money to buy in) but the business rises and falls on its ability to over-promise success in a non-viable business model. So it’s a scam.

  4. Yes Jack, awful exploitation. There must be a lot to be said for making such settlements effectively non commutable and non assignable, just as pension benefits have traditionally been from company pension schemes. Supposedly ‘free markets’ and ‘competition’ are generally admirable but they don’t work well in retail financial services, particularly not when selling to the the old and/ or sick and/ or naive. The asymmetry of power is too great. Sounds as if you should be a natural supporter of Elizabeth Warren?

    • Wait, what?

      Because a particular item of financial manipulation even remotely aligns with Elizabeth Warren’s fiscal vision for the world Jack would be a supporter of Elizabeth Fauxcahontas Warren?

      So if I held 95% conservative/libertarian views and 5% left wing views, could I presume you’d recommend a Democrat for me to support?

    • Because I understand what’s wrong with viatical settlements, I should support a shrill radical socialist with no more leadership experience than Barack Obama knowing that she exploited many of the systems she now condemns to make money after getting her teaching jobs by faking affirmative action credentials as a Native American? Explain how that works.

      • Depends on how much you want to protect the ‘Rose(s)’. Casting thunderbolts of ethical disapproval at the miscreants is a start. But the ‘Roses’ need and deserve more than that: stronger and more effective consumer protection. The predatory behaviour of the miscreants with ‘Rose’ is indicative of a systemic problem: this isn’t a ‘one off’ and it doesn’t just happen with structured settlements. Setting in place the stronger consumer protection isn’t easy, but it is necessary to have politicians like Elizabeth Warren prepared to talk tough with the relevant bits of the financial services industry (practically all of it). The financial services industry clearly wields enormous $ lobbying power. It is of course much in their interest to demonise any strengthening of consumer protection (for financial products) as ‘socialist’ and one step towards the Gulag. More profits for them, and the danger of more misery for ‘Rose’.

    • “Supposedly ‘free markets’ and ‘competition’ are generally admirable but they don’t work well in retail financial services”

      And yes, they do work. Their entire purpose is to enable people to maximize their ability to provide value to the community that the community needs/wants in exchange for value provided from various other members of the community.

      Money happens to be the medium for transferring the tangible value from one person to another. Being what it is, money is a special class of “thing” in the market, being the very river through which transactions can flow in a complex society, playing games with it can easily be defined as “anti-market” behavior without having to toss snide remarks towards the market and competition itself.

  5. Being able to count is essential to succeeding in life. For lots of people, counting is difficult to impossible. For most everyone, the same can be said for succeeding in life. And there sure aren’t any government programs that can insure people will succeed at life.

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  7. Hey Jack,

    I remember that post on the Scoreboard. It was the first time I’d learned the word “viatical” and while at the time I had a suspicion that it was a shady thing, I learned about just HOW BAD it is from you.

    I don’t know whether the notion of “if just ONE person reads it” is important to you about the things you write, but if it is, then I can confirm to that this one person did read it before you took it down. Thank you for educating me.*

    –Dwayne

    *…and frankly, I don’t tell you that nearly enough.

    • Thanks, Dwayne, so much. Yes, the just one person goal is plenty for me; that was Saroyan’s test for art as well: if one voice sings your song.

      Not to be confused with the fatuous “if only one life is saved…” rationalization…

  8. A company contacted my mother after she received her settlement for a car accident she was in trying to buy her out. Thank god my sister has power of attorney and stopped it.

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