Once again I've had the same wretched type of annuity settlement proposal that drives me crazy come across my desk from a competing broker. The kind of proposal that when I see it makes ask, " At what point are the shoddy sales practices of our profession going to get cleaned up".

I'm sure we have all seen a proposal like this, although I am hopeful you never present settlement proposals in this fashion. Let me try to list the "sins of omission" that plague this particular case:

1. The proposal is presented on the annuity brokers company letter head and was obviously typed in using word processing, all with the intent to demonstrate the suggested annuity program that this client should accept as settlement. Whats wrong with this you ask? Well, no where on the "proposal" is there any mention what so ever as to what life market is offering this annuity to the client! Only that this broker is creating an " Individually Designed Settlement " for the claimant.

2. The "proposal" and I use that term very loosely here, determines that the "cost " of the annuity is $65,962. Whats wrong with that you say? How about the fact that this broker created proposal has neither a starting date, or a deposit date, illustrated in the offer to the client? All it has is this wonderful narrative, " Payments to begin 1 month from Funding". Are you kidding me? Really? There is no way you can present a valid proposal absent a start date or a deposit date. None.

3. The "proposal" has the clients date of birth and what they purport to be the Normal Life Expectancy and Life time Yield of the program typed in. All of this in spite of the fact that this man has substantial health issues that will almost certainly result in his being underwritten medically and consequently receiving a rated age on this structured settlement. What that means, is of course, is his life expectancy is likely impaired so that the estimated life time yield is either meaningless or dramatically different. Also, upon what set of facts is this life expectancy number based? The 1980 CSO table, or just pulled out of thin air, which is it? You would never know from this proposal. 

4. The cost is based on this guys age, as well as a yet to be determined deposit date and a yet to be determined starting date. What else is missing from this "proposal" you might ask? How about A RATE CODE from the anonymous company? Obviously that is all too much to ask, given that this intrepid structured settlement professional decided to leave the life market nameless. 

5. A survey of all annuity markets currently writing structured settlement annuities was run by my office at Wahlstrom and Associates and in virtually no instance was my staff able to duplicate the pricing of this annuity, or even to match up the illustrated life time yield figure on his supposed life expectancy. We used current rates at all the life markets using their current quoting software, indicating to me that this entire illustration was a "representative number" and a rough estimate, although that fact was not conveyed to the potential annuitant. To put less of a fine point on it, this broker pretty much made this up all by themselves and just tossed some numbers out to a client to bait them into discussing an annuity knowing that there was no such annuity available to be purchased. 

I could continue on but you get the picture. Honestly, you could hardly find a more offensive example of potentially fraudulent sales and marketing practices of an insurance product if you set out to find it. What kills me is we all know exactly why this proposal is done in this fashion. So that the broker can "sell the benefit" and then select the market that allows him to place it at what ever cost he thinks his client might pay. It's fraud, pure and simple, and if any other professional did what this broker did, that professional would likely be in jail, let alone out of business.

If you are a structured settlement broker reading this could you please ask your self this question? Would you personally buy a mutual fund, to go into YOUR IRA, if you only were told the investment company AFTER you agreed to buy it, AND the only thing you had to rely on for your decision was a hand type proposal from a salesman? Of course you wouldn't, but that's exactly what this client is being asked to do, isn't it?

What makes this so appalling is that the structured settlement broker who presented this monstrosity of potential malpractice and administrative malfeasance is affiliated with one of the nations largest and oldest firms, and I know from my personal dealings with them, that they have been at this business for almost 17 years.

I have never before been so tempted to take a proposal and forward it to a state insurance commissioner for them to weigh in on the marketing practices regarding these sales illustrations and the promised benefits claimed here. If anyone, and I do mean anyone, ever tried to sell a life insurance or disability policy in a similar fashion they would rightfully be fined or prosecuted and lose their license.

How in the world can our "profession" continue to allow these sort of practices from the largest and most experienced of brokers? Just a tip to this broker, and they should know who they are if they are reading this, if I get another piece of paper like this sent to me by a client again I'm sending it to the State Insurance Commissioner to review and you can do your explaining to them. I'm tired of it and I'm not going to put up with it anymore.

In this weeks edition of Speaking of Settlements I am joined by noted national tax expert Robert Wood, who is also now the host of his own channel on The Legal Broadcast Network, entitled The Tax Law Channel. 

As many of you know a private letter ruling was obtained by the IFS group, spearheaded by John McColluch of EPS, in which the validity of using non-qualified assignments and annuity payments as a means of spreading out tax liability on taxable damage cases was affirmed.

In this weeks podcast on Speaking of Settlements you can listen to Mark Wahlstrom and Rob Wood discuss this important ruling on taxable damage settlements by clicking here.

You can also go over to the Speaking of Settlements site to listen to the broadcast, get a copy of it, share it with clients and join the Speaking of Settlements network by filling out a free profile.

What made this PLR so important was not that there were questions on taxable damage cases and non-qualified assignments, but that there had never been a PLR on the topic. The resultant language and ruling from the IRS not only validated the concept, but through it's explanation probably further strengthened the ability of attorney's to structure their legal fees. 

You can also get a full pdf copy of the private letter ruling on taxable damages by clicking here.

Hopefully this PLR, which was the result of the investment and foresite of IFS to get it done, will spur some of the other life markets besides Allstate and Prudential to jump with both feet into the non-qualified market. It is my professional opinion that it is a potentially huge market, particularly if tax rates jump in the next few years, as people will want to defer the tax hit that comes on any taxable damage case.

Today the Legal Broadcast Network rolled out their newest channel, that being The Summit Settlements Channel, the first of several unique or company specific channels and shows that allow settlement and financial professionals to "get in the game" of networking, broadcasting and internet marketing.

You can go check out the brand new channel for Summit by clicking here.

The option to join the site is only open to Summit brokers and staff but you can get an idea of the type of material that Stan Harlan and his brokers will be producing, some of the unique CE presentations that were created at their annual meeting, as well as a glimpse at some of the professional networking options that are available to Summit members.

Obviously, I had a big hand in this as I am both a member of the Summit Settlement general agency and also the chairman of The Legal Broadcast Network, but this is definitely not the last company specific channel we will be rolling out in 2008. What makes it unique in my mind are the following elements:

1. Summit has a full enabled blogging platform built into their channel. Virtually every broker who is part of Summit can create their own professional blog or commentary as part of their membership in this channel.

2. Summit has the ability to create, play and distribute video content on their own private branded network. All of the video created at Summit events, or by Summit members, can now be uploaded to their channel to share with other members or anyone searching for information on that topic.

3. Summit will be producing their own weekly audio podcasts, open to virtually any Summit broker or office, for distribution on their Channel as well as being distributed over the Legal Broadcast Network podcast feed.

4. Each Summit broker can create their own professional networking and media profile, with links to their web sites, publications, blogs, audio and video content, all at no cost.

5. The ability to create and participate in discussion groups and areas of interest to brokers.

In short, what Summit Settlements now has, and what other agencies will soon have are fully enabled audio/video and blogging networks that allow them to publish, broadcast and network material and ideas with brokers and clients. All of this at no cost to the individual brokers at Summit!

If your curious as to how The Legal Broadcast Network is able to leave other networks and broadcasters in the dust when it comes to performance and functionality, all inside the most powerful legal broadcasting network on the web, drop me an email and i'm more then happy to fill you in. In any event, welcome to the new world of marketing for settlement professionals.

Earlier this week The Legal Broadcast Network released a broadcast with the host of our new tax law channel, Attorney Robert Wood of the firm Wood & Porter in San Francisco, CA., and Attorney Shannon Liss Riordan an employment law attorney and expert on the topic from Boston, MA. The topic of that podcast was the recent law suit filed on behalf of a woman who had worked for some time as an editor and writer for the web site "Trip Advisor" one of the internet most heavily trafficked travel web sites, in fact I use to consult Trip Advisor myself prior to leaving for a trip to a city I hadn't visited in advance.

The nominal purpose of Trip Advisor was, and is, to provide user written reviews and reports on hotels, restaurants, lodging, etc, and to have it posted for review by other travelers.  As the service grew in popularity it was acquired by Expedia and it now is a true travel site that provides links to hotel web sites, search engines and other information beyond the scope of user generated content. Toward that end Trip Advisor hired a group of writers, editors, copy-writers and others to maintain, edit, write and generally ride herd over it's growing blog and web based publication and travel site. Like many web businesses on thin budgets, such as our own LBN, they would bring people in on a part time basis and as the business grew they evolved into what were for all intents and purposes full time employees who need to be categorized as such.

However, the cost savings of keeping people as independent contractors is obviously too great and too tempting for a lot of rapidly expanding firms and consequently the list of major companies who take this approach is a veritable who's who of the Fortune 500 and internet firms. 

I can tell you as someone who works with some of the nations leading attorneys and who has interviewed many of the top litigator and tax experts in the country, that this topic is going to be an area of massive growth and activity in the coming years. Just here on our network we have an in depth interview with Attorney Rex Burch on wage and hourly litigation, Rob Wood on his recent book and publication on the IRS push to look at companies not properly classifying workers and now Attorney Liss Riordan and her high profile cases on behalf of American Airline Skycaps and Trip Advisor independent contractors. This topic has flown under the radar for years but it is about to bloom into a harvest for trial lawyers and aggrieved employees who have been denied employment status as employers work to keep them in a ghetto of independent contractor status just to save a few dollars. 

The implications for the structured settlement industry, particularly in light of the recent private letter ruling on taxable damage cases and employment discrimination, are that this could be an area of growing and highly profitable business if our profession continues to adopt 468b trusts as standard practice in multi-litigant cases. Most employment cases involving these types of damages related to independent contractor status are multi-litigant work place situations which are ideally suited for 468b. At the moment only a few life markets write non-qualified annuity contracts on taxable cases but with the double whammy of a PLR and this growing area of litigation we now have an opportunity in front of our business that we need to prepare for. 

If you are an online employer, it's time to get with your lawyers, look at your employment and contractor contracts and read up on Rob Wood's latest publication to make sure you don't have the government or an attorney knocking on your door and asking to see them first. 

If you are a settlement professional or life market, it's time to get acquainted with non-qualified annuity practices and the use of 468b trusts on non-qualified litigation. 

In some rare good news out of the US Treasury department we finally obtained new, final regulations on the application of IRC code section 1.469B-6 trusts. While at first read a lot of structured settlement professionals will be getting all excited and thinking that this is the long awaited ruling from Treasury on 468B qualified settlement funds and single claimant cases, it is in fact related to the issue of escrow accounts, trusts and other funds used during deferred exchanges, such as a section 1031 like-kind exchange.

However, while this is not really relevant to the mass tort and multi-claimant aspect of the structured settlement industry, it is of intense interest to the people over at Allstate and for those of us who are actively in the structured sales business. As we all know this area has languished as a result of a very slow build up in knowledge and familiarity with these annuities, but with a very likely capital gains tax increase on the horizon with the 2009 U.S. Congress the viability of tax deferral of capital asset sales using a structured sale annuity will be of far greater interest to tax payers and tax experts. 

The area of 1031 like kind exchanges is a further subset and niche in that market, but one with immense potential for those settlement professionals willing to invest the time, talent, marketing and process to make it a new line of business. My day job at Wahlstrom & Associates has been focused on this area for over two years and these clarifications should be welcome news in marketing to qualified intermediaries and others who inhabit the 1031 exchange world. 

I will be hosting Attorney Robert Wood, principal of Wood & Porter of San Francisco and the lead commentator on The Tax Law Channel, our newest channel here on LBN. If you want to know more about this ruling, obtain a pdf copy of it or investigate how you can start to work in this market, give me a call or send me an email after our podcast later this week. 

Again, it's not the long awaited 468b single claimant ruling, but it's almost as good if you are in the structured sales market. 

NSSTA, The National Structured Settlement Trade Association, unveiled their video page featuring the Joe Jamail videos that were produced by The Legal Broadcast Network in partnership with NSSTA.

You can access the video page and story behind these landmark videos by clicking here.

Obviously, as I have blogged before, this is a big deal to those of us in the structured settlement industry. Anyone with any time in our business knows that the thought of a trial lawyer of the stature of Joe Jamail, arguably one of the greatest litigator in US history, taking the time to sit down and do lengthy interviews and to speak to those of us who sell structured settlements for a living, would have been impossible to imagine even 5 years ago.

The progress that has been made by the trade association to address educating the trial lawyers, judges, disability activists and injury victims about our product is exceptional, with these videos as the latest example of that out reach using new media. 

Be sure to go to the NSSTA page, read the profile and look at the videos and see what has been accomplished. However, of greater importance make sure you get these videos into the hands of your various state trial lawyer associations and legal clients so that they can benefit from the wisdom and endorsement of this exceptional trial lawyer. 

I'll be posting some tips on video distribution, means and methods for sharing these videos and i'm sure that same information will be made available on the NSSTA web site as well. Either way be sure to take advantage of this unique opportunity to educate trial lawyers and clients about the vital importance of structured settlements. 

In what is one more sad, sordid story involving the misconduct of trial lawyers in handling a large settlement, it was announced this week that the three defendant attorneys, Melbourne Mills, Shirley Cunningham, Jr. and William Gallion got some partially good news in that Mills was acquitted in federal court of the counts against him and that Gallion and Cunningham are heading back to trial after the jury deadlocked on their cases. The genesis of this case was the 2001 Fen phen settlement and a contested $65 million that it is alleged the attorneys defrauded their clients out of. 

Mills is renown for his attorney's rather unique defense of his being " a bad alcoholic" and thus unable to have criminal intent at the time of the alleged misdeeds in handling the $200 million Fen Phen settlement for the a group of over 425 plaintiffs in the state of Kentucky. Apparently in some cases and in some states it pays to get liquored up before you get lawyered up as the jury saw fit to release him. 

As anyone who has read some of my other commentary on this I have no axe to grind in this matter other then it is obvious the business practices and ethical standards of these attorneys were deplorable. However, from the words of the jury foreman, who gave extensive interviews after the hung jury, it is pretty clear that the government had put on a weak case, might have over reached in some of it's charges and in the most damning element, the jury felt that there were other people who should have been indicted instead of these three men.  In the words of the jury foreman Donald Rainone, " There's a lot of people that had their hand in this and there is a lot of people that should have been on trial that weren't." He declined to mentioned exactly who else should have been on trial besides these three men, saying wisely that " he didn't want to get sued." 

Hmmmm. I wonder if he could be talking about some of the other key players in this case, powerfully connected players who were not indicted but who were instrumental in the negotiation of this case and it's approval. The empty chair in the courtroom obviously was a powerful force in getting at least one of these guys off the hook.

Anyways, it is obvious that the government was out lawyered and as the jury foreman said, was un-prepared and didn't have a strong case. The jury was deadlocked at acquittal for the other two at 10-2 so it's pretty clear the sentiment was to let these guys walk, no matter how egregious the behavior.

 Look, the bottom line on this is that these guys are already facing a $42 million verdict from their former clients in civil court, so it's not like they are going to walk away from this financially unscathed, and all three have been sitting in jail on huge bond amounts, amounts that now will likely be subject to reduction as the retrial proceeds. Their careers are ruined, reputations tarnished and if the civil justice system works, ( a big if I might add) they will have been force to some degree to disgorge their profits. 

What makes this case so sickening and sad is that it was totally and completely avoidable if these guys had used a simple device such as a 468b qualified settlement fund, which if it had been used, would have provided complete transparency as to how this was structured and they would have been forced by the terms of the trust to make a full and complete report of the allocations, accounting and payments to the trust beneficiaries. Clearly in this case these guys didn't want the money trail to see the light of day, but if the trial court or the defendants had insisted on the use of this trust, the temptation to work back door deals, pour money into "charitable ventures" and set up life time payments to the inside circle of lawyers and advisors wouldn't have been there. 

The trial bar, both defense and plaintiff, needs to get their collective heads out of their you know whats and begin to look at the process by which cases are negotiated and settled, and start to  rebuild the process so as to have the current best practices and transparency of the money trail. Until they do we will continue to see these appalling cases and spectacles that only further erode public confidence in the civil litigation system. 

In this weeks edition of Speaking of Settlements, the featured broadcast of The Settlement Channel, I am joined by LBN host Scott Drake and guest commentator John Darer of the Structured Settlements 4 Real blog to discuss his recent post on the evaporation of almost $400 billion of market capitalization in life and casualty insurance stocks.

You can access the podcast on the AM Best report on insurance industry market capitalization by clicking here. 

Some of the issues discussed are what exactly this might mean for the legal and settlement industry, will this impact claims settlement practices and does this contraction in market capitalization reduce the amount of new business a casualty company can write. Also, what is the inevitable slow down in paying claims that this capitalization reduction is going to bring on going to do to the settlement and legal professions in 2008 and 2009.

Tune in to Speaking of Settlements to listen in and then go over to our media network page and join this discussion. 

Also, this is a good time to remind people that you can join the show and be a guest on Speaking of Settlements just by contacting me or the LBN Studio's in Phoenix. It's as simple as a phone call, it's an open forum, ( with in reason ) and available to anyone who is a member of the Speaking of Settlement network, which I should add is free to join. Come be part of the discussion on Speaking of Settlements.

As part of the recent Summit Settlements annual meeting I was given the opportunity to do two different continuing education presentations, one on internet marketing and one on developments in mass torts and the use of 468b trusts. I decided to release the internet marketing piece first as it fits in with some of the new developments at LBN, particularly the development of our social/professional media platforms which any settlement professional, life company personnel or trial lawyer is encouraged to join. As you can tell from this video quality, it isn't out greatest technical work, something that provides me no end of aggravation every time I view it, but given the setting and circumstances under which our crew was working it was pretty good quality. Every time we film our staff and studio learn something new, in this case that low ceiling rooms and compressed camera angles make lighting properly a real challenge, but our audio as usual is very good and I think you'll enjoy this tutorial on internet marketing. The points I cover is that any financial, settlement or legal professional who does not have a coherent online media and networking plan is going to be absolutely run over by more aggressive and web savvey competitors. I now work heavily in the internet marketing and media business and I am literally stunned by two things: 1. The speed at which change is occuring and even accelerating in the development of second and third generation internet tools, all of which allow any professional to create a professional media precense on the internet. Just as email seemed foreign once and web pages hopelessly complex and unneccesary, the absolute neccessity of every professional to create a media and professional profile and get into the search engines so their clients and prospects can find them should be a top priority on every firms list. 2. The total lack of knowledge among most lawyers, financial and settlement professionals about how this all works, what it should cost and what the simple, every day things are that every person can do to raise their visibility professionally. I can't stress enough the vital importance of every settlement professional and lawyer to at the very least inform themselves on what is going on, and hopefully this video will assist you in that task. The next step will be doing something about it and of course I am more then happy to point you in the right direction if you just ASK me how we do it and how you can get in the game. Go check out Speaking of Settlements to see what a professional media networking site looks and opperates like. It allows you to join for free, create a professional profile, start your own blog, post media and let people know what your professional practice is all about. All of this for FREE! There are no excuses for anyone to not at least put a toe in the water and learn how to grow their practice and learn some basic tools. I'll continue to post further audio, video and print material bringing you up to speed and making you part of the future. Come be part of Speaking of Settlements and get in the game!

In what is shaping up as a major piece of financial and political news, AM Best issued their mid year index of the publicly traded insurance markets, published in the Best Week, June 30th issue, and it shows a staggering $396 billion in market capitalization wiped out since January 1 of 2008.

This issue was first raised by John Darer, the blogger behind the Structured Settlements 4 Real blog. You can read his entire post here. I also plan on having John on Speaking of Settlements this Thursday to discuss the implications of this unprecedented evaporation of market capitalization, it's impact on the insurance industry, but primarily its impact on the world of personal injury cases, claims and settlements. 

The headline of this post, " Making money the old fashioned way in the insurance business by not paying claims" is one of my favorites.  It was first used by Andrew Tobias in his classic book, " The invisible bankers" and was a critique of John D. MacArthur, the notoriously cheap and ethically challenged insurance tycoon who started and built a massive insurance empire during the early and middle parts of the 20th century. It referred to the fact that MacArthur, when his firms were in a cash flow crunch, would send down the order to the claims department that no further claims were to be paid, that all cases were to be contested and to turn off the spigot. Never mind the cases or claims were legitimate, John D. knew that simply sitting on claims was the single most effective tool for conserving cash until sales or reserves rebounded sufficiently to build up the cash coffers again. 

Now, I'm not suggesting that this market capitalization reduction is going to lead to financial catastrophe. It is after all the market capitalization of the firms stock, not it's reserves or cash positions. However, those of us with some gray hair remember similar market cycles in the past in which the word went out to claims departments to run out the clock on cases and negotiations, all with an eye toward sitting on cash until market conditions improved. 

My conversations with trial lawyers and settlement professionals from around the country indicate we are about to enter a very challenging period of time for the legal and settlement professions. The combination of tort reform laws passed in the last 3-5 years has impacted the number of cases filed, particularly medical malpractice cases, the judiciary is understaffed and under funded in many states, causing log jams of cases and procedural delay. Most of the casualty markets have a concerted policy of  delaying cases, making low ball offers and running out the clock to squeeze under funded trial lawyers and now, in my opinion, we are about to see a large scale squeeze at the casualty claims level to hold on to cash that is going to only make this situation worse.

Bottom line, is if you are a trial lawyer or a settlement professional, you better build up your cash reserves, settle the cases you can for the best you can get and prepare for a period of belt tightening and expensive trials.