They sought ‘lead paint virgins’ and bought their settlements. It will be hard for victims to get their money back
By Rachel Chason
The Washington Post|
Jan 21, 2019 | 5:40 PM
Chevy Chase based Access Funding made millions of dollars from deals with victims of lead poisoning.
A Chevy Chase company that made millions of dollars from deals with victims of lead poisoning targeted an “entire generation of youth coming of age in Baltimore” with its deceptive practices, Maryland’s top law enforcement official alleges.
But even if a lawsuit filed by Attorney General Brian Frosh is successful, the amount of restitution those victims can receive is severely limited by a separate class-action claim.
The settlement of that lawsuit, brought by two of Access Funding’s former customers, entitles victims of the company to receive about $750,000 — about 4 percent of what Frosh’s office asserts they are owed.
Brian Brown, an attorney who represented the victims in the class-action suit, said his firm, Brown & Barron, got “the best possible deal for our clients.”
A federal financial oversight agency sued a Maryland-based financial firm on Monday, alleging it created an illegal scheme to deceive victims of lead paint poisoning from collecting court-approved settlements.
Frosh’s office is appealing the lawsuit in the hopes that it will be able to win back money for the victims.
Access Funding made deals with people poisoned by lead paint in their homes who were awarded “structured” settlements, which are paid in small increments over decades, ensuring that plaintiffs do not spend their money all at once.
The company obtained rights to structured-settlement payments worth nearly $18 million from 100 Maryland residents between 2013 and 2015, according to an investigation launched by Frosh’s office in response to reports in The Washington Post. More than 70 percent of the residents were victims of childhood lead poisoning.
Access Funding was founded in 2012 by Lee Jundanian, Michael Borkowski and Raffi Boghosian, all of whom are named as defendants in Frosh’s lawsuit. None of them responded to requests for comment.
One of their customers was Freddie Gray, who was poisoned by lead paint long before his death in police custody plunged Baltimore into riots in 2015.
Gray and his two sisters sold $435,000 of their settlement — valued at $280,000 — for about $54,000. A Prince George’s County judge, to whom Access Funding funneled most of its cases, approved the deal. Neither Gray nor his sisters were in court for the approval.
Much of Frosh’s investigation either confirms or amplifies reporting by the Post. A motion filed in connection with the state’s lawsuit this month details how Access Funding bombarded victims of lead paint poisoning, many of them mentally impaired, with calls and texts offering quick cash and directed them to a lawyer who was supposed to provide independent advice but was actually working closely with the company.
“It was just an outrageous abuse of these young adults,” Frosh said.
The motion describes emails obtained through the lawsuit that make clear the lengths to which company executives went — in the words of Jundanian — to “truly ‘own’ the lead paint market in Baltimore.”
For two years, the company’s research department tried to identify “lead paint virgins” as part of what it called its “virgin research project,” the emails say. The aim was to find families or groups of people who had received settlements but had not yet sold them to another company.
Phone calls to the number listed for the company were not returned.
Twin siblings Tyree and Tyrell D., who are identified in court filings as victims of lead paint, sold 40 years of payments, which had a present value of $1.3 million, for about $300,000 in cash when they turned 18.
Under the terms of the class-action suit, they would receive $40,000 for their loss — 4 percent of what Frosh’s office asserts they are owed.
Brown, who said his firm has fulfilled its “duty to zealously represent our clients,” said it determined after an investigation that the amount of restitution it could seek from the defendants was “nominal at best.”
The $1.1 million the firm sought — about $330,000 of which went to legal fees — would come from Access Funding’s insurance. No money has been awarded pending Frosh’s appeal. A hearing will be held in March, Brown said.
At the time Access Funding made the deals that are the focus of the lawsuits, Maryland law required the seller of the structured settlement to consult with an “independent professional adviser” before the agreement could be reviewed by a county judge.
Charles E. Smith, a Maryland lawyer who oversaw the vast majority of Access Funding’s deals, claimed to provide “independent professional advice” to its customers. But he should have been disqualified from doing so because he was “engaged by,” “compensated by” and “affiliat[ed]” with Access Funding,” which paid him more than $50,000 from 2013 to 2015, Frosh’s lawsuit states.
Smith, who is also named as a defendant in the Maryland case, did not respond to requests for comment.
In 2015, he told the Post that he had “no business partnerships with any company in the structured settlement purchasing industry.” However, emails obtained through Frosh’s investigation show he regularly communicated with Access Funding’s staff members and bragged about how quickly he could get new customers to sign off on the paperwork necessary to move forward with the deals.
At one point, Boghosian wrote to Borkowski, then the chief executive, saying Smith was “like an extension of our internal team.”
Smith was Boghosian’s “lifelong friend” and “brother,” according to Frosh’s motion, and Smith maintained an equally close friendship and shared a law practice with Access Funding’s lawyer, Anuj Sud.
Neither Smith nor Access Funding disclosed their connections with each other to their customers or explained that Smith was contacting them so he could later say he had provided them with “independent professional advice.”
No criminal charges have been filed against Access Funding. A spokeswoman for Frosh said the office does not confirm nor deny the existence of investigations.
After the Post’s investigation of the industry, Frosh’s office pushed to provide stronger protections for victims, which Maryland’s highest court approved in 2015.
People selling structured settlements are now required to appear in court so a judge can assess their cognitive capacity. Their counselor must submit their biographical information, including whether they have previously sold payments.
Frosh said his office is now responsible for licensing companies wanting to do business in Maryland, providing for stronger oversight.
“We’ve substantially reduced the potential for abuse going forward,” Frosh said. “But I think this is going on all over the country.”