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Editorial: Veterans investment scheme offers a cautionary tale

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Feds accuse Charleston mortgage lender in $800K investment scheme (copy)

W hen someone’s been stealing your paycheck every month, and the thefts stop, that’s good news. But it doesn’t fix the problem: You’re still out of months’ or even years’ worth of stolen income.

And even if the thief is prosecuted and convicted, you’ll probably never get much, if any, of your money back.

That’s the situation an untold number of veterans allegedly find themselves in after an Upstate attorney signed a consent order last week that is expected to stop her from filing lawsuits to enforce what was essentially a payday-loan operation.

But those veterans have no real hope of getting back any of their money, and there’s even less hope of relief for the people who invested their savings in the proceeds from that operation, only to be told earlier this year that they would no longer receive their payments.

The Post and Courier’s Andrew Brown reported last month that attorney Candy Kern-Fuller had run a nationwide scheme for seven years that preyed on desperate military veterans in order to mislead unwitting investors. She and her associates persuaded veterans to pledge their future pensions or disability payments to her Upstate Law Group in return for high-interest loans. Then they persuaded insurance brokers and private wealth advisers to market those supposedly secured payments, promising returns of up to 8 percent. When veterans stopped sending her their monthly checks, she took them to court, often winning large verdicts against them and driving some into bankruptcy.

The operation netted millions of dollars that Ms. Kern-Fuller and the insurance brokers and wealth advisers siphoned off the top of each investment. But federal law prohibits assigning your military benefits to anyone, and S.C. law prohibits using any earnings as collateral for a loan; state and federal officials say that makes the loans void — and thus noncollectible.

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Last month, several veterans who brought federal lawsuits against Ms. Kern-Fuller reached the proposed settlement, which also prohibits her from engaging in any such operations again. That’s good news for everyone involved in those lawsuits — although, again, it doesn’t get them any of their money back.

And the investors could be in even worse shape. Earlier this year, as state officials stepped up their investigations, Ms. Kern-Fuller’s Life Funding Options notified investors that it had “purchased” their benefit contracts and was freezing their payments. Although some are suing, it’s hard to imagine that any of them will recoup much, if any, of their investments.

It’s possible that none of this would have happened if the state and federal penalties for running such operations were tougher and the laws were more aggressively enforced. And it’s worth looking into improving both. But the fact is that there are always people looking for ways to take advantage of people.

So unfortunately, this is mostly a cautionary tale, both for people who need short-term loans and for people looking for good investment opportunities. If you need a loan, go to a bank, or a credit union; if you’re considering a loan from anyone else, check with the S.C. Department of Consumer Affairs to see if what you’re being offered is even legal, much less safe.

If you’re an investor, don’t invest in anything that isn’t traded on a regulated exchange unless you’ve vetted it with regulatory agencies — even if your financial adviser recommends it. If the returns sound too good to be true, they probably are.

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