Will the AIG Structured Settlement RICO case destroy the structured settlement brand?
Earlier this week a tidal wave of what some might deem as shocking news rolled over the structured settlement profession in the form of a lawsuit filed in the US District Court, Boston MA, alleging a RICO type conspiracy by AIG and the structured settlement brokers who are part of their Agency Partners or approved list programs.
The case was filed by the nationally respected class action firm of Hagen Berman and is focused on the contention that the format and business practices of the AIG program were part of a scheme that rose to the level of a RICO type conspiracy. Whether or not this is in fact the case will be determined by the courts in the coming months and years. However, given the sheer size and scope of the AIG program, you can’t underestimate the importance and impact of this news on the settlement profession as well as claims professionals and trial lawyers nationwide.
Over the last few days many different people and organizations in the structured settlement profession have contacted my office to not only see what I thought of the suit, but also to ask how I felt settlement planners, structured settlement experts and others should address what is now a huge elephant in the room any time they are on an AIG case.
I’m not going to comment as of yet on the merits of the suit or the details of the complaint, although I might do so at a future date. Instead I want to discuss how best to handle this from a communication standpoint, which is the immediate problem facing the structured settlement profession.
Crisis management is an art, as is salesmanship and the skill of persuasion. Too often in the past when other cases or crisis have arisen, the settlement profession chose to ignore, minimize or gloss over the matter at hand, believing that by discussing it, they gave it more weight than necessary. That might have worked in a pre-social media, non-Google search era, but now that EVERYTHING is searchable and everyone can express an opinion, different tactics are required or the profession runs the risk of allowing the narrative on this case to spin out of control. Careless attacks on the concept from those who looked to damage the structured settlement profession may could potentially brand many of the major names in our profession as alleged members of a racketeering scheme.
The terms “racketeer” “Conspirator” and “fraudulent enterprise” are powerful and very sticky. They can cling to a lawyer, a company, a professional or firm like stale cigar smoke in a room with out windows. When people have been conditioned by media, movies and writers to assume the worst of large financial companies, they already have a narrative in their heads, subconscious though it might be, that plays like a repeating video clip confirming their bias that “all big banks/insurance companies” are crooks. Whether this suit succeeds or fades away, the branding damage can already be done.
So what to do?
First, ignoring the “Structured settlements are crooked” branding message from those looking to benefit from this lawsuit and the negative publicity it created, simply won’t work. The image is too sticky, evocative and plays to a long standing confirmation bias.
Second, denying the “Structured settlements are crooked” branding won’t work either. That just opens us up to debating details and only serves to harden the association of the term structured settlements with a bad image. Not only that, but broad debate produces a huge volume of internet searched, keyword specific content that further damages the brand when people look up that story. All people hear, as they did in the Freddie Gray/Washington Post stories, is that “Structured settlements are bad and sold by bad people” and denying that we aren’t like THOSE structured settlement guys doesn’t work at all.
So if you can no longer ignore the issue and you can’t effectively deny it without creating further damage, what do you, as a structured settlement professional need to do?
Well, lucky for you, the only option left, going on the offensive, is the BEST option in a new media world, a reality that was on full display during a raucous pre-presidential press conference earlier this week. Just as Donald Trump knows to go on offense against a destructive narrative by flipping the table and making the people who are use to attacking, i.e. "The Press" the bad guys, you as a professional need to do the same. You have to totally scramble your opponents narrative and get them playing defense and denying your attack, instead of you being in a defensive crouch all the time.
While the members of The Settlement Channel professional directory have access to these new media tools and tactics, most settlement planners and brokers don't. Therefore, here are some immediate suggestions you can implement if you don't have a new media platform in place where you can go on the offensive:
1. Contact your clients so they hear about the lawsuit from YOU, rather than a listserv, insurance news web site,online media source or worse, one of your competitors who wants to associate you or your product with the negative elements of this lawsuit. You MUST be the one who brings it to them, not your opposition.
2. To recognize the built in bias of the RICO title which everyone associates with Mobsters and remind people there are CIVIL RICO laws and this isn’t a criminal RICO case. It helps to have a sense of humor on these things so go for a lighter touch. For example, this isn’t John Gotti being cuffed and perp walked, it’s a lawsuit looking into a long standing, well known claims practice that will be decided by the courts, not public debate.
3. Offer to keep them informed and that you will continue to update them on this lawsuit so that your attorney is not put into a situation where they are working on a case and are not aware of the implications of this litigation. Be the one that protects them from professional embarrassment and continues to assist in planning to protect the assets and settlement award of their clients. This also allows you to counter destructive attacks or misinformation by positioning yourself as the expert source of information on this matter.
In conclusion, the Structured Settlement brand is at risk. The damage from the factoring news of last year on Freddie Gray was harmful, this in my opinion, is much worse. Every firm will need to decide on how they want to either capitalize on this news, or be a victim that allows a valuable planning tool to be forever tainted in the eyes of consumers, lawyers and the courts.
I’ll be back next week with a look at another big topic, the issue of disclosure of commissions, asset management fees and fiduciary duty standards. Many people are wondering if they are going to be imposed on the structured settlement profession. Check back next week or follow us on Twitter or Facebook and find out. Also if you want to learn how you can be part of The Settlement Channel and have access to a powerful new media platform that positions you as an expert in your city, state or region, email us using the contact form and I'll be happy to give you the details.
AIG named in structured settlement class action RICO lawsuit
In what will be one of the more closely watched lawsuits of the last ten years, AIG and many of it's subsidiary companies, including American General, were named in a federal lawsuit filed on January 3, 2017 in U.S. District Court in the district of Massachusetts. You can read the entire filing of case number 1:17-cv-10007 here.
Hagens Berman law firm has filed a class-action lawsuit against the nation's largest insurance company -- American International Group, known as AIG and American General Life Insurance Company, which is a part of AIG.
This case is the first to address the totality of the industry wide practice of having "Approved Brokers" lists and the financial, business and strategic partnerships created by those programs. In the complaint, one of the primary contentions is that injury victims and annuitants who settled cases with AIG and it's various casualty companies over a 20 year period, were injured due to AIG "secretly deducting four percent from the cash portion of the settlement that the settling parties agreed would fund future annuity payments, and retaining that four percent for themselves or to pay commission to defense brokers." It goes on to further state, " By secretly and unlawfully diverting settlement money to pay their structured settlement specialist and unjustly enrich themselves, Defendants both avoided the cost of this defense expense and significantly decreased the amounts they promised to pay to fund future annuity payments to the settling claimants."
This is going to be a very interesting argument to make, as it is reasonably well known that the defense "brokers", a term which the plaintiffs contend is not an accurate title, are paid a 4% commission on structured settlements in return for essentially cost free services they provide for casualty companies. They pick up their travel, business and other expenses, do not bill hourly and are reliant fully on the commission of the structured settlement to be compensated for their work with the casualty company. However, I think the plaintiff's strategically take issue with the title of "broker" for a reason. By focusing on the fact that defense "brokers" are not really brokers in the legal sense of the word, but actually appointed agents of life companies, they contend in the suit, that by using this false or misleading title, the defendants "signal(s) a false duty of loyalty to the unsuspecting consumer." This distinction, as argued in the complaint, is an important hook in requesting the case be pushed forward as a RICO under 18.U.S.C section 1961(4).
As a profession this is obviously going to cause some tidal waves, as virtually every major structured settlement firm that does defense work is listed in the case as having been on either the AIG approved broker list, the "Agency Partners" program or other internal recognition systems. These lists authorized only certain general agents and "brokers" to work in partnership with AIG claims, with the pay off being fed lucrative and steady settlement business, while in return to agreeing to the claims practices these programs required. No defense structured settlement expert wants their firm listed as a possible participant in a RICO suit, or associated with racketeering, as the implications and damage to reputations in the legal world are dire.
As the authors and owners of The Settlement Channel, we've spent the better part of 30 years fighting against the concept of approved lists of brokers, life markets and other unreasonable restrictions which we feel prevented claimants from choosing the design, funding company and guarantor of their annuity payments. It has been our long held opinion, shared publicly for decades, that these strong arm deals and tactics were anti-consumer and a vestige of the dark ages of the early days of structured settlements when even the true cost of annuity programs were denied to claimants. Still, we have no desire to kick anyone when they are down or to pile on at this point. Let's just watch how this case unfolds as I am certain the concept of using defendant annuity agents to assist claims departments in providing structured settlements is a practice that can with stand scrutiny in most cases.
We will continue to follow the case and see if it reaches discovery, at which time much of the program in question will be opened up to review and people can make up their own minds as to the propriety of the industry wide practice of approved lists. The bigger issue in our analysis is whether the structured settlement profession will begin to be pulled into and under fiduciary standards and consumer friendly disclosure practices on a national level. As it stands now certain states have a modest patchwork of statutes or regulations that require some level of disclosure, but is the tide of pro-consumer, transparent compensation agreements and disclosure of conflicts about to wash over the structured settlement profession?
Time will tell, but this is going to be a battle of heavy weights on both sides. Buckle up.
