The Daily Need

A legal blow for company ‘buying’ military pensions

Last week, we told the story of a company known as “Structured Investments Co.” that offers what it calls “pension buyouts.” Under these “buyouts,” the company gives an individual an immediate lump sum of cash in exchange for some part of that person’s future pension payments.

In our collaboration with the Center for Public Integrity’s iWatch News project, we told the story of Louis Kroot, a former Navy medic, who entered into a deal with this company to help pay off his family’s medical and tax bills. The company gave Lou roughly $92,000 in cash, and in exchange, Lou promised to give the company roughly 95 months of his Navy pension, which works out to over $240,000.

As we reported, a federal law prohibits members of the military from “assigning” their pension to any other parties. The company argues that its deals don’t run afoul of this law. (Bankruptcy courts across the country have been divided on the issue: some have ruled in the company’s favor, others have ruled against it.)

On Monday, a Superior Court in California just ruled against the company, saying its contracts do violate the federal law on the assignment of military pensions. The ruling [PDF] came in response to a class-action lawsuit brought by several retired members of the military who had signed “pension buyout” contracts with the company. (The Kroot family wasn’t involved in this case.)

We’re awaiting word from the company on whether it plans to appeal.

 
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Comments

  • Ankarjen3

    Congratulations, NTK, for exposing this vile company.  Although the Kroots are not part of the class action suit related to this ruling, I hope they are made whole by this judgement.  I wish them well.

  • Financialgroups

    The Kroots were trying to play the victims role when this was actually
    the second round of funding for them.  Get real now!

  • Financialgroups

    The Kroots were trying to play the victims role when this was actually
    the second round of funding for them.  Get real now!

  • Flugallev

    He was not part of the class action because he chose not to be. Another class action case was settled and every person doing business with this company was given the option of either taking the settlement ($1,200.00 max), or joining the second class. There were 500 that took cash, and 63 that (including myself) that took their chances in the second case. As the lawyer in the winning case stated to me, it was a case of bird in the hand. The company does take advantage of people, but it’s a choice. You know how much you’re paying, and for how long. They are not victims, just people that make bad choices.

  • Flugallev

    He was not part of the class action because he chose not to be. Another class action case was settled and every person doing business with this company was given the option of either taking the settlement ($1,200.00 max), or joining the second class. There were 500 that took cash, and 63 that (including myself) that took their chances in the second case. As the lawyer in the winning case stated to me, it was a case of bird in the hand. The company does take advantage of people, but it’s a choice. You know how much you’re paying, and for how long. They are not victims, just people that make bad choices.

  • Mensa1

    The benefit is highly excessive for Kroot since the pension is government insured. Present value calculations would reveal an outrageous interest
    charge entirely out of proportion to the minimal risk involved. However if there is sufficient competition for these buyouts a more equitable arrangement
    would emerge. The principal responsibility of government is to prevent
    monopolistic practices, If this is done then the FREE market will ensure
    equitability.