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.