Finalist: Jeffrey Meitrodt and Nicole Norfleet of the Star Tribune, Minneapolis, Minn.

They’ve suffered tragic, disabling injuries, and received large settlements to be paid over their lifetimes. Then little-regulated firms came calling.

By Jeffrey Meitrodt, Nicole Norfleet and Adam Belz

Photos by Jeff Wheeler

The money was supposed to last the rest of Stanley Turner’s life.

He was 5 when a collision hurled him and his sister from the car, leaving both with permanent brain damage.

Doctors said Stanley would never live normally again.

The insurance company for the driver at fault in the crash settled the Turner family lawsuit by agreeing to a financial package worth more than $4 million to the children. The deal included guaranteed payments that would continue until Stanley turned 60.

He is only 40 now, but the checks have stopped coming. Instead, they’re being cashed by investors who persuaded judges in Minnesota and Florida to let them buy decades of Turner’s future payments.

For his latest sale in 2019 of more than half a million dollars in future payments, Turner received $12,001.

His mother, Barbara Turner, was still despondent a few months after the deal closed. She said her children would have had enough money to live even without working, but now they have almost nothing.

“The wolves have sucked it all out,” she said.

The Turners are among the 750,000 Americans who receive settlement payments, often guaranteed for life, after suffering catastrophic and permanent injuries. The money provides on­going support to people whose lives have been shattered to the point that they often cannot earn an adequate income or provide for themselves or their families.

But the billions of dollars these victims receive each year also makes them targets for companies that operate in an obscure, largely unregulated niche of the financial services industry.

Each year, settlement purchasing companies persuade accident victims across the country to give up an estimated $1 billion in future payments in return for a much smaller lump sum of cash.

On average, the settlement purchasing companies keep about 60% of the money, according to a Star Tribune analysis of more than 2,400 deals from seven states between 2000 and 2020. In Minnesota alone, these companies have paid $28 million since 2010 for $70 million in future payments, court records show. At the time those deals were struck, the companies valued the payments at $53 million. Typically, payments are worth less the longer someone has to wait for them.

Gina Tedesco, who spent three years soliciting deals at one of the industry leaders, said she believes settlement purchasers prey on people in desperate situations, even though some clients are “not in the right state of mind.”

“It just didn’t sit right,” said Tedesco, who earned $80,000 a year working for other companies before starting her own consulting firm that helped negotiate deals for sellers in 2017. “If you want to last, and survive, you have to not have a conscience.”

The pandemic damaged many sectors of the economy, but companies that buy future payments saw their business surge in Minnesota last year. Altogether, $8.1 million in settlement payments changed hands, close to a state record, documents show. Companies paid a total of $3.3 million for the right to those payments.

Companies signed deals with dozens of people who had never before sold their payments. Nearly a third of the sellers cited lost employment and other financial pressures from COVID-19 as a primary motivation, records show.

Court records show that many settlement recipients in Minnesota struggle with mental health problems or addiction, often as a result of a car crash. Among those who agreed to sell some or all of their settlement payments in Minnesota are 63 people who were ordered to obtain mental health services by a state judge. That list includes 27 people who were involuntarily committed to a mental institution at least once after engaging in bizarre or self-destructive behavior. Dozens of other customers were left cognitively impaired by lead paint poisoning or head injuries.

In some cases, records show, companies were allowed to buy payments just months after a person was released from mental health care facilities. Others were ordered to obtain mental health services shortly after the sale closed.

No state routinely requires the appointment of a guardian to protect the interests of a seller or their children, though judges in West Virginia must consult a guardian if the seller is an “infant, an incompetent person or a ward of the court.”

A sale may mean giving up years, even decades, of financial security — sometimes for pennies on the dollar. Records show that nearly 13% of people who sold their payments in Minnesota later filed for bankruptcy or were evicted from their homes.

Few federal or state laws govern these sales or limit the profits that investors can make. Only seven states, including Minnesota, require sellers to meet with an adviser, but that person is sometimes recommended by the company buying the payments, according to court records and interviews with sellers.

Advisers are not required to rule on the merits of the deal. Some are paid from the proceeds of the sale, which is illegal and has prompted a few judges to reject deals.

No state requires that a seller be represented by an attorney during court proceedings, and most were not in the cases reviewed by the Star Tribune.

New disclosure requirements adopted in 2014 by the Minnesota Legislature appear to be having little impact. Companies that buy the payments are paying, on average, about the same as they were before the rules went into effect, according to documents obtained by the Star Tribune.

County judges must sign off on every deal, but few say no. In the rare instances where Minnesota judges denied a deal, the Star Tribune found dozens of cases where payment buyers filed requests with a new judge, who approved the sale.

In interviews conducted over the past two years, a dozen judges complained about an approval process that seems stacked in favor of the settlement purchasing companies, with key information — such as civil commitment records — usually left out of files.

Some sellers were coached by the companies on how to handle challenging questions from a judge, interviews show. Judges who have denied deals have been removed from subsequent cases at the companies’ request, a maneuver that is legal in Minnesota and requires no supporting evidence.

“I am horrified,” said Kathryn Messerich, chief judge of Dakota County. “This is one of those things that needs a legislative fix more than anything.”

Richard Cordray, who launched an investigation of the settlement purchasing industry when he was head of the federal Consumer Financial Protection Bureau, said more oversight of payment purchasing firms is needed.

“A lot of tragedies occur when people become aware that other people have access to a substantial pot of money,” Cordray said. “There is always opportunity for predatory conduct, and they need to be policed more closely.”

Officials with the National Association of Settlement Purchasers, a trade group that represents some of the biggest buyers in the business, acknowledged that “bad actors” have engaged in questionable conduct. A spokesman said NASP is now trying to persuade lawmakers in all 50 states to adopt new rules that would make it harder to defraud settlement recipients. NASP also revised its code of ethics and standards of conduct after the Star Tribune presented its findings to the group.

“NASP and its members have taken extraordinary steps to protect consumers by implementing strict standards of conduct and leading efforts to enact robust laws in all 50 states and the District of Columbia,” NASP Executive Director Brian Dear said in a written response to questions.

Steve Matiatos of Lino Lakes was 7 when a 1,200-pound concrete sewer culvert rolled over him and partly crushed his skull. He lost most of his teeth and went blind in his right eye. His face was permanently scarred. He never finished high school.

Now 52, Matiatos could be receiving more than $2,000 a month from an out-of-court settlement that guaranteed him an income for life. But in 2000 he started selling his future payments to J.G. Wentworth, which buys more “structured settlements” than anyone else in the United States.

Wentworth went to court six times to buy payments from Matiatos. Twice, it had the judges assigned to his cases removed, court records show.

In one deal, Matiatos agreed to sell $90,000 of monthly payments he was scheduled to collect if he lived to age 59. Wentworth said those payments were worth about $75,000 under federal standards for valuing annuities, records from the 2015 case show. Matiatos received $20,000.

With the loss of sight in his remaining eye and unable to work, Matiatos will not receive another check until he is almost 80 years old. Altogether, Matiatos sold $1.5 million in payments to J.G. Wentworth for $226,500, about 25% of what the company said the payments were actually worth.

“I kick myself in the ass every day for doing this,” he said. “I’d be living like a king. Instead, I am probably going to be on the streets soon.”

Some sellers said they were incapable of understanding what they were doing at the time they agreed to sell their payments.

Sasha Stromberg spent two weeks in a coma after a car crash in 1984, when she was 6. She dropped out of high school in 10th grade and suffered a nervous breakdown at 27. Court records show she gave up three children for adoption “because of her inability to handle responsibilities.”

Since 2003, judges have allowed Peachtree Settlement Funding to buy $370,202 in payments from Stromberg for $77,202. The payments were valued at around $300,000. Stromberg said her ex-husband convinced her the deals would help them dig out of debt.

“I had no idea what I was doing,” Stromberg said. “It’s like they seen me coming.”

Wentworth, which merged with its biggest rival, Peachtree, in 2011, and other major settlement purchasing companies have declined repeated requests by the Star Tribune since 2019 to provide on-the-record comments about their business practices or specific cases. Wentworth’s chief executive and its top attorney traveled to the Twin Cities in late 2019 to meet with Star Tribune reporters and editors but ultimately declined an on-the-record interview. In a statement, the company said, “We are proud of our 25 year plus history of helping structured settlement holders access funds when they need it in transactions approved by judges.”

The former executive director of NASP said his members provide a valuable service to people whose circumstances or financial goals change. On its website, the group urges people to carefully read the disclosure statement that comes with each deal and reveals how much someone’s payments are currently worth and the amount of money sellers are giving up. Companies are required to provide those disclosures in Minnesota and other states.

“The vast majority of these people are working men and women who have had something go awry in their life, or they have an objective they want to achieve — whether it is buying a house, getting a car or sending a kid to college,” Earl Nesbitt, the trade group’s former leader, said in a 2019 interview. “This is simply an asset they are seeking to liquidate.”

The executive director of a group of large insurance companies and consultants who set up settlement packages said the Star Tribune’s findings about payment purchasers make his “skin crawl.”

“The way they prey on people is unconscionable,” said Eric Vaughn, executive director of the National Structured Settlements Trade Association. “I’m just angry.”

For the companies buying settlement payments, the deals usually carry little financial risk.

Structured settlement payouts are tax-free and guaranteed by some of the country’s biggest life insurance firms. Once sold, the payments go directly to the firm that bought them. Often, payments continue as scheduled even if the person who sold them dies before they are set to end.

In 2019, J.G. Wentworth sold $141 million worth of bonds backed by structured settlement payments it had purchased from individuals. Moody’s assigned the bonds its safest rating — the same given to bonds sold by the state of Minnesota. That AAA rating, Moody’s says, means such obligations “are judged to be of the highest quality, subject to the lowest level of credit risk.”

A small share of structured settlement payments are set to end when the victim dies. Records show that the companies buying this type of payment often require sellers to spend thousands of dollars on life insurance policies. If they die, the company is the beneficiary.

 The Star Tribune examined more than 1,700 settlement sales filed in Minnesota since 2000 and found that judges approved 90% of the deals that went to a hearing. Reporters also reviewed more than 700 cases in other states.

In addition to reviewing case files, the Star Tribune attended 12 hearings and reviewed the transcripts of 64 more.

Most hearings in Minnesota end in less than 10 minutes, with judges rarely asking any probing questions.

The approval process is often casual. Though the sellers must typically appear in court, attorneys for the companies buying the payments are sometimes allowed to appear via speakerphone, records show.

Those rules were relaxed even more during the pandemic, when judges held video hearings via Zoom. Sellers usually testified from home, and judges sometimes had to remind them to take off baseball caps or move to quieter rooms when children’s noise interrupted the proceedings.

Some judges approve the deals reluctantly, even when they believe the seller may be making a mistake.

When Stanley Turner appeared in a Dakota County courtroom in 2019, it was the sixth time a firm had asked the courts to allow it to buy some of his payments. None of the previous requests were denied.

Turner has a lengthy rap sheet, including convictions for trespassing and domestic assault. A medical evaluation at age 14 concluded that Turner “underestimates the magnitude of his psychological and behavioral difficulties.” In 2019, Turner was sent to a St. Paul treatment center for drug abuse and mental problems after he was charged with assault and other crimes.

In a letter to one of the judges overseeing the cases, Turner pleaded for leniency, arguing that he has suffered from mental health problems since the car accident. He described himself as “crazy,” “disabled” and “institutionalized.”

“I am 40 years old and I have nothing to show for it,” said Turner, who was released from prison in May. “I’ve been homeless basically since I was 17.”

Turner wept as he reviewed his latest sale. He said he never learned how to manage money and doesn’t have a bank account. He said his mental problems often leave him “overwhelmed,” leading to bad decisions.

The most recent deal means Turner will not receive monthly settlement checks of $2,842 until he is 75. Court records show Turner’s future payments were worth $191,608 at the time of the transaction. The $12,001 payment he received in March 2019 from Catalina Structured Funding of California represented just 6.3% of the value.

“This stuff is heartbreaking; it’s so painful,” Turner said as he looked over the documents. “If I could only take some of this back.”

Dakota County Judge Tim Wermager warned Turner about the size of the discount he was taking at his hearing in 2019.

“I just don’t want you to second guess yourself because if it’s done today, it’s done today,” Wermager said, according to the transcript. “You are taking, in my mind, a small amount for what you’re giving up in the future.”

Wermager declined an interview request.

Turner, whose mental problems recently qualified him for state disability assistance, is now hoping to land a spot in an adult foster home. He said he bitterly regrets selling his monthly payments, claiming he was “manipulated” into the deal.

“I am not in a state mentally to make any kind of decisions,” he said. “I am not responsible at all. I try to stay out of trouble, but I am always getting locked away for doing something stupid.”

This was Catalina’s first deal with Turner. CEO Chris Milton said he has walked away from other deals with people with mental problems, and he blamed judges for any deals like Turner’s that slip through the cracks.

“I am not going to take advantage of someone who is not mentally competent,” Milton said.

Milton said Turner received so little money because the monthly payments he sold do not start until 2040, when Turner turns 60. Milton said his company made about $5,000 on the sale. Catalina was unable to obtain life insurance on Turner because of his medical conditions. His investors will earn hundreds of thousands of dollars if Turner lives long enough for 15 years of checks to roll in.

“It looks like I am making millions of dollars and ripping these people off — and that’s not the case,” Milton said.

Gary Davis’ life changed forever in 2012 when a locomotive hit him while he was working in the rail yards in St. Cloud. A stroke a few days later destroyed at least 25% of his brain.

Davis now suffers from “compromised memory and does not have an ability to care for himself on a daily basis,” according to court records. His driver’s license was taken away. He walks with a cane and a nurse visits him regularly. Records show Davis also needs help paying his bills and tracking his personal finances.

Davis settled his lawsuit against the railroad for $2.5 million in 2014. He says his attorney at the time suggested he ask the court to appoint a conservator to help him manage the money.

Davis regrets that he never did.

A few weeks after receiving his settlement, Davis saw a commercial for J.G. Wentworth and called the company’s toll-free number. The company offered $100,000 in cash for $245,000 in monthly payments.

Davis, who said he wanted to pay down his mortgage and take his extended family on vacation, accepted.

Over the next three years, Minnesota judges allowed two companies to buy all of Davis’ remaining guaranteed payments. He sold more payments than anyone else in Minnesota, according to records obtained by the Star Tribune.

In return, Davis has received a total of $743,578, or roughly 35 cents on the dollar. The companies valued the payments at $1.7 million.

Davis used some of the cash to remodel his house and pay his bills, but he said he gave most of it away to friends and family members.

“I still don’t understand large sums of money,” Davis said. “To me, it is like the price of a candy bar or something.”

As he discussed his situation, Davis spoke haltingly, sometimes forgetting a question in the middle of answering it. In 2019, he learned that he forgot to pay about $8,000 in state taxes and owed $54,000, including interest and penalties. He agreed to repay the taxes to avoid losing his home.

“It makes me sick to my stomach,” Davis said. “I feel like I was taken advantage of.”

Until the 1960s, accident victims like Davis usually received one big check when their cases settled.

But a surge in personal injury litigation led to the adoption of what are known as structured settlements. Often these are set up as an annuity, with payments stretched out over time, in many cases for life. Sometimes, payments are scheduled to coincide with expected needs, like paying for ongoing medical treatment or covering living expenses for accident victims who cannot work.

In addition to being tax-free, scheduled payments proved popular for another reason: They reduced the likelihood that the money could be squandered quickly, which was a big problem in the past with cash awards.

“People blow through their cash settlements extremely quickly, but our money cannot be outlived,” said Vaughn, the head of the association of large insurance companies that fund structured settlements.

Around 1990, a few entrepreneurs figured out that there were significant numbers of people with long-running settlement packages who might be willing, even eager, to sell them for quick cash.

As the settlement purchasing industry grew, so did the number of horror stories.

Reacting to abuses, Congress passed a law in 2002 requiring all sales be approved by a local judge or face a big tax. But the rules that Minnesota and most other states have set for judges to follow are vague. No standards or formulas guide the process.

In most places, a judge can allow someone to sell their payments for virtually nothing, even if it is that person’s only reliable source of income, as long as they find the deal is in that person’s “best interest.”

A Hennepin County judge allowed 321 Henderson Receivables Origination to buy $80,100 in future payments for $14,000, even though they were valued by the company at $41,543. The seller, a 21-year-old man from Alexandria, Minn., could not finish high school because of the lingering effects of lead poisoning. He said he was evicted twice after selling his payments. In Cass County, a judge allowed Peachtree Settlement to buy $430,000 in guaranteed payments for about $85,000. The seller, a 29-year-old Bemidji man, had lost his leg at age 9. At the time of the deal, Peachtree valued the payments at $339,000.

For some, selling scheduled payments provides a needed jolt of cash to get ahead.

Texas resident Tyler Wade, who received a settlement over a day care injury he suffered at the age of 3, has sold $555,111 in payments to DRB Capital of Florida for $209,143. He said he used most of the money to buy a condo and pay down student debt.

“Would I do it again? Yes, if I ever needed that kind of money and I didn’t want to take out a loan,” said Wade, whose payments were valued at $417,792 by DRB at the time of the deals. “I feel like it was fair.”

Craig Ulman, a Washington, D.C., lawyer who helped draft the laws that govern settlement purchases in many states, said selling payments is rarely in the customer’s best interest.

“Many of their customers are vulnerable people,” Ulman said. “They are vulnerable by virtue of having sustained a disabling injury that in the worst case may have affected their judgment, their ability to appreciate the value of their settlement payments. … They need the protection that a structured settlement can afford.”

In 2016, both the Maryland attorney general and the federal Consumer Financial Protection Bureau accused a Maryland firm of reaping $17 million in profits from the sale of structured payments by victims of lead-paint poisoning and other incidents.

The court filings include the training manual Access Funding provided to its telephone salespeople. It describes the typical structured settlement recipient as someone who has “not adapted many of the necessary basic life skills that normal people must gain to survive in the world.”

The manual advises: “It is important to remember that [they] do not generally have the peace in their lives that comes with financial stability. Take this fact as a positive and take full advantage. You are their savior and the answer to all their problems.”

The cases are still pending.

No state requires that people selling their payments prove they are mentally competent.

In Minnesota, records show that one in eight transactions approved by local judges involved a seller with documented mental health problems. Many of those individuals received settlements after suffering traumatic brain injuries that permanently disrupted their lives.

Melanie Reynolds’ daughter broke her back and suffered a severe brain injury in a car accident when she was 4. She dropped out of high school in 10th grade and has “nonexistent” math skills.

“She cannot work,” Reynolds said in a 2019 interview. “Her disability income is gone as soon as she gets it. She will put it in some sort of video game or whatever before she deals with the actual bills.”

Her daughter, who could not be reached for comment, was involuntarily committed for mental illness seven times between 2006 and 2012. The following year, two Stearns County judges allowed Seneca One to buy $205,000 in future payments from her for $64,377. The company valued the payments at $182,502, court records show.

At one of the hearings, Reynolds’ daughter, then 26, told the judge she needed the money because she was unemployed and pregnant. In 2017 she was evicted from her Sartell apartment for nonpayment of rent, court records show.

“I don’t think she understands anything about what she was actually doing — nor does she understand the repercussions,” Reynolds said.

Nesbitt, the former head of the association that represents firms that buy structured settlements, said people should not be prevented from entering into such contracts “just because they have been involuntarily committed in the past or sought assistance for mental illness.”

“Almost every single one of them get back on their meds and lead productive lives,” Nesbitt said.

Tim Knaak was 17 when he received a six-figure settlement after the death of his father. Because he was born with a severe learning disability, Knaak had a court-appointed conservator to protect his assets until he turned 30 in 2008.

Seven years later he filed for bankruptcy in 2015 after selling $542,140 in payments for $132,922. At the time, the companies valued the payments at $465,523.

“They really took advantage of me,” said Knaak.

His first request to sell payments was denied by Wright County Judge Stephen Halsey, who noted that Knaak suffers from a mental handicap that “may prevent him from future employment other than manual labor.” He said Knaak showed no understanding of the financial implications of the deal.

But in subsequent years, two companies persuaded him to sell more of his payments. Halsey approved one of the deals, even though he noted in his order that “nothing has changed” for Knaak since his prior denial. Halsey declined to comment.

Knaak, who was supposed to get $1,183 a month for life, will not see another payment until he turns 65 in 2043. He said he used most of the money he got from the transactions to pay his bills. When he filed for bankruptcy, he had just $195 left in the bank.

“I didn’t understand it too well,” said Knaak, who works as a janitor. “I didn’t realize I lost all that money.”

Minnesota lawmakers tried several years ago to make it tougher for settlement purchasing companies to exploit people like Tasheeka Griffith, a victim of lead-paint poisoning as a child.

Griffith first tried to sell some of her payments after she turned 18. Hennepin County Judge Mel Dickstein, now retired, denied the sale because he believed the Minneapolis woman, a single mother, was still in high school and had trouble managing her finances.

Subsequent judges allowed Griffith to sell more than $350,000 in payments.

Three years later, she was back in Dickstein’s court trying to sell another $299,000 in payments for $19,000.

Dickstein was dismayed to learn that the money from the previous sales was spent. He was also troubled by the fact that she had not informed the judge of her previously approved deals.

“This case and the related cases are unfortunately poster children for why the transfer of structured settlement process may need repair,” Dickstein said at the 2011 hearing.

Spurred by Dickstein’s findings, the Minnesota Legislature passed new rules in 2014 requiring settlement purchasing companies to disclose prior attempts to buy an individual’s payments.

But the law included a big loophole: Companies are not required to disclose any prior deals involving their competitors. According to a Star Tribune review of 69 filings since the new rules went into effect, about half of the applications failed to include some or all of the prior requests.

Griffith, now 31, filed a total of 10 applications since 2008 to sell parts of her settlement. Four different judges allowed her to sell $732,828 in payments to three different companies for $137,214. The present value of those payments was not included in all of those transactions.

The deals have done little to improve her life. In 2011, Griffith told her attorney she was homeless, and in 2019 her infant daughter was placed into foster care and she was ordered to obtain individual psychotherapy after reports of child neglect.

Griffith did not respond to interview requests.

In 2019, Griffith filed a new request to sell another $761,277 in payments for $35,777 — about 10% of the present value disclosed in court records. It is one of the most one-sided deals ever filed in Minnesota.

The court filing did not disclose the three previous sales that judges had denied, or the deals Griffith had walked away from. Bruno Rodriguez, managing partner of Les Pitts LLC of Delaware, said he was unaware of the court denials or Griffith’s mental health problems before striking his deal with her.

“We don’t do a background check — we do a credit check,” Rodriguez said.

At her hearing in 2019, Griffith told Hennepin County Judge Daniel Moreno she wanted to do the deal because her living situation “is not OK for my children right now.”

When the judge pressed her on how much money she was giving up, Griffith defended the deal she had struck with Les Pitts. She said it was one of the few companies that did not try to “steal from me.”

“In the beginning, I was a vulnerable adult,” Griffith said at the hearing. “I wasn’t very understanding and aware of what I was doing, being honest. And they took advantage.”

Les Pitts eventually agreed to increase Griffith’s payment to $63,777 after arranging a $480,000 life insurance policy for her. Rodriguez said his investors will receive the money if Griffith dies before her payments end.

Moreno approved the sale. He declined to comment.

Rodriguez said the insurance policy allowed his company to pay Griffith three times as much as his competitors were offering.

“This industry is a difficult industry and there are a lot of players that do take advantage of unfortunate individuals,” Rodriguez said in a 2019 interview. “But we gave her more money than she’s ever gotten in any of her deals. She really got taken advantage of before.”

About the series

Unsettled is a Star Tribune special report examining how companies obtain court approval to purchase payments intended to help accident victims recover from their injuries. The series was largely reported in 2019 but publication was delayed when the pandemic struck in early 2020. Additional reporting was conducted in 2020 and 2021.

SERIES CREDITS

Reporting: Jeffrey Meitrodt, Nicole Norfleet and Adam Belz

Illustration: Brock Kaplan

Photos and videos: Jeff Wheeler, Mark Vancleave and Cheryl Diaz Meyer

Development: Thomas Oide

Design: Dave Braunger, Anna Boone, Josh Penrod

Graphics: C.J. Sinner

Editing: Eric Wieffering

Copy editing: Lisa Legge, Ginny Greene and Catherine Preus

Digital engagement: Anna Ta, Ashley Miller and Tom Horgen

ABOUT THE DATA

Applications to buy settlement payments are public record, and the Star Tribune reviewed more than 1,700 individual case filings in Minnesota courts over the last 20 years. We compiled a database with information on each case, including the company that bought the payments; the financial terms if available; the district court and presiding judge; whether the case was approved, denied, dismissed or pending, and notable details about the person filing to sell their settlement.

To measure individual outcomes, we filtered the data to about 1,200 sales that judges approved. We summarized those deals by person, identifying about 800 individuals who made at least one sale, including the total amount they sold and received. We removed people for whom we didn’t have financial details from all of their sales. This left nearly 700 people for whom we calculated the total percent of money they received against what they would have received had they not sold any payments.

The final, often reluctant arbiters in settlement buyout cases are given little information about sellers and few rules on companies seeking to buy.

By Jeffrey Meitrodt

Photos by Jeff Wheeler

Five months after Judge Joseph Carter decided that Laura Dalluhn’s mental problems were so severe she had to be confined to a psychiatric hospital, she was back in his courtroom.

This time, however, Dalluhn was the one requesting the hearing. She wanted the Dakota County judge’s approval to sell $60,135 in settlement payments she was due to collect in the coming years.

The Florida company buying the payments estimated they were worth $51,771. Dalluhn, who suffered a traumatic brain injury and spinal fracture after being struck by a car in 2014, had agreed to sell them for $24,129.

It wasn’t the first time Dalluhn had tried to sell her payments. A different Dakota County judge had rejected a virtually identical deal just two months earlier, noting in her order that Dalluhn “testified that she suffers from a mental health condition, has been civilly committed four times and is under civil commitment now.”

At her January 2020 hearing, however, Dalluhn’s mental health problems were dispensed with quickly, according to a transcript of the proceedings. Judge Carter asked if Dalluhn was still taking her court-ordered medications and seeing her therapist. Dalluhn said she was.

A day later, Carter approved the sale. The following month, he extended her civil commitment for another six months, finding her mental problems were still serious enough to require close supervision.

Carter declined to discuss the case, but in his order he concluded Dalluhn had the “mental capacity” to enter into the agreement. Dalluhn’s mother disagrees.

“She is very vulnerable,” Mary Jo Dalluhn said. “And they know that. When you are talking to someone who is living in a psychiatric ward, you know that person is mentally not able to be making those kind of decisions.”

Across the country, local judges have the final say on whether companies can buy settlement funds paid to individuals, many who have experienced devastating, lifelong injuries. They can reject deals if they believe the terms are unfair, or if they believe the sellers lack the ability to understand what they are giving up.

But it is a power that judges are often reluctant to wield.

In Minnesota and most other states, laws on the sale of structured settlement payments provide judges with no guidelines on what may or may not be in someone’s best interest, no limit on the profit companies can make on a sale, and no restrictions on how often someone can come to court to sell their payments.

About 750,000 people in the U.S. receive structured settlement payments, and each year thousands of them sell an estimated $1 billion worth of future payments for smaller lump sums of cash. National data was unavailable, but industry sources say overall volume was down in 2020, primarily because courthouses were closed for months in some states, slowing the pipeline of pending deals.

In Minnesota, judges say they are routinely deprived of key information about the people selling their payments, including medical records and court filings that might provide insight about their cognitive ability or mental competency.

Meanwhile, companies have successfully sought removal of some judges who have rejected sales or questioned the lopsided nature of deals in past cases, according to the Star Tribune’s review of more than 1,400 Minnesota cases that have gone to a hearing since 2000. Such maneuvers are legal in Minnesota and require no supporting evidence.

“I hated these deals, but it was hard to say ‘no’ because everyone else was saying ‘yes,’ ” said former Hennepin County Judge Ann Alton, who handled about 100 settlement cases before retiring in 2014. “I brought it up at bench meetings, but nobody wanted to get into it.”

Executives with companies that buy the payments argue that Americans should have the freedom to make their own financial decisions. They defend the approval system, saying judges have all the authority they need to protect people.

If judges are concerned that someone trying to sell their payments is mentally incompetent, or “immature” or “unsophisticated,” they can appoint a guardian or “simply deny the deal,” said Earl Nesbitt, former executive director of the National Association of Settlement Purchasers, a trade group that represents 10 companies that buy settlement payments.

In Minnesota, judges approved 90% of the deals that have gone to a hearing since 2000. A guardian was appointed in just one of 1,725 cases reviewed by the Star Tribune.

In an interview, Laura Dalluhn said she was still confined in a Minneapolis mental institution when a sales representative from Florida-based Greenwood Funding talked to her about selling her payments. She said the representative told her that “she had bipolar disorder, too.”

“They are kind of like vultures,” Dalluhn said. “It felt very aggressive to me.”

After the first judge rejected the deal, Greenwood redid the contracts and filed a new request under the name of an affiliate, Sempra Finance, interviews and court records show. Greenwood officials did not respond to requests for comment, and an attorney for the company also declined to discuss the deal.

Though he refused to comment on Dalluhn’s situation, Judge Carter said in an interview that the courts should find a way to routinely appoint a guardian or some other neutral party to advise judges on whether a deal is really in a seller’s best interest.

“It is a good idea for someone in these cases … to have the petitioner’s interests at heart,” Carter said.

Some judges take a narrow view of their responsibilities.

They approve deals they think are ill advised because they do not believe state law gives them the authority to say no, records and interviews show.

In 2019, a Wisconsin judge agreed to let Peachtree Settlement Funding buy $135,000 in payments for $12,000, even though she found the deal “really troubling.” The seller, a 46-year-old man working part-time in a fast-food restaurant, was giving up “life changing” payments that would come his way beginning at the age of 55.

“I am struggling with this,” said the judge, who later dismissed the case after Peachtree discovered the man had previously sold the payments.

Dakota County Judge David Knutson was blunt when Troy Wicka sought his permission to sell $75,000 in installment payments for $20,000 in 2015. The company proposing to buy the payments, J.G. Wentworth, calculated the current value of those tax-free payments at almost $63,000.

“I certainly don’t think it’s in your best interests” to sell the payments, Knutson said.

He approved the sale anyway.

In 2018, Wicka was involuntarily committed to a mental health care facility after he drove to the parking lot of a Burnsville Costco with a loaded gun. He refused to relinquish the weapon during a nine-hour standoff with police.

“I definitely have regrets about selling the payments,” said Wicka, 42, who sold off a total of $500,000 in guaranteed payments for $95,000 over a two-year period. “My eldest sister is absolutely furious about it to this day. She won’t let it go.”

In Minnesota, the Star Tribune contacted 47 judges from 2019 to 2021 who reviewed at least one sale of settlement payments. Half of the judges agreed to discuss the way they handle these cases or provided written responses to questions.

Judge Kevin Mark in Red Wing, Minn., has approved 11 cases and rejected none since 2003. He said it is not his job to tell a competent adult how to spend his or her money.

“I don’t investigate the nature of their original claim and settlement,” Mark said. “I don’t look into their injuries. … I’m generally focusing on the deal in front of me. I don’t get into what their particular economic situations are.”

Though other judges have rejected deals because they thought the terms were unfair, Mark said he does not believe state law requires him to substitute his judgment for the person selling their payments.

“I am not surprised that many of these people would have regrets afterwards,” Mark said. “But for the court to intervene and say we know what is better for you, I don’t generally take that role in their lives.”

Most settlement cases in Minnesota are decided with little fanfare or discussion. Hearings take an average seven minutes to finish, records show, with some judges approving transactions after just two or three minutes of testimony. Often, only three people are present for the hearing: the judge, the person selling the payments, and a lawyer for the company buying them.

Family members are often shocked to discover that there is little they can do to block a sale. Rick Forsberg found that out the hard way, when he tried to prevent his stepson from selling $213,247 in future payments for $97,424.

Forsberg said his stepson was 8 years old when he was seriously injured in a car crash that also killed his mother. Forsberg had been his court-appointed guardian for 10 years. A few weeks after that guardian relationship ended, his stepson signed a contract to sell his payments to industry leader J.G. Wentworth.

At the 2016 hearing, the 28-year-old told Pennington County Judge Tamara Yon that he needed money because his wife was pregnant, and he was $53,000 in debt.

Though some judges have allowed family members to testify at hearings, Yon did not allow Forsberg take the stand. She approved the sale after a brief hearing.

“You have family that doesn’t support this, but you’re an adult,” Yon told Forsberg’s stepson, adding, “You may regret this down the road.”

Forsberg said his stepson wasted the funds and later asked him for money. “I tried to help him,” Forsberg said. “I was there when the judge said it was OK. It was nuts.”

Brian Dear, who succeeded Nesbitt as executive director for the trade group of settlement purchasers, said in a written response to questions that the industry helps people meet pressing financial needs. He said the courts ensure that a seller “fully understands the terms of a transfer and that it is in the payee’s best interests.”

In the interviews, Minnesota judges said the Minnesota Code of Judicial Conduct bars them from investigating facts “independently.”

That means they are not allowed to conduct background checks that might help them better determine if a sale is in the person’s best interest.

As a result, they are often unaware if the person appearing in their court suffers from a brain injury that can impair their judgment or if another judge had to involuntarily commit that person to undergo treatment for severe mental illness.

“Most trial court judges are not equipped with the information or the ability to protect people from their own poor choices,” said Washington County Judge John Hoffman, who approved all 11 of the deals he reviewed. “It would be helpful if a judge had a third-party investigator.”

A few states have passed laws aimed at helping judges obtain vital information. In Delaware, for instance, judges can appoint an attorney to advise the court on whether a deal is fair and reasonable if they determine the person selling their payments “does not adequately comprehend the substance of the transaction.” Most states, including Minnesota, do not provide for such assistance.

In Oregon, people selling their payments must disclose whether they have settlement-related injuries that prevent them from working or substantially limit the work they can do. Several states, including Michigan, require sellers to show that a deal is necessary to avoid financial hardship. North Carolina even limits the profit settlement purchasers can make, with a formula that ties the discount to the prime lending rate.

Margaret Marrinan, a former Ramsey County judge who retired in 2017 after 30 years on the bench, said the lack of clear standards in Minnesota can make it hard for judges to do their jobs effectively.

Marrinan said she made every effort to find relevant information about people trying to sell their payments. Her clerks would pull records on prior settlement transactions, and she would keep witnesses on the stand for as long as 30 minutes.

Still, she approved deals for at least two individuals who had mental health crises that she was not aware of.

One, Sharon Nyquist, suffered a traumatic brain injury at age 3 when she was injured in a car crash. She was committed to a mental health care facility repeatedly from 2008 to 2015.

In 2014, Marrinan allowed Nyquist to sell $40,000 in future payments for $18,000. A year later, Nyquist was committed again after she became suicidal and fought with staff members at a Minneapolis hospital. In a court order, an Anoka judge noted that Nyquist suffers from impulse control disorder and borderline personality disorder and has a “long history of mental health services.”

In a brief interview, Nyquist said she has been the victim of a “conspiracy” against people with traumatic brain injuries.

Her dad, Mark Nyquist, said his daughter has been in court so often she knows how to tell judges what they want to hear.

“I think she’d be very persuasive if she wanted the money,” he said in a 2019 interview. “My biggest fear is that she is going to end up with no money, no place to live and be out on the street.”

Marrinan also approved a deal for Bruce Evjen, who was run over by a school bus when he was 6. Evjen, who sustained a head injury, began suffering from seizures after another accident in 1992. He cannot drive or work on a regular basis because he has trouble walking and can fall over anytime, according to court records.

Evjen, who did not respond to repeated phone calls, was the subject of six civil commitment proceedings from 2001 to 2021. He was committed to a mental institution for six months in February.

His December 2015 hearing before Marrinan lasted about 10 minutes. She approved Evjen’s sale of almost $118,000 in payments that he would receive the following May. Peachtree paid $104,000 for them.

The next month, Peachtree was back in court with Evjen. It wanted to buy another $73,420 payment — due in 2021 — for $35,000. This time they appeared before Ramsey County Judge Shawn Bartsh, who pressed Evjen about the proceeds from the December sale. He said he gave at least $50,000 to relatives.

Bartsh rejected the new deal, telling Evjen that his overly generous nature made her “question whether he has the requisite mental capacity and maturity necessary to make informed decisions about this transfer.”

In court, the judge’s concerns drew a swift objection from attorney Theresa Peterson, who represented Peachtree.

“I would respectfully disagree that it is up to either you or I to tell Mr. Evjen what to do with this money,” said Peterson, according to a transcript of the case. “He is 34 years old. He is a mature adult. He fully understands the consequences of the transaction.”

Responded Judge Bartsh: “He’s a mature adult with a head injury.”

Marrinan said she would have denied the deals involving Evjen and Nyquist had she been aware of their mental health problems. She said she was “blindsided” because of the limitations on fact-finding.

“I don’t know why they have some of these rules,” Marrinan said. “If you’re a judge, you need that information so you can make a well-based decision.”

Even when they do know of a person’s history, Minnesota’s judicial rules force them to ignore it, some judges say.

Polk County Judge Jeffrey Remick said he had to forget much of what he knew about Charles Zornes when the 41-year-old farmworker appeared in his courtroom in 2018 seeking approval to sell $330,000 in payments to J.G. Wentworth for $23,500. The company valued the payments at $178,838.

Since becoming a judge in 2006, Remick has handled six cases involving Zornes, including two of his seven civil commitment proceedings.

Zornes, who was badly burned in a fire as a young child, stopped going to school when he was 7 or 8 because of severe mental health problems, according to his mother, LeAnn Zornes.

“He can’t think for himself,” LeAnn Zornes said. “He always needed help with almost everything.”

In a 2019 interview, Remick said he believed Zornes needed a court-appointed conservator to protect his finances. But Remick said he had to put that knowledge aside when deciding the merits of the sale to J.G. Wentworth.

In his view, he was limited to Zornes’ testimony and the thin application file that contained no information about Zornes’ mental health.

“I know a lot about Charles,” Remick said. “But I have to cast it aside and make a decision on those two things, which is extremely frustrating to me.”

Though Remick said he thought Zornes was agreeing to a bad deal, he approved it anyway. Two weeks later, Wentworth filed a motion seeking to undo it. In an affidavit, Vice President Shannan Colangelo said officials “became aware of information regarding Zornes which caused us to re-evaluate the viability of the transfer.”

Colangelo provided no details about the nature of that information. The company’s request to vacate the approval order was granted. Zornes could not be reached for comment.

Remick said he understands why people would second-guess his decision.

“My hope would be that the governor and the Legislature regulate this,” Remick said. “I wish [they] would come up with a formula that says unless a buyout reaches this criteria, it doesn’t get approved.”

Minnesota remains one of eight states with no limits on court shopping in structured settlement cases.

That means settlement purchasers do not have to file their cases in the seller’s home county. Instead, they can pick districts where judges are statistically more likely to approve a sale.

In Anoka County, for example, judges signed off on 96% of the settlement purchase cases they reviewed. At least nine of those people lived in Hennepin County, where the approval rate was 82%, records show.

The Star Tribune also found dozens of instances where companies filed multiple requests at the same time on behalf of a seller, withdrawing any remaining cases once they get an approval. The related cases are sometimes filed in different counties.

NASP officials acknowledged the problem, noting that some companies have even flown people to other states in an attempt to find a friendlier court for their deals. After the Star Tribune presented its findings to NASP, the trade group revised its code of ethics to ban the practice, called forum shopping. The group said some companies left the group while those changes were being made.

Some Minnesota judges who denied deals said they have been removed from subsequent cases by the companies, which can file a motion seeking a new judge without listing any reasons. In Minnesota, those motions are routinely granted in all civil cases, records show.

“I wasn’t very popular with the structured settlement people,” said former Itasca County Judge Lois Lang, who was removed without reason from a case involving J.G. Wentworth in 2016. “I made them come to court in person ... and provide me with all of the facts showing they complied with everything.”

Lang, who retired in 2018 after 24 years on the bench, said she took pride in being a thorn in the side of the industry. She said she would even notify the attorneys who handled the original lawsuits for people who won settlements to see if they thought the deals were a good idea or not. She denied about a third of the cases she reviewed, often because she did not believe the person had a compelling reason to sell their payments.

“I think the law needs to be more clear about what a judge can and can’t do — because it is really very vague,” Lang said.

Firms go to great lengths to find people who receive settlements, swamping them with checks, calls and ads even after they've agreed to sell. The payoff is high.

By Jeffrey Meitrodt and Adam Belz

Photos by Jeff Wheeler

It did not take long for the phone to ring the first time Brandon Kaczmarek sold a portion of the legal payments he was due from a childhood tractor accident.

A sales representative from J.G. Wentworth was on the line the next day, with a question: Was the Hutchinson, Minn., resident ready to sign over more of the payments he was due from his court settlement?

"I said, 'Dude, I sold you $40,000 yesterday!'" Kaczmarek said.

Each year, companies such as J.G. Wentworth, DRB Capital and Novation Settlement Solutions buy an estimated $1 billion worth of payments from people who have received a legal settlement, often because of a personal injury or medical malpractice event that resulted in lifelong injuries or other health problems. There is no readily available list of people who receive a structured settlement, so companies go to extraordinary lengths to find them. They comb court records and spend tens of millions of dollars on television commercials, for premium placement in online search results and on direct mail.

Once found, the people face relentless pressure to sell again and again. The payoff for companies is lucrative.

In Minnesota, 25 people accounted for nearly 20% of all settlement payments sold since 2000, according to a Star Tribune analysis of about 1,700 settlement purchases over the last two decades. Industry leader J.G. Wentworth has gone to court 13 times since 2010 to buy payments from a 58-year-old Washington County woman. A former hockey player from the University of Minnesota did six deals with four companies from 2004 to 2019, selling more than $900,000 in future payments he was due to receive for a foot injury that ended his career.

Companies are often able to get repeat customers to accept smaller returns on their money in subsequent sales — even when those future payments are guaranteed. People agreed to worse terms than their original deal in more than two-thirds of the cases reviewed by the Star Tribune.

That's what happened to Kaczmarek, who as a child was so badly burned over much of his body that he had to wear a mask and tights on his legs for two years. He dropped out of high school and was unemployed and living in his car — but sitting on an annuity that would pay him almost $1 million over the course of his life — when he first saw a commercial for J.G. Wentworth.

For his first sale in 2010, Kaczmarek received 77% of the present value of the payments. For his fifth sale in 2017, J.G. Wentworth bought $80,000 in payments for $28,000, meaning Kaczmarek received about 48% of the present value of those payments.

After a judge approved Kaczmarek's first sale, Wentworth's competitors swung into action. He still gets as many as 10 to 12 calls a day, sometimes beginning as early as 7:30 a.m., from companies offering him a cash advance on payments he will receive through 2047.

He has begged to be placed on do-not-call lists and has changed his phone number several times. But the companies always find him.

"It's that crazy," Kaczmarek said. "They pressure you and pressure you."

The sales effort begins in county courthouses across the country.

Unknown to people who receive settlement checks, companies that buy those payments employ an army of researchers to plow through court records. They are on the lookout for cases that usually end with a large settlement rather than a trial: serious car crashes and medical malpractice claims, or wrongful death and large class-action lawsuits, such as those involving asbestos or lead paint poisoning, where the victims might number in the hundreds or even thousands.

Wentworth, in a 2014 filing with regulators, said its database of 122,000 current and prospective customers represented "$32 billion of unpurchased structured settlement payment streams."

Chris Milton, president of Catalina Structured Funding, said his California company sends out thousands of fliers each week. In March, a Minnesota customer received three realistic-looking checks totaling $4,500 in so-called "90-day Covid-19 Assistance" from the company. On the back of the checks, Catalina noted that the funds are actually an "advance" that would be released only if the recipient signed a contract selling some of his future payments to the firm.

Milton said it took years for his company to build a database of about 40,000 potential clients.

"It is incredibly expensive," he said. "Think about it — how many counties are in the country?"

Names, ages and terms of the settlement, if available, are entered into proprietary databases. Sales agents work those databases hard. A training manual from another company, Maryland-based Access Funding, instructed agents to call potential clients nine to 10 times a day for at least three days after making initial contact. The manual was turned over to federal officials in 2019 as part of an ongoing civil case against the firm.

"In addition to calling them relentlessly, you must also be texting them, e-mailing them and trying to find them on social media, like Facebook," the manual said. "The bottom line is that the more touch points you have with the lead, the higher likelihood that you will eventually make contact, build a relationship, close deals and make money."

The companies that buy settlement payments argue that they provide a valuable service to people who are locked into agreements that pay out over years, even decades. By converting a portion of those payments into a lump sum, their customers can pay for college, make a down payment on a house, or get out of debt.

If finding prospective customers is hard, the business model is relatively straightforward: Pay as little as possible for payments that are both guaranteed and tax free.

Chicago resident Kenneth Jennings was paralyzed after breaking his neck playing high school football. He received a settlement valued at $4 million.

"I grew up as a kid in the projects — $100 was huge for me," Jennings said. "And all of a sudden I had all of this money in my lap."

When buyers contacted him about selling some of his payments, Jennings said he was too young and unsophisticated to understand what he was giving up. Since 1998, a handful of large players in the business, including Novation and Peachtree Settlement Funding, have bought about $2 million in payments from Jennings. He said he received about $500,000.

Most of the money went to medical expenses, such as 16-hour-a-day caregivers, he said. There were also big hospital bills.

"I've had pneumonia 12 or 15 times, and I was in the hospital for a couple of months for reconstructive elbow surgery," Jennings said. "That all came out of my pocket."

Every time a company persuaded Jennings to sell a stream of future payments, his financial safety net weakened — something Jennings said he did not realize at the time.

Today, he is living with the consequences. He should be getting monthly payments totaling more than $14,000 this year, but instead his deals have chopped that income to about $4,100. He was forced to cut back on his use of caregivers, and he had to get rid of his van after the lift broke.

"My whole way of life is different from what it should be," Jennings said. "I can't travel like I want to. I am not able to take care of my daughter the way I want to. It's a struggle."

In 2016, Jennings and other Peachtree customers in Illinois filed a lawsuit against the company's corporate parent, J.G. Wentworth, saying sales agents for the two firms misleadingly portrayed them as competitors when they were shopping around for the best deals on their payments. As a result, they said they had been tricked into accepting "paltry" amounts of money for their payments.

J.G. Wentworth denied any misrepresentations in a legal filing. The case was dismissed after an Illinois judge noted that the contracts signed by Jennings and other plaintiffs included binding arbitration clauses.

John McCulloch, a Chicago consultant who helps insurers and lawyers set up these structured settlement packages, estimates that 70% of the settlement purchasing industry's business comes from repeat customers.

He likens companies that buy the installment payments to drug dealers and has proposed mandatory "speed bumps" that would restrict settlement recipients from selling payments more than once every two of three years.

"Once they know who you are," he said, "they swarm until there's nothing left."

The business of buying settlement payments started almost by accident in 1989, when a real estate developer in Dallas, Jim Lokey, responded to an ad in a local newspaper from a man who wanted to sell his future payments for a lump sum.

Lokey eventually formed Settlement Capital and set out to find more people who might want to sell their payments for a lump sum of cash, a business now known as factoring.

"All of a sudden we were getting referrals from all over the country," Lokey said.

Competitors, including J.G. Wentworth and Stone Street Capital, entered the business (Wentworth later bought Stone Street). A trade group, the National Association of Settlement Purchasers (NASP), formed in the mid-1990s. Today, it counts 10 corporate members — seven of them are located within a 50-mile stretch north of Miami.

One, Novation Settlement Solutions in West Palm Beach, claims it has purchased $1.5 billion in structured settlement payments since 2000. Another, 123 Lump $um, says in a promotional video on its website that it has bought $250 million worth of payments since 2010.

But there are dozens more that are not members of the trade group, including the biggest, J.G. Wentworth, headquartered in suburban Philadelphia. Wentworth says it has purchased more than $9 billion worth of settlement payments since 1995. In Minnesota, Wentworth or Peachtree were involved in more than half of all settlement purchases identified by the Star Tribune since 2000.

In a 2014 filing with regulators, Wentworth described its typical customer as "young, lower-middle income individuals," and said "executing repeat transactions" with them was a key growth strategy.

Historically, the company has spent more on marketing than any of its competitors — at least $700 million over the last three decades, according to documents filed with regulators when its stock was publicly traded.

Many of Wentworth's customers find them via its ubiquitous TV commercials, which feature the slogan "It's my money and I need it now!" The company has boasted that it spends five times its nearest competitor on television advertising.

Bobbi Jo Smith was 21 and trying to raise a child on a minimum wage job when she saw Wentworth's ads. Her mother warned her against selling her payments. "I know Mom thought I was young and stupid, but I believe I made the right decision for the circumstances I was in at the time," said Smith, who used the money to buy a car, attend cosmetology school and cover living expenses. "If I hadn't done that deal, I probably would have ended up living with my parents for the rest of my life."

Smith's mother, who set up the structured settlement after her daughter suffered a brain injury in a crash by a drunken driver in 2003, is still angry that Bobbi Jo received just $32,000 for $107,681 in payments. She has $6,000 left in future payments.

"I think they take advantage of people when they're in a vulnerable state. … If you rub candy in a kid's face, they're going to want it," Bonnie Jo Smith said.

Once a purchasing company finds someone who has a structured settlement, they often go to great lengths to hide them from competitors.

Many firms obscure the identities of customers in Minnesota court records, often using initials instead of the customers' full names.

Records show that some firms have sued rivals that scrape court records and swoop in to offer a better deal before a transaction is approved by a judge. RSL Funding has been involved in legal battles with competitors over such practices for more than a decade. The Texas company's website features a 3½ minute video entitled, "You've likely been ripped off by J.G. Wentworth."

In one case, a company lawyer pressed Deborah Benaim, then senior vice president of Imperial Holdings, on whether the industry's trade group, NASP, prohibited members from offering each other's clients a better deal at the last minute.

"If there's a signed contract, we don't interfere in each other's contract," Benaim said in a deposition. "I know that it's a policy of NASP … for as long as I've been involved in the structured settlement business."

In 2019, Louisiana lawmakers passed an anti-poaching law that prohibits structured settlement purchasing companies from offering sellers a better deal while a competitor's deal is awaiting court approval. Georgia and Nevada followed suit with their own anti-poaching laws in 2021.

The three laws also require settlement purchasers to register with the state and post $50,000 bonds that can be forfeited if companies engage in forbidden conduct. Violations could trigger revocation of a company's registration and even lead to stiff tax penalties that could make deals unfeasible.

NASP Executive Director Brian Dear said his group actively lobbied on behalf of the new laws, which he said will protect customers from "bad actors" by outlawing "forum shopping, false advertising and misrepresentation." He said the group will lobby other states, including Minnesota, to make similar changes.

But critics say the new laws will do little to deter abuse, noting that a single deal is often worth more than the entire bond of $50,000.

"The primary objective of the amendments appears to have been to discourage competition among factoring companies, by raising barriers to entry and by restricting 'poaching' of transactions," said Craig Ulman, a Washington, D.C., lawyer who represents insurance companies that set up the original structured settlements.

Big insurance companies have long frowned on the practice of buying and selling payments, arguing that annuities and other payment mechanisms provide a secure, lasting income. Through the 1990s they claimed that selling the payments was illegal, but judges generally sided with firms that buy future payments.

In 2017, after years of objecting to deals in court, Berkshire Hathaway Group Structured Settlements started its own operation aimed at offering customers more cash than they can typically get from companies that buy payments.

"We call it our hardship exchange program, and the reason we do it is we understand that people are taken in by the appeal of factoring companies," said Brennan Neville, a lawyer for BHG. "We view it as a means for them to do it in a more socially responsible manner."

While purchasing companies typically get a return equal to about 15% when they purchase a stream of payments, Berkshire Hathaway offers a rate of 6.5%, plus a $1,000 administrative fee if the transfer gets approval.

To illustrate the difference those percentages can make, take the case of Robert Tibbetts. Wentworth went to court in Beltrami County in 2018 to get a judge to approve Tibbetts' sale of $32,796 in future payments to J.G. Wentworth for $20,000.

Berkshire Hathaway objected. In a counteroffer presented to the court, the company offered to pay Tibbetts $20,000 if he was willing to give Berkshire Hathaway $25,353 in future payments. That would allow Tibbetts to keep nearly $7,500 in extra payments.

A judge still approved the deal with J.G. Wentworth less than three weeks later. But Neville said his company has made headway with customers and has done nearly 100 deals of its own.

"This is not a moneymaker for us," Neville said. "But we recognize that there are situations where people are going to have problems, and we would rather they come to us than go to a third party that's going to take their money at 15 percent."

Any sale of settlement payments creates a public record where none previously existed. That person is quickly added to the prospect list of dozens of firms, each eager to persuade them to sell even more of their payments. That's when the soliciting begins.

Phone calls. Texts. Facebook messages. Mailings promising gift cards worth $25, $50 or $100 if you call a toll free number and confirm that you are still receiving payments. Visa gift cards worth $250 if you sign a contract to sell those payments.

Wayne Ludvigson, who first sold some of his settlement money in 2011, collected a total of 44 mail solicitations in the first three months of 2021. Many of the appeals suggested he had been ripped off on his previous sale and urged him to act quickly before the offers expired.

Six of the solicitations were tailored for people whose finances are hurting from the pandemic.

"NEED MORE STIMULUS?" asked DRB Capital, in a letter accompanying three checks worth more than $2,000. "Today is your lucky day. … Call now to get your checks activated."

American Annuity Funding, a Florida-based company, sent him a $500 "stimulus check" that was valid "only to persons who execute a full contract with American Annuity Funding in which you agree to sell us future structured settlement payments that you have not previously sold or agree to sell to anyone else."

Ludvigson ended up selling almost half of the $236,000 settlement he received over a medical malpractice claim involving the death of his mother. He received a total of $21,141, which represented just under 50% of the estimated present value of those payments in the first sale, about 27% in the second and less than 15% in the third.

Ludvigson, who won't see another monthly payment until the year 2035, says he has repeatedly asked companies to stop contacting him.

"I tried to explain to them … that this is the type of case that's more emotionally sensitive," he said. "I really don't like being reminded of it all the time."

In a written response to questions, DRB said it is "fully committed to protecting the interests of our customers."

"As an industry leader, we have well-established policies and procedures that adhere to all laws and regulations, and we conduct a comprehensive 'do not call' procedure that allows consumers to 'opt-out' of marketing programs," the company said in the statement, which was provided by NASP, the trade group. "Through NASP, DRB continually advocates for strengthened consumer protections, including requiring registration of structured settlement purchasers and establishing laws that protect the personal information of individuals seeking to transfer portions of their settlements."

In New Mexico, Peachtree's aggressive tactics persuaded Perstine Tsosie to cancel her deal with the company and cut a deal with a competitor, even though that company couldn't come close to matching Peachtree's offer, court records show. At a 2019 court hearing, a New Mexico judge pressed Tsosie on the issue, noting she was losing more than $90,000 by switching firms. She was adamant.

"Over the course of approximately three months, they have harassed me by calling hundreds of times at all hours of the day," Tsosie said in a subsequent letter to the judge. "Due to Peachtree's lack of respect, they have put me and my family in a worse situation than we were months ago with their … lies and their selfishness."

In court, Peachtree acknowledged that the company attempted to contact Tsosie in an attempt to "renegotiate" the faltering deal, but the judge denied Peachtree's request to enforce its original contract.

Mantorville resident Coty Allen says he has gotten 10 to 15 phone calls a day from companies that want to buy part of the $51,417 he received through an out-of-court settlement over the death of his mother when he was 8. He changed his number and signed up for the federal "Do Not Call" register, but after a few months of silence, the calls began again.

"It is very annoying," Allen said. "They say, 'We'll put you on the no-contact list,' and then the next day it is the same. … They're con artists, in my opinion."

Allen sold the last of his payments in 2014. The calls continue.

By Nicole Norfleet and Jeffrey Meitrodt

ALBUQUERQUE, N.M.

Siera Parker needed money fast.

The 21-year-old had just given birth to her second child. Her first child had special needs. Parker was barely getting by with the help of food stamps, Social Security benefits and monthly payments she received from a legal settlement after she was sexually abused when she was younger.

Desperate, Parker went before a judge to approve the deal she struck to sell $21,628 of her future settlement payments for a lump sum of $10,000 — about half their present value.

Across the United States, county judges routinely approve thousands of transactions like Parker’s every year. The sellers are rarely represented by an attorney, and the standard for evaluating the deal — whether it is in the seller’s “best interest” — is typically left to individual judges to determine.

But in Albuquerque, judges appoint guardians to investigate almost half the cases they review, usually if the sellers have children or significant cognitive problems. The judges usually follow the guardians’ recommendations, and they typically help sellers keep more of their money than people who sell their payments in other parts of New Mexico, according to court files and transcripts from 474 cases reviewed by the Star Tribune.

While Minnesota judges approve nine out of 10 deals that come before them, Albuquerque judges signed off on just 42% of the deals involving a guardian, records show. In many cases, judges never had to rule because the sellers withdrew their requests after meeting with a guardian.

“If somebody wants to do something stupid, they are allowed. It’s a free country,” said former Albuquerque Judge Alan Malott, who retired in 2018. “But when there are dependent children or other dependents involved, then the state has more of an interest.”

In Parker’s 2015 case, a court-appointed guardian believed the deal was not in her best interest, and J.G. Wentworth Originations LLC asked that the case be dismissed. Later that year, Peachtree Settlement Funding LLC, which is owned by the same holding company as J.G. Wentworth, petitioned again for Parker to be able to sell her payments, but the transfer was ultimately denied.

In an interview in 2019, Parker was grateful the sales didn’t go through.

“That $400 every month helps me and my kids every day,” Parker said in an interview. “It honestly is better that it happened that way.”

One 47-year-old New Mexico woman had agreed to sell $26,322 in future payments to J.G. Wentworth for a lump sum of about $2,000. She said she needed the money to heat her home.

The payments at the time the case was filed were valued at $22,587 by J.G. Wentworth. The guardian recommended against it, and a judge rejected the sale.

Another woman, disabled in a car accident, had already sold some of her payments when Peachtree filed for the court to approve the sale of additional future payments to pay for repairs of her family’s home. After a guardian found the woman “lacks the ability to understand simple concepts,” could not live independently and wanted to sell her payments to “go shopping,” the company asked the court to dismiss the case.

A 42-year-old woman wanted to sell $48,600 in future payments for $21,000. The payments were then worth $44,724. She planned to use the cash to pay for a Las Vegas wedding and a trip to Hawaii for her children. A judge denied the deal after a guardian raised objections.

“While a Hawaii vacation is certainly nice and a benefit, I do not believe this is a need that would justify the high interest rate,” the guardian wrote in her report. “Nor would the marriage in Vegas.”

The guardian’s ultimate obligation is “to protect that person either from themselves or from a bad deal,” said Matthew Vance, an Albuquerque attorney who has served as a guardian for more than 20 cases.

“I’m not trying to dissuade them so much as I’m trying to say, ‘Here are the terms. Here’s what you’re doing. Do you understand this?’ ” said Vance. “Because I doubt very much that that company sits down with them and goes to the same extent.”

The cases are rarely easy.

At a court hearing in September of 2019, a 27-year-old woman pleaded for approval to sell a final payment from a car accident. She said she was close to defaulting on her student loans for a second time and couldn’t afford diapers or formula for her 11-month-old daughter.

“This is my last-ditch effort to really make a difference in her future,” the woman said, “because where we are standing at right now, it’s just getting worse and worse.”

The final installment of $89,143 is due in 2022. J.G. Wentworth, a Pennsylvania company that is the largest buyer of settlement payments, was offering her $70,000, payable immediately. The discounted present value of the payment was calculated to be $82,849.

The guardian in the case, Gabrielle Valdez, told the court she thought it made more sense to wait 32 months to get all the money.

“I do not believe that would be in the best interest of her 11-month-old daughter,” Valdez said. “I do not believe that it would provide any benefit for her.”

The woman, seated next to Valdez, cried during her statement. She later withdrew her request before the judge could rule.

Judges rarely overrule a guardian’s recommendation, and when they do, they usually try to modify the terms for the sellers. But that doesn’t always guarantee a happy customer.

For years, Korbin Rasmussen remained angry when a judge put a guardian in control of disbursing the $9,213 he received in 2014 for selling $37,100 in future payments. Though the guardian made sure he used the money to pay off a car loan and other bills, Rasmussen insisted the extra oversight was unnecessary.

“I could have made that money go a lot further than it did,” Rasmussen said in a 2019 interview outside his mobile home in the West Mesa area just outside Albuquerque.

Rasmussen died by suicide in 2020 at the age of 30. His mother, Michelle Rasmussen-Rocha, wishes the judge had turned down her son’s deal, noting her 11-year-old granddaughter was left with nothing to inherit. In various deals, Rasmussen sold both his monthly checks and a $125,000 payment he was scheduled to receive in 2028, Rasmussen-Rocha said. She said her son squandered the money on drugs, booze, boats, cars and a mobile home that has lost value. He also let his life insurance policy lapse, she said.

“There is no money left,” Rasmussen-Rocha said. “If he would have left those funds alone, it would have been better for my granddaughter, absolutely. … He kind of spent the money ridiculously.”

Judge Malott, who approved the deal over the guardian’s objections, said he doesn’t remember the case.

One state — West Virginia — requires that guardians be appointed when the payment rights belong to “an infant, an incompetent person or a ward of the court.” But judges also have discretion to assign a guardian in all other cases.

In Maryland, state law was updated in 2016 to allow judges to appoint guardians when cases arose from lead poisoning claims or if it appears the seller suffers from a mental or cognitive impairment. According to the Maryland Attorney General’s Office, the number of sales plunged after implementation of the new law, which also required settlement purchasing companies to register with the state attorney general. In 2014 and 2015, companies filed an estimated 500 to 1,000 petitions each year to purchase settlement payments. In 2019, the companies reported filing slightly over 50 petitions; around the same number was filed last year.

In Minnesota, a guardian was appointed in just one of more than 1,700 cases the Star Tribune examined dating back to 2000. Minnesota judges told the Star Tribune they don’t believe the rules allow them to make such appointments on a regular basis, noting that state law limits the use of guardians to cases involving minors and adults who are mentally incompetent.

“There is no ready way for judges in Minnesota to obtain assistance in these cases because it’s not built into our law,” said retired Hennepin County Judge Mel Dickstein, the only Minnesota judge who has enlisted the aid of a guardian in a payment sale. “I have no doubt that judges would welcome the assistance of an independent fact finder who reports to the judge. I know it was of immense help to me.”

In New Mexico, other judges are beginning to mimic the Albuquerque approach. In 2020, Eighth District Judge Melissa Kennelly appointed guardians in two structured settlement cases after discovering the sellers had young children. Kennelly wound up approving one of the deals, while the other was withdrawn.

Whitney Zambrano said she is glad Kennelly forced her to review her deal with a guardian. Zambrano, who received her settlement from the accidental death of her husband in 2014, is now raising three young children by herself.

“I understand the need for it,” said Zambrano, who received court approval to sell $70,000 in future payments for $35,553. “A few friends of mine have not made great choices with their structured settlements and have squandered their money on nothing — when it was supposed to help their family. Kids should be put first.”

Earl Nesbitt, the former executive director of the National Association of Settlement Purchasers, acknowledged in a 2019 interview that a guardian may be warranted when someone wishing to sell their payments “appears to be uncertain or immature or unsophisticated or certainly if they appear to have any sort of [mental] competency issues.”

But Nesbitt said he doesn’t believe the use of guardians should be required.

“The critics of this industry say these are vulnerable people and they lump them all together,” Nesbitt said. “But we do transactions with people who are judges, who are lawyers and who have MBAs in finance. We also do transactions with carpenters and truck drivers who are damn smart and understand their transaction. … They shouldn’t have to be forced to get a lawyer.”

Suzanna Valdez (no relation to Gabrielle) works exclusively as a guardian in New Mexico. Most of her work is for children in insurance settlements. Occasionally, she’s also asked to independently evaluate a proposed sale of settlement payments.

She jokes that sometimes she feels like a social worker when she is trying to make her assessments. She often visits the homes of people who want to sell their payments to observe their living conditions. She will evaluate their budgets and their financial goals, as well as how they intend to use the money that they get from the sale.

“I am not certified as any type of financial planner,” Valdez said. “It really comes down to what is this person bringing in per month and what are their obligations.”

In addition to interviewing the applicant, the guardians have to track down the original legal settlement documents and sometimes the attorneys who worked on the cases to determine the circumstances that led to the payments. They also take into account debt problems, civil commitments, medical history and drug or alcohol abuse, though each case and each guardian is different in terms of how much they weigh each of those factors.

Fees for guardians often range from $1,200 to $2,500, paid by the companies hoping to buy the payments. This added cost has not killed the market — the industry’s largest companies continue to seek court approval for deals in Albuquerque, records show. And local residents are keeping an extra 3% of their money compared with sellers in other parts of the state.

Without guardians, judges are often engaging in “guesswork” because there is nobody offering a different point of view about whether a settlement sale makes sense, said Stuart Rossman, director of litigation for the National Consumer Law Center.

“If you got everyone coming in saying, ‘This is a great deal. Trust us,’ then the judge has to be the one to sort of guess what the ramifications might be,” Rossman said. “There’s no one taking the opposing point of view. The guardian ad litem doesn’t mean that it has to become adversarial; it just means that if there is an opposing point of view or a different point of view, at least the fact finder is going to get both perspectives.”

Ronald Hobbs said he was going to sell $72,000 in future payments for less than $18,000 before he met with a guardian in 2020. He decided to back out after they talked. Hobbs said he needed help understanding the transaction because he suffered brain damage when he was injured in a car accident at the age of 13.

“Sometimes my thinking is not as clear as it should be, pros and cons-wise, for decisionmaking,” Hobbs said. “He helped me with that.”

Still, the relationship between the guardian and the person who wants to sell their payments can be tense, said Vance, the attorney who serves as a guardian.

He recommended against a sale in which a company had struck a deal to pay about $242,000 for $600,000 in future payments that had a present value of about $396,000.

The seller said she wanted to spend most of the money on a house, but Vance questioned whether she would qualify for a mortgage since she had been unemployed for eight years.

“For a lot of folks this smacks of legal paternalism,” Vance said. “Even if they are approved, they are not happy that they had to go through the process. Or if they are not approved, they are upset.”

Judges do not always follow a guardian’s recommendation, but sometimes a guardian’s rejection can generate a better offer from the company trying to buy a person’s payments.

In 2013, a company increased its offer by $3,000 after the guardian recommended against a deal for a 21-year-old woman. The judge approved the sale.

In another instance in 2017, a guardian recommended against a 25-year-old man’s plan to sell his payments. The judge approved the sale after the company agreed to increase its offer by $2,000, to $20,000. He ordered that half the money be placed in trust to be used only to purchase a home.

Suzanna Valdez, the guardian in that case, said she released the $10,000 after the man was able to verify he was buying a house.

Jessica Juarez, now 36, welcomed the advice she got from her guardian in 2013 when she got approval to sell a $75,000 payment she would have received in a year and a half. She used the proceeds, $54,000, to pay off debt and attend nursing school.

“I feel that [guardians ad litem] are a good resource to have,” Juarez said. “Most people need help making big financial decisions, especially when a clear plan is not in place.”

“I don’t have any regrets because I have a more secure future for me and my daughter,” she said.

Recently retired Albuquerque Judge Clay Campbell still remembers the 2008 case that made him think something more had to be done to protect the interests of people who had struck deals to sell their payments.

The man, who had suffered a brain injury in a 1986 car accident, had just gotten out of prison and applied to sell $37,500 in future payments. He said he needed the money to fix his car and support himself and his two young sons.

After filing fees and other expenses, he would end up with just $6,000. The company valued the payments at $22,683.

Campbell approved the request, but not without deep misgivings.

“I can say with honesty in hindsight that that case is one of the types of cases that causes me a tremendous amount of sort of after-the-fact stomach churning and feeling like I don’t think that the process … was serving people very well,” Campbell said in an interview.

Malott joined the bench in Albuquerque shortly after Campbell issued that order. The financial crisis was in full swing, companies like J.G. Wentworth were advertising heavily, and he and his colleagues were seeing a sharp rise in the number of people asking to sell their payments.

“We were looking at these structured settlement proposed transfers and just going, ‘They are giving people 20 cents on the dollar, 30 cents on the dollar,’ ” Malott said.

Like most states, New Mexico’s law requires the court to evaluate whether the settlement transfers are in the best interest of the person getting the money. It also allows judges to consider “the welfare and support of the payee’s dependents.” With that in mind, Campbell said he decided to adopt “my own sort of best-practices approach.”

“I feel good about this level of improvement that we reached,” Campbell said. “But I can’t help to sit back and be mortified by what it took to get us there.”