MD AG’s Office Blocks Unregistered Shell Companies From Accessing Lead-Paint Settlements From Maryland Victims Court Filings to Prevent Potentially Harmful Financial Transaction
Baltimore, MD (Dec. 11, 2015) –– As part of an effort to protect victims of lead paint poisoning from financial harm, Attorney General Brian Frosh announced today that he has moved to block certain financial transactions in which unregistered apparent shell companies seek to obtain long-term settlement payments for a fraction of their value from impaired and injured individuals.
The Office of the Attorney General has asked to intervene in a number of cases involving proposed transfers of structured settlement payments. In each case, the company proposing the transaction was not registered to do business in Maryland. In response to the Attorney General’s filings, four unregistered companies have withdrawn requests for court approval to obtain the payment stream. At least two of the proposed transactions involved victims of lead paint poisoning.
Maryland law requires out-of-state companies doing business in the state to register with the State Department of Assessments and Taxation, a process that makes it easier to hold companies accountable if their conduct violates state law or harms citizens. The Attorney General can bring court actions to restrain companies from doing business in Maryland if they fail to register or otherwise violate Maryland corporate law.
“As our actions show, we are concerned that victims of lead paint poisoning who may have significant impairments are entering into transactions that they may not understand and that may compromise their future,” Attorney General Frosh said. “And we are concerned about the practices of this industry, which induces injured Marylanders, in many cases, to give up these settlement payments for a fraction of their value.”
In September 2015, the Office of the Attorney General began an investigation into the practices of companies that buy structured settlements from lead paint victims and other injured Marylanders.
As part of the investigation, the Office has reviewed 171 petitions filed by a single family of companies in the Circuit Court for Prince George’s County, and it found that the companies and related entities had acquired payment rights worth about $21 million in net present value from Office of the Attorney General, and, in exchange, had provided only about $6 million in cash.
Through its investigation, the Office of the Attorney General has also learned that many of the entities obtaining structured settlement payments from lead paint victims and other injured Marylanders are limited liability companies, or LLCs, that do not register to do business in Maryland, that provide little or no information about their ownership and true identity, and that are often difficult to trace.
According to court filings by the Attorney General’s Office, the “extraordinary proliferation of unregistered LLCs deters regulatory approval and judicial oversight and may make it more difficult for Marylanders who may have been harmed in these transactions to obtain relief for any such harm.”