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Federal financial regulators accuse SC attorney in veteran, investor scheme

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John Pelinski at his home in Batesburg on Friday, September 20, 2019. Pelinski, an Iraq War veteran who suffers from post-traumatic stress disorder, was forced to file for bankruptcy and almost lost his marriage. He's one of hundreds of veterans who sold their federal pensions and disability payments in a nationwide scheme. Lauren Petracca/Staff

A South Carolina attorney is accused of helping to orchestrate a financial scheme that duped military veterans out of their federal benefits and misled retirees and other investors all over the country. 

Candy Kern-Fuller, who owned the Upstate Law Group, was sued Thursday in South Carolina federal court by the Consumer Financial Protection Bureau and the S.C. Department of Consumer Affairs. 

The civil lawsuit alleges that Kern-Fuller worked with a series of shadowy companies that convinced veterans to sign over the rights to their pensions and disability benefits — something prohibited under federal law. 

And it accuses Kern-Fuller, a licensed South Carolina attorney, of processing payments from investors throughout the country who believed they were buying the rights to those future pension and disability payments.  

Kern-Fuller could not be reached by phone for this story. She did not return an email seeking comment.

The allegations largely mirror the findings of an investigation by The Post and Courier, which was published last September. 

The newspaper documented Kern-Fuller's lengthy relationship with a number of companies that offered military veterans lump sum payments in return for them promising to sign away several years of future pension or disability payments. 

The companies then marketed the veterans' future benefit payments to investors, who coughed up tens of thousands of dollars in many instances. 

Some of the investors' money went to the veterans for the lump sum payouts, and the rest allegedly went into the pockets of the various middlemen, including Kern-Fuller.

Kern-Fuller effectively operated as the banker, legal counsel and debt collector for the financial operation for nearly seven years. 

The Upstate Law Group used its bank accounts to wire millions of dollars back and forth from the veterans and investors. And Kern-Fuller allegedly developed the process for how all of the middlemen got paid, according to the lawsuit. 

Kern-Fuller also sued dozens of veterans who took back control of their pension or disability payments, including several who recognized the arrangement might be illegal. 

The Post and Courier documented more than 60 lawsuits that Kern-Fuller filed against veterans in state court in Greenville County.

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Some of those lawsuits ended tragically for the veterans. Many filed for bankruptcy. And some were forced to pay back far more than they ever received through the lump sum payouts. 

One veteran from Kentucky, for instance, initially received $53,377 for signing over his monthly benefit payments. But after he defaulted on that contract, he was sued by Kern-Fuller and ordered by the court to pay back more than half a million dollars. 

The lawsuit alleges that Kern-Fuller filed those lawsuits even though she knew, or should have known, the contracts were void and unenforceable under federal law. 

John Pelinski, one of the veterans sued by the Upstate Law Group, called the lawsuit against Kern-Fuller a "dream come true." 

"That's great news. I'm just ecstatic," said Pelinski who was bankrupted after a court judgment was lodged against him. "Shut her down. Disbar her."

Robert and Susan Mallory are also victims of the scheme that Kern-Fuller allegedly helped to orchestrate. The couple from Houston were two of the investors that were talked into providing the lump sum payments to veterans.

Now, they are on a fixed income and still waiting to get back more than $22,000 they invested in the scheme.

"We had no way of knowing this was illegal. We did it in good faith. And we thought we were going to be repaid. It's very disappointing it is a scam. Nobody has really come to us to try to fix it," Susan Mallory said. 

The companies that Kern-Fuller assisted in the financial scheme swapped names over the years, as they got cited by investment regulators in one state after another. The string of companies Kern-Fuller partnered with includes Voyager Financial Group, SoBell Corp., BAIC Inc., Performance Arbitrage Co. and Life Funding Options. 

Life Funding Option, which was registered in Greenville, was the last in that line. It was ordered to shut down by the S.C. Department of Consumer Affairs early last year.

Since then, many of the people who Kern-Fuller worked with have also been cited in lawsuits filed by the Consumer Financial Protection Bureau. 

Kern-Fuller's former law partner, Howard Sutter, was also named in the lawsuit filed Thursday. He did not return a call seeking comment. A secretary at Sutter's office said he and Kern-Fuller were no longer working together. 

That likely won't matter to state and federal officials. They want both of them to pay fines and refunds for taking part in the scheme. 

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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