W000343
Wednesday, November 14, 2001 1:33 PM
Public comment regarding September 11 Victim Compensation Fund of 2001
Dear Mr. Zwick:
On behalf of Cambridge Galaher Settlements, I am attaching for your
consideration our company's comments in response to the Department of
Justice's Notice of inquiry and advance notice of rulemaking. If you have
any questions, I can be reached at , and can
be reached at . Thank you for your consideration.
Sincerely,
Attachment 1:
November 14, 2001
Mr. Kenneth L. Zwick, Director
Office of Management Programs, Civil Division
U.S. Department of Justice
Main Building, Room 3140
950 Pennsylvania Avenue NW.
Washington, DC 20530
Re: September 11th Victim Compensation Fund of 2001
Dear Mr. Zwick:
We are writing to provide public comment in reference to the rulemaking process concerning the September 11th Victim Compensation Fund of 2001.
Introduction
Cambridge Galaher Settlements is in the business of assisting parties involved in claims or litigation to resolve their differences using structured settlements. We act as brokers in the placement of the annuities as the qualified funding asset used to fund the future financial obligations in such transactions. In that capacity we also provide clients with a variety of ancillary services to assist with the evaluation of claims, and we advise on the details of the structured settlement transaction. At appropriate times we will suggest related mechanisms that may be incorporated into the settlement plan to enhance the overall value to the claimant. This will enhance the likelihood that victims and their families will recognize that the Department of Justice has taken every possible step to protect their long-term security and support. Although the legislation establishing this fund makes no reference to structured settlements as an option in the resolution of these claims, we are writing to encourage the Department of Justice to consider the use of this type of settlement in its rulemaking and resolution processes.
Benefits to Claimants
We will not, unless requested, provide a detailed description of what structured settlements are and how they can be employed, since we are aware that the Department of Justice has employed this type of settlement in many different circumstances. Certainly you are already well aware of the fact that all periodic payments made under a structured settlement involving a physical injury or death will flow tax-free to the claimant or his or her heirs, as provided by Section 104(a)(2) of the Internal Revenue Code. We understand that in most circumstances, the government has owned the funding annuities purchased to fund its settlement obligations. In the event that the Department of Justice would not wish to do so in this program, assignments of obligations would be available consistent with the requirements of Section 130 of the Internal Revenue Code.
We do believe it useful to recite some of the additional benefits that claimants and their families would realize should they accept a structured settlement as the mode of settlement.
* Structured settlements are designed to address specific individual needs of each claimant and family. Some of those needs are for immediate cash, and some are for future financial concerns, such as income, healthcare, education and retirement.
* Spendthrift protection. Probably the most important benefit is the protection from early dissipation. Studies have shown that the majority of all large lump sum distributions are dissipated in just a few years. The structured settlement will help claimants to establish realistic spending plans that will assure continuous support as long as it is needed.
* Avoidance of unsound investment decisions. The structured settlement will free claimants from the worry over how to invest and spend their money in a way that it will last as long as it is needed. This allows claimants to focus on the more important aspects of life and family. Financial peace of mind is critically important to these victims and their families.
* Avoidance of the costs of reinvestment. The investment of a large lump sum of money is a complex and costly exercise, potentially requiring one to engage financial advisors repeatedly throughout life. Each time assets are reinvested, there is a cost attached. With a structured settlement reinvestments are avoided altogether.
* Avoidance of the impact of future market fluctuations. Future payments are guaranteed by sound financial institutions to which the investment risk is transferred.
Benefits to the United States
Structured settlements will also benefit the government. There is significant precedent for the use of structured settlements by various departments and agencies of the United States government.
* Considering the best interests of victims. By providing structured settlements the Department of Justice will take an active interest in the welfare of the victims by arranging for an analysis of specific needs of each claimant and by providing a plan to respond to those needs. This is a far more socially responsible approach than simply providing a lump sum of cash and wishing the victim well.
* Avoidance of double jeopardy. In some of those cases where large lump sum distributions have been squandered in the past, claimants have ultimately resorted to the only available support mechanism, public welfare. To the extent the Department of Justice can encourage structured settlements, it will reduce or eliminate the likelihood of any of these claimants becoming victims of their own financial mistakes, undo pressures from family and friends, or even outright fraud, any of which could result in a future dependence on government assistance.
Economic Experts
The Department of Justice has invited comments regarding the evaluation of economic loss. As leaders in the structured settlement field, Cambridge Galaher Settlements' representatives have economic resources and computer software available that will assist in the present value evaluation of the loss of future earnings. While we realize that only a minority of these claims may involve medical life care planning, we also have two different software programs that can evaluate the future cash flow needs of extremely complex life care plans. In addition, should the Special Master need to apply New York's Kaiser formula to allocate damages, we have software to do that. These are some of the ancillary services we would be happy to provide at no cost to the government or claimants on cases we are assigned.
We feel that with appropriate guidelines in place, these types of services will eliminate the need for costly and complex economic analysis and evaluation of competing economic theories. Annuity-type funding of such losses will eliminate the arguments over the appropriate discount rate to employ in evaluating present value, since annuity rates inherently include a market-based rate of return that would apply and which would be guaranteed throughout the life of the settlement.
Regarding the evaluation of those future income losses which are based on highly contingent, variable, or unpredictable factors, it would be our suggestion to collect several years of tax returns to establish not just income levels but also trends. Highly speculative claims probably cannot be considered in evaluation, but they can often be addressed in the design of the structured settlement as a means of satisfying the claimant's desires as well as needs.
Cambridge Galaher Settlements and Insurance Services, Inc.
Cambridge Galaher Settlements is an industry leader in the field of structured settlements, our only business. Founded in 1981 when the industry was in its infancy and before tax status was certain, our company grew to prominence early on. Now as part of Cambridge Integrated Services Group, and Aon company, we employ more than 100 people throughout the United States working together to provide superior service to our clients. Our professional specialists have a wide range of expertise as a result of their involvement in many different types of claims, large and small.
Cambridge Galaher Settlements is partnered with Frenkel Topping Structured Settlements in the United Kingdom, which handles approximately 80% of all structured settlements there. As you are no doubt aware, some 300 British citizens lost their lives in the events of September 11. Our association with Frenkel Topping will provide the Department of Justice with a unique source of international expertise to assure that structured settlements offered to British citizens meet the tax and other requirements of both countries. Frenkel Topping also has an accountancy practice within their company, which could serve as a source of information on the claims involving British citizens.
Because our company was personally touched by the tragedy of September 11, we have a sincere interest in the successful resolution of these claims. We would welcome the opportunity to discuss any questions or concerns you may have concerning the implementation of a structured settlement program for the September 11th Victim Compensation Fund of 2001.
Sincerely,
Comment by Cambridge Galaher Settlements and Insurance Services, Inc.
Andover, MA