Affinity Scams on the Rise
Personal Injury Plaintiffs Are Easy Targets
March 10, 2021 - Affinity fraud, which the U.S. Securities & Exchange Commission (SEC) defines as "investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups," is everywhere.

And according to the SEC, complaints are on the rise.
Google "investment scam + (any word)" and you'll get googles of links to articles about people who have been conned, duped, and deceived out of their life savings, oftentimes by their very own "friends."

One instance that hits particularly close to home shows up in this January 17, 2017 article from the Orange County Register where the scammers' victims included a "family friend" who had received money from a personal injury settlement.

With friends like these, who needs enemies, right?

A structured settlement would have protected this individual from becoming a casualty of this unscrupulous grifter.

Personal Injury Plaintiffs Can Be Gullible Prey

Individuals emerging from an oftentimes lengthy and grueling litigation process naturally want to gain more control over their lives.

Their eagerness to make themselves financially secure, however, leaves them vulnerable to scam artists who can dazzle them with promises but who, in reality, seek only to separate them from their newfound wealth.

Large personal injury awards represent the greatest amount of money most people will ever see at one time. And typically, inexperience in how best to ensure their award lasts as long as they do can leave them susceptible to nefarious hustlers, some of whom are quite skilled at appearing legitimate.

For those inclined to invest in registered securities with the cash portion of their settlement, the Financial Industry Regulatory Authority (FINRA) provides this helpful link as a public service:

Structured settlement brokers (who are regulated by the state departments of insurance) won't typically be registered with FINRA or any similar regulatory body unless they, too, sell and market registered securities.

Most do not. We do not.

That said, because of our firm's commitment to full transparency and to help allay any client anxiety about financial professional legitimacy, we support voluntary, public Certified Background Checks with the National Ethics Association for structured settlement brokers.

Attorney Duty to Advise

For their part, plaintiff attorneys should always make their clients aware of the tax implications of any settlement or verdict.

Unless their firm also specializes in advising on tax matters, however, attorneys should instruct clients to seek out appropriate pre-and-post-settlement tax counsel to ensure an optimal outcome.

Though rare, law firms have been sued for legal malpractice for failure to take tax consequences of a verdict or settlement into consideration.

We hosted an in-depth discussion on the Mraz v. DaimlerChrsyler and A.M. v. Lieff Cabraser Heimann & Bernstein, LLP litigation in our November 2019 newsletter. This conversation with an expert witness highlights the risks attorneys face.
The Continuing Allure of Structured Settlements

To help stave off would-be financial predators, a structured settlement is an excellent, tried-and-true recommended method of securing the financial future of one who is anticipating settlement proceeds from a personal injury claim.

By arranging to have settlement proceeds paid over time, plaintiffs can insulate themselves from others who can often be only too eager to separate them from their money, thus jeopardizing their entire future.

Sadly, too often, the predators include family members who may outwardly appear well-intentioned.

Safe, secure, and 100% guaranteed by some of the most financially stable institutions in the world, structured settlements provide future payments that are 100% income tax-free (physical injury claims) or tax-deferred (nonphysical injury claims).

In closing, we remind everyone that with the today's passage of the American Rescue Plan Act of 2021, there are suddenly $1.9 trillion worth of reasons for scammers to be happy.

Be vigilant.
Thank you for the opportunity to be of service and best wishes to you for continued success in your personal and professional lives.
Dan Finn, CPCU, MSSC™, RICP®
Master's Certified Structured Settlement Consultant
Retirement Income Certified Professional®

"Building lifetime client relationships!"
CA Insurance License: 0A96173