Sunday, November 13, 2011

Where Is the Nanny State When You Need It?

Regular readers may remember that I've received numerous cash offers in the mail from companies who think I've won the lottery, and want to lend me money or buy out my winnings. Their offers usually appear with hand-written envelopes and notes, and contain checks for amounts like $25,000.

Since I've never won a lottery, I write "void" on the checks, tear them up, and toss them in the recycling.

Yesterday's Star Tribune told about that very business of buying up long-term payouts in exchange for short-term money. A young Twin Cities woman, who was awarded about $800,000 in a personal injury settlement because of lead poisoning as a child, has signed away most of her settlement money to two of these companies.

Tasheeka Griffith is legally a vulnerable adult, yet after she turned 18 a few years ago, a court allowed her to sell most of her future income from the settlement. (She had been guaranteed about $1,200 a month for life, with an additional $70,000 payment periodically.)

The Strib story brings out the sorry details:

  • Griffith says "a family member initiated most of the transfers and took much of the money."
  • She first sold $352,000 for $77,000 (22 cents on the dollar) to Seneca One, one of Daughter Number Three's lottery correspondents.
  • Then she signed over $269,000 for $46,500 (17 cents on the dollar) to RSL Funding.
  • Both of these transactions were at first rejected by judges, but were permitted later by other judges. Sounds like judge shopping, in my opinion.
  • In 2010, she was trying to sell the remaining $299,000 for just $19,000 (a bit over 6 cents on the dollar) to RSL Funding, when Hennepin County judge Mel Dickstein stopped the sale, and appointed a guardian to investigate all of the sales.
  • RSL Funding responded by suing Griffith for interference.
Minnesota, along with 46 other states, requires judges to approve these types of buyouts, and the state also requires the sellers to get "independent professional advice." In Griffith's case, the attorney who advised her was paid for by RSL Funding, but even so, told her not to take the deal. Griffith (possibly because of the relative who was involved?) ignored that advice and took the deal anyway.

In the most recent case, the Strib summarizes Griffith's statement to the judge like this: "Griffith told the judge she knew the latest transfer wouldn't be in her best interests, but she needed the $19,000 for an apartment and a car."

This is a classic example of a person who has trouble delaying gratification, a type of executive decision. It's similar to the famous marshmallow experiments by researcher Walter Mischel: 4-year-olds left alone in a room with a marshmallow are told they can have two treats if they just wait 20 minutes. About a third managed to wait. Mischel then gathered data on the kids for decades afterward, and found that those who ate the marshmallow early had SAT scores 200 points lower, on average, than those who didn't, had significantly more behavioral problems, and had trouble maintaining friendships. By their 30s, they were more likely to have higher body mass indexes and problems with addictions.

Getting the car now was more important to Griffith than having financial security in the future. As Dave McRaney's You Are Not So Smart and Jonah Lehrer's How We Decide make very clear, our brains are designed to work against us when it comes to making long-term decisions.

An apartment and a car are arguably more important than a marshmallow, and Griffith's case is further complicated by the possibility of pressure from her relative, that she had brain-damaging lead poisoning as a child, and the fact that she has been declared a vulnerable adult.

But where is our so-called nanny state when you need it?

Postscript: There are about 20 companies in the business of buying out settlements, and I guess that's enough to require a national association to represent their interests in Washington: The National Association of Settlement Purchasers. I kid you not.


Ms Sparrow said...

Many of these settlement companies sprang up in the years when an AIDS diagnosis meant certain death. Even though most insurance companies would give insureds with a terminal illness a lump sum settlement, shrewd viatical companies would seek out men dying of AIDS and purchase their policies at a fraction of their value. It's a profitable business, how else could they afford those pricey TV commercials?

Nancy/BLissed-Out Grandma said...

Now that I read this post and Ms. Sparrow's comment, I remember hearing of this. Hard to believe judges would allow a vulnerable adult to be bilked like that.