On Aug. 19 iWatch News published the story of Structured Investments, a California company that gives lump-sum payments to military retirees in exchange for their pension payments. These agreements are often equivalent to a loan at an annual rate of 30 percent or more. This week, a judge in Orange County, Calif., delivered a blow to the company, issuing a preliminary ruling that Structured violates federal laws prohibiting the “assignment” of military pay to someone else.
“The defendant’s practice is unscrupulous and substantially injurious” to retirees, Judge David Velasquez wrote.
He awarded $2.9 million to the 63 pensioners who filed suit, or an average payout of about $50,000.
“For other companies seeking to skirt federal prohibitions on the selling of military pensions, this decision clarifies that business model is simply not permitted under law,” said Rob Bramson, a lawyer who represented the plaintiffs.
Steven Covey, a co-founder of Structured, did not immediately respond to a message seeking comment.
Under California law, the company can file an appeal after the preliminary ruling is finalized, a process which can take about a month, Bramson said.
That ruling won’t be of immediate help to Louis and Kathie Kroot, the Lexington, Ky., couple who took a $91,566.37 lump-sum payment from the company in 2005 in exchange for paying the equivalent of $242,753.99 over eight years. Since they weren’t a part of the class action suit, they’re not eligible to reap any of the judgment. Still, if the judgment is upheld it’s likely to become a legal millstone for the company if its pension buy-out contracts are challenged in the future.