Two lawyers who facilitated the sale of millions of dollars in settlements belonging to victims of lead paint poisoning are under investigation by the Maryland Office of the Attorney General for possible violations of the state Consumer Protection Act.
In a pair of pleadings filed this week in Montgomery County Circuit Court, authorities askedCollege Park attorney Anuj Sud and Derwood attorney Charles Smith to divulge records that relate to their participation in the structured settlement purchasing industry. In particular, authorities said they are trying to determine whether Smith — who advised dozens of vulnerable people on questionable transactions — had an improper relationship with a purchasing company or its attorney, Sud.
“Mr. Sud and Mr. Smith have violated the Consumer Protection Act if, among other potential violations, they made false statements or conspired to mislead consumers in connection with either the solicitation of advisory services business for Mr. Smith or the inducement of injured Marylanders to transfer structured settlement payment rights to Access Funding entities.”
The petitions cast fresh scrutiny on an industry that has come under increasing pressure since a story published in The Washington Post in August revealed companies have purchased millions of dollars in settlement payments from lead paint victims for dimes on the dollar.
The report focused on one Chevy Chase company, Access Funding, which did deals with dozens of Baltimore residents who were overwhelmingly poor and African American, and often cognitively impaired as a result of lead poisoning.
In all, according to the agency’s investigation, the company purchased payment streams that totaled $28,723,988 — and had a present-day value of $21,426,399 — in exchange for $6,817,213. “In this manner, Access Funding entities extracted, at a minimum, a total of nearly $15 million from poor and vulnerable Marylanders from June 2013 to August 2015,” the pleading said. At least half — “and perhaps substantially more than half” — of the company’s deals involved Baltimore victims of lead paint poisoning.
Sud and Smith have played a central role in facilitating these deals since 2013. The men now contend in court papers they don’t need to share all of the requested records with authorities because they say the Consumer Protection Act excludes attorney services.
“That’s just wrong for a number of reasons,” Maryland Attorney General Brian Frosh said. “But it’s just wrong.”
Lawyers representing Smith and Sud didn’t return requests for comment on Wednesday.
In e-mails sent months ago, Smith said: “I have no business partnerships with any company in the structured settlement purchasing industry. . . . In all instances, I am directly contacted by the [settlement recipient.] . . . I’m not exactly sure how [they] come to me. . . . My independence is in no way compromised or at risk.”
Structured settlements — as opposed to traditional agreements that pay out in one lump sum — dispense regular payments across decades to protect vulnerable people from immediately spending their entire compensation. As a protective measure, Maryland passed a law in 2000 that said the courts must approve the deals before they go through.
In Maryland, companies often use two lawyers to complete this process. The first files the petitions and represents the purchasing company at hearings in which a judge determines whether the deal is in the settlement recipient’s best interest. The second lawyer offers what’s called “independent professional advice” to the customer as to the deal’s implications. The statute specifies that this counselor cannot be affiliated with the purchasing company.
The Post reviewed more than 60 Access Funding petitions, chosen at random, and Smith was the independent professional adviser on every one. Authorities now say Smith acted in this capacity in all of Access Funding’s petitions in Maryland between June 2013 and June 2015.
“Smith had an arrangement with the Access Funding entities under which he exclusively provided advisory services to Maryland tort victims who had been induced to transfer structured settlement payments to Access Funding,” the petitions said. One recipient, who is functionally illiterate and sold payments that had a present value of $337,855 for $62,636, sued Smith in June, alleging he never met with her and didn’t provide advice on the “financial, legal and tax implications” of the deal. Smith has argued she signed paperwork stating she understood the deal, and the suit is pending.
Authorities are now focused on answering several questions: Did Access Funding pay Smith? What affiliations, if any, did he have with either Access Funding or Sud?
“The victim of lead paint poisoning or some other tort is supposed to have independent advice,” Frosh said. “But if it’s the same person giving the same advice, and it’s always the same entity on the other side of the transaction, it calls into question their independence.”