Ethics Hero, If A Bit Late To The Party: Maryland Attorney General Brian Frosh

Horrified by this story in the Washington Post and others like it,  Maryland Attorney General Brian Frosh has filed suit against Access Funding and other viatical settlement companies, asserting that they take advantage of vulnerable victims of lead poisoning by purchasing their structured settlements at less than fair-market value.

Gee, ya think?

I have written about this many times and in other forums, and even been threatened by a few the despicable companies (“It’s your money!”…”I have a structured settlement and I need cash now!”) in this cruel and predatory industry. 

Few in the general public know about it or understand what’s going on. Structured settlement are annuities bought by insurance companies to ensure a regular flow of compensatory damages to personal injury and medical malpractice plaintiffs to cover their medical costs and living expenses. The settlements aren’t given out in lump sums because many such plaintiffs are poor and have no experience handling money. A large payment of millions of dollars guarantees that needy family members and friends will beg, plead for and demand loans and hand-outs, while the recipients themselves are tempted to buy luxuries they have long dreamed about with funds intended to cover lifetime cancer treatments.

As I wrote in a post almost seven 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.

One of the victims involved in Frosh’s lawsuit is Crystal Linton, damaged forever by lead poisoning, whose structured settlement was set up to pay her $630,000 over 40 years, with a present cash value of over $400,000. Brain damaged structured settlement holders are perfect potential customers for viatical settlement companies; all the better to deceive and rob them. Linton  received enticing mailers about getting quick cash, and she sold her lifetime income stream for a paltry $66,000.  Frosh says that she didn’t  understand the full impact of what she was doing. Of course she didn’t.

“This set of circumstances makes my blood boil,” he told CBS. “It looks to me like sophisticated and very aggressive folks targeting the most vulnerable people in our society—people who are poor, people who are cognitively impaired and people who are young and unsophisticated.”

It looks to you this way, does it, Brian? Good Lord…plaintiffs lawyer have been complaining about these scummy companies for decades.

“I would be astonished if it were only happening here,” he added.

Stop. You’re killing me. Yes, it is not just happening in Maryland. It has been happening across the country, not just to lead poisoning victims but victims of all manner of products and negligence, ruining thousands and thousand of desperate citizens, and I am not the only one who has tried to raise public consciousness about it.

Frosh’s suit may help get these businesses outlawed in Maryland, as they have been in a handful of other states. I am dubious that he can win in court; these companies are typically very careful to leave a record that shows that they didn’t misrepresent the transaction. They just used high-pressure tactics to make immediate money more attractive than ten times the amount spread over a lifetime. That’s not that difficult when the sales target is poor, naive, trusting and brain-damaged.

______________________

Pointer and Facts: ABA Journal

 

8 Comments

Filed under Business & Commercial, Ethics Quotes, Government & Politics, Law & Law Enforcement, Marketing and Advertising, Workplace

8 responses to “Ethics Hero, If A Bit Late To The Party: Maryland Attorney General Brian Frosh

  1. JutGory

    I have dealt with these companies a few times. My state requires that, before these assignments are made, the individual is required to receive independent professional advice. They are also required to disclose a number of things, like the discounted present value of the settlement. I do not know if other states have similar laws or not.

    Sometimes, the circumstances are not that bad. One guy had a structured settlement because he got injured as a minor. He did not want to wait until he was 25 to get his money, which really was not a lot to begin with, as I recall. Another guy was like someone in your post. The problem was: he had already “cashed out” several of the payment streams in his structured settlement. By the time he got to me, there was very little left to sell. As I recall, I tried to talk him out of it, but he knew what he was doing. He just had a very bleak outlook on the rest of his life; he did not expect to live long enough to get the few remaining payments, which were scheduled to be made 20 years our (or so). It was kind of sad.

    -Jut

  2. Al Veerhoff

    The state attorneys general have a dedicated website for exchanging information. I hope we’ll be seeing more lawsuits filed in other jurisdictions, especially if these companies operate in multiple locations.

  3. THE Bill

    We went through this with my mother after her car accident. They sent her letters , called her , even showed up at her assisted living facility but luckily the staff their knew what they were up to and chased them away.

  4. Gee – if she had asked the fund paying the stream what they’d lump sum it for, I bet they would have offered more than $66,000. It really should be illegal to sell a structured revenue stream that was established by litigation. I can see selling your $25k a year from winning Amazing Race…but I would advise against it.

  5. zoebrain

    Want to bet that some get a guardian appointed for the severely cognitively impaired, and then get them to take a lump sum?

    I’ve seen some truly dirty work at the crossroads in the records of some county courts.

  6. Cynical John

    In one of life’s little ironies, the next e-mail on my computer after this one was an instruction to open the e-mail if I had a cash settlement, which I did, out of curiosity. I was informed therein that records indicate that I had a structured settlement. News to me. I wonder how much they’d give me for a settlement I don’t have. Despicable bastards–I have seen them take advantage of more than one individual, back in the days when I was doing bankruptcy work.

  7. Settlement purchasers are not necessarily Viatical settlement companies. A Viatical settlement involves the purchase of a life insurance policy from a terminally ill individual. A structured settlement purchase involves the purchase of annuity payments at a discount. Ironically, Viatical settlement providers are regulated. Settlement purchasers are not.

    • I worked in the settlement consulting field and also with the plaintiffs bar: they both routinely used viatical settlement to describe the annuity income stream purchases as well, since the principle is similar. But you are correct. Thanks for the clarification.

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