by Structured Settlement Watchdog
John Bair’s February 7, 2020 article in the CrowFly Legal Examiner “Buffalo startup poised to disrupt the structured settlement industry”, is stunning in its inaccuracy. What a disappointment, but unfortunately not unexpected of late.
Pellets of Flying Crow Poop from John Bair
1. Bair: “Selling structured settlements has been law since 2003″.
Reality Check 1 John Bair has been “selling structured settlements” since 1999, first with EPS, then Forge Consulting and then Milestone Consulting. The date upon which he or his entities began conflating the term to apply to the transfer of structured settlement payment rights (like the worst of the structured settlement secondary market) is unknown.
Reality Check 2 As someone who has touted his pro bono services to Trial Lawyers Care and pro bono structured settlement work for participants in the 9/11 Victims Compensation Fund, it’s notable that Bair has had such a lapse of memory concerning the Victims of Terrorism Tax Relief Act of 2001 (VTTRA), which went into effect in January 2002. The VTTRA established 26 U.S. Code § 5891 which is titled ‘Structured settlement factoring transactions’. The essential function of the IRC 5891 is the imposition of an excise tax of 40% [IRC 5891(a)] on the factoring discount in non-compliant transactions, and the guidelines for an exception from such excise tax [IRC5891(b)]. Readers can see for themselves.
26 U.S. Code § 5891. Structured settlement factoring transactions (a)Imposition of tax
There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.
(b)Exception for certain approved transactions
There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.
(b)Exception for certain approved transactions
(1)In general
The tax under subsection (a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured settlement payment rights is approved in advance in a qualified order.
(2)Qualified order For purposes of this section, the term “qualified order” means a final order, judgment, or decree which—
(A)finds that the transfer described in paragraph (1)—
(i)does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and
(ii)is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents, and
(B)is issued—
(i)under the authority of an applicable State statute by an applicable State court, or
(ii)by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.
(3)Applicable State statute For purposes of this section, the term “applicable State statute” means a statute providing for the entry of an order, judgment, or decree described in paragraph (2)(A) which is enacted by—….
Structured settlement factoring transactions had been going on before VTTRA 2001. It would make no sense to levy an excise tax unless there no prior knowledge of business practices
2. Bair “The Industry has done nothing to protect the people they benefit from having as financial customers”
Reality Check Bair’s statement of purported fact is just dead wrong. Bair speaks of his rage that a structured settlement he helped build in 2004 was obliterated when his client sold multiple times to the nebulous “guys on TV”. Where was Bair, who was CEO and co-founder of Forge Consulting when the structured settlement was established? Setting aside the last few years, what articles or tweets has he posted on the subject since 2002?
An industry is the sum of its parts. Nobody has helped identify and written more about secondary market abuses than me since 2005. My blogging has helped identify the ugliest cases of secondary market abuse. In some cases this has led to legal action and media exposure that has increased awareness on a national level. An industry is the sum of its parts.
As I wrote in my 2015 white paper THE STRUCTURED SETTLEMENT SECONDARY MARKET FILLS A NEED BUT RECKLESS LACK OF OVERSIGHT OF THE SECONDARY AND TERTIARY MARKET CREATES PROBLEMS IN NEED OF CONSTRUCTIVE SOLUTIONS, the key to stemming the abuses, in my opinion, is to regulate the sales practices.
Regulation should parallel the life settlement industry:
- Mandate licensing, assign a regulator (possibly the same one that regulates life settlement) and give the regulator the power to fine, suspend, or revoke authority to transact business.
- That way you prevent fly by night companies or pop up entities from entering the business or companies founded to literally to do a single bogus deal, such as a case that I will be covering in a blog to be published very shortly.
- What has Bair done to use his connections to help regulate the sales practices of participants in the structured settlement secondary market? Simply trying to undercut rates, through a purported exchange, as Crowfly is doing, does not address the regulation of participants?
In 19 years after VTTRA we should shortly have all 50 state structured settlement protection acts. What role did Bair play in any state structured settlement protection act, given that he’s licensed in all 50 states? NSSTA, the entity that Bair is boycotting played a significant role, as did NASP in the shaping of these acts.
Bair states he has boycotted the NSSTA, yet it is the NSSTA who had the primary role in establishing the Structured Settlement Caucus. What effort has Bair made to support this bipartisan caucus?
3. Bair “Never before has there been a professional who created structured settlements, get into the business of unwinding them”
Reality Check:
Rhonda Bentzen of Bentzen Financial in Nashville, TN, began her career as a Canadian structured settlement broker before joining SFA (effective January 1, 2020 SFA merged with Arcadia) in the USA. Around 2002, after the VTTRA 2001 took effect, Bentzen founded her own firm specializing in the transfer of structured settlement payment rights, avoiding direct marketing and high-pressure tactics. Contrary to Bair’s statement, Ms. Bentzen held a prominent role in the Society of Settlement Planners during Bair’s membership and even served as SSP membership chairperson when his membership was under consideration. My, how time flies!
Michael Upchurch, along with the Delta Group in Jacksonville, FL, and several of its brokers, were believed to be the first to use structured settlement payment rights to fund future payments for injured plaintiffs. Upchurch also played a role in founding Rescue Capital, a company that purchased structured settlement payment rights and employed a few former JG Wentworth staff.
Nick Coccimiglio of San Francisco, CA, is a settlement planner and broker with the Delta Group, as well as the founder and CEO of Multistream Capital. The company purchases income streams in bulk, breaks them into payments, and tailors a new stream for each client based on their future income needs. According to public information, all payments in the MC Portfolio are indirectly backed by annuities from life insurance companies.
and there are others who are more than casual players in the secondary and tertiary market.
Why would John Bair reason that it’s acceptable to make an easily disprovable lie about himself to potential customers to drum up business?
4. Is CrowFly a Marketplace or a ” Marketplace”?
- “CrowFly is a conscientious online marketplace” CrowFly LinkedIn (retrieved 2/8/2020)
- “Fin-tech startup in Buffalo seeking to build ethical marketplace for settlements” Buffalo Business First (2/7/2020)
- “CrowFly is the first online marketplace transforming… ” CrowFly Press Release WNY Venture Association (9/12/2019)
- “CrowFly’s transparent, efficient marketplace…” Crowfly Legal Examiner (8/30/2019)
- ‘Our “marketplace”, and online service… ‘ CrowFly Legal Examiner (2/7/2020)
Begs the obvious question