Companies brought S.C. victims to courts where they didn’t live to get upper hand

Antwun supposedly lived in an apartment in Aiken County when he agreed to give up $15.5 million, scheduled to come to him over several decades, in exchange for $600,000 in immediate cash.

He had been awarded the tax-free millions years earlier as part of a structured settlement. Plaintiffs who win personal injury lawsuits often choose the financial arrangements when their injuries are anticipated to limit their ability to earn a living. In Antwun’s case, he had suffered severe injuries in a New York hospital as an infant.

The 21-year-old sold his future payments to private companies, known as structured settlement factoring companies, in a series of deals in 2019 and 2020, according to court records. Each sale was approved by an S.C. judge. And Antwun’s future wealth was gone.

This is where Antwun’s case becomes puzzling. He probably did not live in that apartment in Aiken, according to property records. He probably didn’t live in South Carolina at all when the deals were approved — although S.C. law requires it.

The finding raises questions about whether some factoring companies operating in the state are following the rules. Firms have been accused in other states of misrepresenting where sellers live to increase the likelihood of court approval of the sales.

Antwun, who appears to have lived in Pennsylvania at the time, is among a handful of people identified during a months-long McClatchy investigation allowed to sell their future payments in South Carolina despite evidence that they lived in another state. The newspaper’s review also uncovered documents where sellers appeared to have lived in Illinois and California.

Attempts to interview officials from the factoring companies that purchased Antwun’s future payments were not successful.

Richard Steadman, a North Charleston attorney who represented the companies, denied filing any cases involving sellers who lived out-of-state. He or the factoring companies he works for always request confirmation a seller lives in South Carolina, Steadman said.

Forum shopping, as it is sometimes called, has been a problem in other states that lawmakers have worked to stop, say industry experts.

“The factoring companies figure out (what court) they should go to,” said Eric Vaughn, executive director of the National Structured Settlements Trade Association, which represents consultants and insurance companies that set up these settlements. “They know the court, they know the system, know the judge (who) never asks any questions, and (the deals) are just rubber stamped.”

A New York man, for instance, recently sued a factoring company, alleging they convinced him to lie about his residence. In a complaint, he said he was told they had “a sure-fire way to do the transfer in Florida instead of New York.”

Forum shopping lawsuit by David Weissman on Scribd

And a Richland County woman submitted an affidavit to court in 2017, describing how a factoring company passed her off as a Georgia resident to get her transfer approved there.

“(They) represented that I could claim residency in GA using an address provided by the aforementioned representatives and that doing so was proper and appropriate,” she wrote.

Questions go beyond just out-of-state sellers. McClatchy’s review found a much more common trend of S.C. sellers being brought across county lines and appearing before certain judges who rarely, if ever, deny the companies’ requests to buy future payments.

Take Antwun’s case, for example. Even if he had lived in that Aiken apartment, his deals still raise eyebrows because they were taken before an Allendale County judge, who hasn’t denied a structured settlement transfer in at least eight years.

More than 100 of these deals — where the seller lived in one S.C. county but appeared before a judge in another county — were approved between 2014 and 2021, according to the newspaper’s analysis.

Efforts to reach Antwun were unsuccessful, which is why McClatchy is only using his first name. His story is told using public court records.

The New York attorney who helped set up Antwun’s structured settlement expressed dismay that an S.C. judge would approve the deals.

“I can’t imagine how the courts would approve that … To destroy that lifetime of wealth, really, is heartbreaking to me,” said Daniel Hansen after McClatchy told him the details of Antwun’s sales. “We had some certainty that he’d be cared for for the rest of his life, or so we hoped.”

Several states including Florida and West Virginia have recently amended their laws to close apparent loopholes. Meanwhile, South Carolina legislators haven’t touched the state’s Structured Settlement Protection Act since putting it into place 20 years ago.

The amount of potential forum shopping McClatchy discovered in South Carolina is likely an undercount as most court filings obscure sellers’ names and addresses. It’s part of an increasing trend of secrecy that includes redacting the dollar figures, which will likely make it more difficult to watchdog the industry in South Carolina going forward. The newspaper’s analysis was also limited to specific counties where the number of deals appeared out of line with its population size.

Tiny Allendale County, for example, was among the top 10 counties in South Carolina in terms of the number of approved transfers.

Even when judges do deny deals, McClatchy found they often get approved later in front of judges in other counties.

Antwun, for example, had two deals denied in Virginia in 2018 before popping up on Allendale County’s court roster with a listed mailing address in Aiken County.

Court records show he lived in a Pennsylvania apartment through at least July 2019. He and his mother purchased a house in Pennsylvania in August of that year, just days after his first deal was submitted in Allendale court, according to property records. The pair claimed a homestead tax exemption, reserved for people who live in their homes.

That leaves a small period of time when he may have briefly lived in Aiken County, though no other court or tax records could be found connecting him to South Carolina. And his other two S.C. deals were approved during 2020.

A favorable interpretation of the law

“Where’s that? Florida, right?” said Patrick Stevenson when asked whether he knew his latest sales were approved in Allendale County.

Under normal circumstances, it might be understandable that the 24-year-old man had never heard of a small county about 100 miles away from his Elgin home.

But public court records showed that Stevenson had recently sold more than $600,000 of his future payments in Allendale.

Most S.C. transfers approved between 2014 and 2019 involved in-person court hearings that sellers like Stevenson were required to attend. But that changed with the onset of the coronavirus pandemic in early 2020, court records show.

As courts closed, hearings went virtual or were conducted over the telephone — as was the case with both of Stevenson’s deals that were approved in Allendale. The result: sellers weren’t always sure where the judges were located who were hearing their cases.

That arrangement has largely continued despite courts reopening.

“Because it’s more convenient,” Judge Walter Sanders explained.

Sanders, Allendale County’s part-time master-in-equity since 1991, seems to be a favorite among some factoring companies, according to McClatchy’s analysis. A master-in-equity is a judge whose job is to rule in non-jury matters, most often foreclosure filings and other real estate-related issues that are referred to them by circuit courts.

Sanders approved 84 transfers without denying any between 2014 and 2021, according to the newspaper’s analysis. Dozens of Sanders’ cases involved sellers who neither lived in Allendale, nor were their settlements approved there.

Many of the numbers from the cases Sanders approved are redacted from public view. But for the 44 transactions where full data was available, sellers received an average return of less than 12 cents on the dollar for their future payments. That was the lowest average for any judge or special referee who approved at least 25 transfers, according to the paper’s analysis.

Sanders spoke with McClatchy in April about how he generally handles the cases, but he has not responded since to multiple requests for a follow-up interview that would have included questions about forum shopping and specific cases he approved.

Attempts to reach Sanders included calls, emails, a visit to his Fairfax office and a certified letter outlining McClatchy’s findings sent to his home.

Sanders said during that April interview that he finds it difficult to know if sellers are telling him the truth when he questions them about the transactions, and he suspects the factoring companies’ attorneys coach them on what to say.

“Like most lawyers, it’s to their client’s benefit for these (structured settlement sales) to go through,” he said. “Usually because the same attorneys are the ones that appear before me, and they know what I’m looking for, so they’re gonna make sure their client is aware of that.”

The attorney who most frequently brought these deals before Sanders is Steadman, according to the analysis. Sanders granted factoring companies that Steadman represented 67 transfers, nearly twice as many as the attorney received from any other judge or special referee.

Steadman has represented some larger factoring companies including DRB Capital and Catalina Structured Funding, but most frequently represents companies filing under various limited liability company names which conceal who’s behind the deals.

Steadman told McClatchy that he and the companies he represents typically file these cases in the county where the seller lives, but added that they can file in “an alternative county” based on their interpretation of South Carolina’s Structured Settlement Protection Act.

The law states that transfers “may be brought in a court of competent jurisdiction, including … in the county in which the (seller) resides, in the county in which the structured settlement obligor or the annuity issuer maintains its principal place of business, or in any court which approved the structured settlement agreement.”

The phrase “may be brought” allows for leeway on where they can actually file the case, Steadman said.

“It doesn’t state that is the only place, or that’s where it shall be done,” he said. “It uses the ‘may’ language.”

Brian Dear, executive director for the National Association of Settlement Purchasers, which represents some of the largest factoring companies other than JG Wentworth, declined to say whether he believed South Carolina’s statute allows for forum shopping, but noted some companies could take advantage of the “may” phrasing.

“With some proper legislative crafting, that hole could be fixed real fast,” Dear said. “That is something our organization would support.”

The National Conference of Insurance Legislators, which crafted the model legislation on which South Carolina’s is based, has since altered its recommended language to “shall” from “may.” Other states, including Virginia and Maryland, have made that change in their laws.

In Virginia, the overwhelming majority of cases were being filed in a single courthouse, where a judge approved dozens at a time, The Washington Post reported in 2015. The newspapers reported similar findings in Maryland, where factoring companies were filing cases in the county where their attorney lived.

Steadman said he makes judges aware when sellers live elsewhere, and the judges agree with his interpretation of state law.

But Philip Wright, a Lancaster County special referee who has frequently ruled on transfers filed by Steadman involving out-of-county sellers, said his understanding has always been that the sellers lived in Lancaster or had another connection to the county. A special referee is an attorney appointed to serve as a judge in certain cases.

Wright approved 52 cases with no denials between 2014 and 2020. Of those, McClatchy found more than 20 involving sellers who did not live in Lancaster County. For the 46 deals he approved where full data was publicly available, the sellers received a total of less than $2.7 million in exchange for almost $18 million in future payments.

That represented an average return of less than 15 cents on the dollar, the second lowest average for any judge or special referee who approved at least 25 of these transfers, just ahead of Sanders.

Wright told McClatchy he was paid about $250 per case to serve as special referee.

Steadman denied having any personal relationship with Wright or Sanders, telling McClatchy that he and the companies he represented preferred to take cases to Allendale and Lancaster counties because they offered “good scheduling.”

“(Sellers) don’t do (these deals) without having some general, immediate need, so a delay is critical to them,” he said.

Covid-induced forum shopping?

South Carolina’s other two attorneys who most frequently represent factoring companies offer differing interpretations of the state’s law.

Tucker Player of Columbia said the statue is very specific about where cases should be filed. He admitted that companies have asked him to file petitions in counties where sellers didn’t live, but he has refused.

“I just wouldn’t budge because it’s not worth it,” he said. “I got to appear before these judges … in cases … that are far more important than the (structured settlement transfers), so I’m not going to sell my soul or reputation for a (factoring) company.”

Robin Alley, the attorney for JG Wentworth and its affiliates on their deals in South Carolina, files more transfer petitions than Steadman and Player combined.

Alley said the companies he represents are the most reputable in the industry, and they require him to file in the county where the seller lives “unless there’s some kind of extraordinary circumstances.”

“If you’re suggesting there’s forum shopping, there isn’t,” he said. “Not by me anyway, (because) my company wouldn’t allow it.”

But McClatchy found dozens of cases filed by Alley in counties where the seller didn’t live, primarily brought before a special referee named Bennett McCollough.

McCollough, who mostly serves as a special referee on the deals in Williamsburg County, where he’s based, but also several in Sumter and Clarendon counties, did not respond to requests for an interview. He approved 102 transfers without a denial between 2014 and 2021, the most of any S.C. judge or special referee in the newspaper’s analysis.

Factoring companies purchased more than $20.7 million in future payments for less than $4.6 million in deals approved by McCollough in 96 transactions where full data was publicly available. That represents an average return of about 22 cents on the dollar for sellers.

Responding to McClatchy’s findings, Alley suggested the deals involving residents that lived elsewhere were likely filed in Williamsburg County due to the pandemic shutting down other courts.

Many of the deals McClatchy identified were filed in 2020 during the height of the pandemic. But 11 others were filed during 2018 and 2019.

Angela St. Jean told McClatchy she lived in Berkeley County in 2018 when Alley and JG Wentworth filed her structured settlement transfer petition in Williamsburg County with Judge McCollough.

St. Jean, who received her settlement following a near-fatal 2002 car crash, had already sold about $218,000 of her future payments for $79,000 in Berkeley County. McCollough signed off on her final deal transferring $181,260 in future payments for $14,250.

She couldn’t recall exactly why she was told her case was moved to Williamsburg, but remembered it had something to do with being able to get it approved more quickly.

Alley said he doesn’t look into whether sellers live where they claim.

“The factoring company usually makes (sellers) give them a driver’s license, so I feel like that’s fettered out before it gets to me,” he said.

Empty promises and denials

Player, the Columbia attorney who frequently represents factoring companies, said he often feels there’s a disconnect between the seller, factoring company and the attorney filing on the company’s behalf that can leave room for corruption.

He doesn’t have any communication with sellers until shortly before their court hearings, he explained, so he’s relying on the companies to give him contracts with accurate information.

“If anybody inside the company has made promises outside of that contract, I don’t know unless that (seller) tells me,” Player said.

He learned to start asking sellers before entering the courtroom whether anyone promised them anything outside of the contract, he said, recalling an instance where a factoring company representative promised a seller help purchasing an investment property in Florida.

“I said, ‘We’re not doing this,’ and it ended right there because they can’t do that,” Player said.

Player also learned about false promises and deceitful disclosures when a Greenville County judge questioned a deal in 2016.

Player, relying on information provided to him by the factoring company, told the court this would be the seller’s first transfer, and she wanted to sell her future payments for a lump sum to purchase a house.

But the woman told Judge Charles Simmons she had done previous deals and that she and her fiance had recently moved into a new house. The factoring company had promised to help her turn the money into a property management business, she said, according to a hearing transcript.

Simmons, Greenville’s master-in-equity, was so incensed by the “borderline unethical and illegal practices” that he submitted a complaint to the S.C. Secretary of State office about the company, called U.S. Annuity Services LLC.

The office responded that it lacked the authority to investigate and penalize corporate entities and would forward the complaint to the S.C. Department of Consumer Affairs. (The agency recently told McClatchy it could not find any record of that complaint.)

Complaint response by David Weissman on Scribd

That case was one of nine denials issued by Simmons, one of the few judges found to require court reporters in hearings for the transactions. He approved 26 transfers between 2014 and 2021 with sellers receiving an average return of about 44 cents on the dollar for their future payments, according to McClatchy’s analysis.

That was the highest average for any S.C. judge or special referee that approved at least 25 cases, and the second most denials issued.

Eight of the deals Simmons denied involved sellers who later got similar deals approved by a different judge, McClatchy found. That was a common trend throughout South Carolina with companies finding another judge to approve future deals with sellers in 74 of the 111 denials issued — often filing the cases in a different county.

Susan Stauss, general counsel for the National Structured Settlements Trade Association, said state protection acts are designed to put the onus on judges to gather information and make an educated ruling.

“If (judges) are going to rubber stamp (these deals), sure, every factoring company is going to find a way to get in front of that judge,” she said.