by John Darer® CLU ChFC MSSC RSP CLTC
Ralph Edward Thomas Jr,, a Baltimore financial advisor, was indicted by a grand jury for allegedly ripping off $756,000 from a trust account with proceeds from a child’s medical malpractice settlement, depositing money into his own personal bank accounts and using the child’s money to buy a residence in Reisterstown, MD and luxury automobiles.
Ralph Edward Thomas, Jr. also allegedly took out three mortgages in the name of the mother of the child with birthing injuries. by forging her name on mortgage documents and used $26,886 for personal expenses.
As if that wasn’t enough Thomas allegedly withdrew $75,000 from an annuity of a retired Baltimore woman and her 85 year old sister with dementia and used $42,000 for his personal benefit.
According to the indictment, the trust for the infant’s benefit was was created in 1994 pursuant to Md. Code Ann., Est & Trusts S 13. It appears that the trust purchased a Jackson National annuity with the settlement funds in the trust. The annuity paid $3,990 each month beginning in 1994; the payments were to increase annually at the rate of 4.25% and were to continue until the infant’s death or 2029, whichever came first. (emphasis ours)
To add insult to injury and not mentioned in the indictment, it appears that a structured settlement was not part of this infant’s settlement plan. WHY NOT? A structured settlement would have provided income free of taxes. An annuity purchased by a trust after the settlement proceeds have been received will be partial taxable . The taxable amount is the amount that represents interest over the cost of the annuity.
In June 1994 the 30 year treasury rate was about 7.5% (source: Fidelity). Typically the internal rate of return of a structured settlement will exceed the comparable treasury rates. Furthermore, a child with birthing injuries would likely receive a rated age. The rated age, if obtained, would have boosted the return on a structured settlement annuity placed on behalf of the injured child.
Ralph Edward Thomas Jr. didn’t even consider a structured settlement and instead placed his client in higher-commission annuities.
- Shouldn’t an investigation have been conducted and a comparison be made between the tax free benefits lost by not taking a structured settlement?
- Consider that if a structured settlement was placed, Ralph Edard Thomas Jr would not have been able to withdraw or transfer money from those annuities from January 2002 to December 2003 because the transactions would have been subject to Court approval per the Victims of Terrorism Tax Relief Act of 2001 and applicable state law.
- What. if any. surrender charges was the victim needlessly subject to for following the advice of having a regular annuity purchased post settlement as opposed to having a structured settlement be part of the original settlement?
Surely there are enough responsible parties here so that the poor child can be made whole.
Ralph Edward Thomas Jr. copped a plea and was sentenced by Judge Catherine C. Blake on February 3, 2012. He faced up to 20 years in the slammer.
Copy of Criminal Indictment against Ralph Edward Thomas Jr. August 16, 2011
FBI — Baltimore Financial Adviser Sentenced in Scheme to Defraud Vulnerable Clients of $838,350
Finra bars broker who stole from sick child – InvestmentNews
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