The FBI Broadens The Investigation of Scott Rothstein Structured Settlement Fraud

In yet more bad news for the structured settlement profession the FBI today put out an announcement for information from the public and investors who had been burned or involved with what they are calling the Rothstein Structure Settlement Investments. (RSSI). Scott Rothstein

Great, just what we needed as a profession, more traffic and news with our trade name dragged into what looks to be a growing fraud in which the term Structured Settlements was used to lull investors into thinking this scam had the legitimacy and security offered by structured settlements.

You can read the entire FBI press release by clicking here.

What is also distressing is that what looked to be a $100 million scam and limited to a few cases is now being announced by the FBI as potentially exceeding $1 billion in losses and involving a network of individuals who were working with Scott Rothstein.

The Legal Broadcast Network will be following this story closely over the next few week but as a special guest we had Civil Action Attorney Jan Schlichtmann join us today to discuss from the perspective of a trial lawyer the distressing trend of lawyers being implicated in not just frauds, but in the betrayal of their clients and associates all in the name of greed. Watch today's extended interview with Jan Schlichtmann on Voices of the Law and tune in next week as we continue to bring in more commentators and news on this scam, as well as shine light on the "cash now" industry that seems to have been the model for how this program was designed.

Watch Attorney Jan Schlichtmann discuss the Scott Rothstein fraud and the issues confronting trial lawyers nationally regarding the proliferation of "cash now schemes" that are being offered to lawyers, plaintiffs and investors with little or no regulation or oversight.

Tax Law Expert Rob Wood on Structured Legal Fees

Tax Law Channel host Rob Wood discusses structuring legal fees...a versatile tool only available to contingent fee lawyers.

If an attorney has a contingent fee arrangement with a client, the lawyer may enter into a structured legal fee arrangement under which the defendant, instead of paying the attorney’s fees for the case in a lump sum at the time of settlement, can fund an arrangement that pays the fees over time. As discussed below, payments under a structured legal fee arrangement have been held to not be taxable until actually paid to the attorney. Structured legal fee arrangements are designed to level out the peaks and valleys that generally characterize the fluctuating income of plaintiffs’ attorneys. These arrangements let lawyers defer paying taxes on their fee income. Structuring legal fees is a good way to spread out income, reduce income tax burdens, provide for retirement, or contribute to estate planning.  

A structured fee arrangement will generally be funded by an annuity purchased by an assignment company. That company purchases the annuity with funds provided by the defendant in the case—funds that would have paid the lawyer’s fee. Properly set up, a legal fee structure takes the lump sum that would otherwise go to the client and puts it to work in a tax-deferred annuity. The lawyer pays tax only as he or she receives the periodic payments. For example, instead of receiving a $500,000 lump sum, the lawyer might receive $70,000 a year for ten years. The extra $200,000 in this example is attributable to the tax-deferred return on the money.

With all the talk of tort reform in Washington, plaintiffs’ lawyers may feel discriminated against by Congress in various ways. Even so, they are entitled to a benefit no one else receives: the ability to structure their legal fees. Indeed, contingent fee lawyers are the only ones who can structure legal fees.

Jordan Kimmel "Securities Regulation After the Economic Crisis"

J. KimmelBack in June, Federal Reserve Governor Daniel Tarullo said ..."Capital market developments of the last several decades are not going to be fundamentally reversed, nor should we want them to be. Reform by nostalgia is not usually an effective approach, since it tends to forget the problems of the past and deny how much has changed. The task is to refashion a regulatory structure so as to encourage the efficient allocation of capital to productive uses, while protecting the financial system from the defects and excesses that are inherent in financial markets."

National Securities Analyst Jordan Kimmel says transperency is the first big step we must take.

Rob Wood "When Contractors Become Employees"

LB Network Tax Law Channel host Rob Wood writes in the "Daily Tax Record" 8/17/2009:

"The Top 10 things The IRS Wants You to Know When Contractors Become Employees"

 Download the PDF

"When the Good Lord created tax law experts, He wanted them to be like Rob Wood" (Lao Tzu)

 Scott gets the lowdown from Rob Wood:

Rob Wood on IRC Section 104 Regulations Clarified by IRS

Attorney Rob Wood joins Mark Wahlstrom on this weeks Speaking of Settlement to discuss the release of new regulations and clarification on Section 104 and Section 130 damages. If you are a trial lawyer, settlement professional or tax professional you will want to know what this revision to IRC Section 104 is all about.

Section 104 regulations PDF