During tough economic times, are former plaintiffs who receive long-term, guaranteed monthly payments unusually eager to exchange them for immediate cash? No, says Matthew T. Bracy, general counsel of Settlement Capital Corp. in Dallas.
“People are scared,” he says. “Even consumers in the position of needing to sell future payments are sitting back and collecting checks. People are a little more reserved. People are laying back and waiting to see what happens.”
Settlement Capital is a privately owned financial services company. It buys the rights to structured settlement payments from individuals who would prefer to have a lump sum of cash. Structured settlements are agreements, typically settling a personal-injury suit, in which an individual agrees to accept an annuity or stream of payments over time, such as $1,000 a month for 20 years, rather than a lump-sum payment of cash all at once, Bracy says.
“And sometimes they have a change of circumstances and need more cash than that for a new handicapped-accessible van or to modify a home,” he says. The company buys part or all of the future payments in exchange for a lump sum.
During the recent economic slump, though, fewer annuitants are making big purchases, he says. Bracy declines to estimate the drop in business over the past 18 months, saying that the 40-employee company does not release financial information.
Settlement Capital is one of about 17 companies that specialize in structured settlement purchases, he says. The largest company is J.G. Wentworth, which is known for its cable television ads, he says. “For cocktail-party purposes, I say that J.G. Wentworth, that’s our competition.”
Bracy has one lawyer working in-house with him and says a large portion of his own job is litigation management. He says the company is involved in about 50 suits involving customers allegedly breaking contracts. For example, a customer who accepted a lump-sum payment from Settlement Capital might file for bankruptcy and try to get the contract with Settlement Capital set aside.
In addition to managing litigation, Bracy handles the company’s contracts with vendors, such as marketing companies, and is in charge of the company’s underwriting and closing department.
“My goal is to make sure we are buying what we think we are buying,” he says. “It’s trickier than you think it is. We make sure the payment stream is not encumbered. We end up paying off an awful lot of child support,” he says.
If the customer owes child support, the company pays off the amount owed directly out of the customer’s lump-sum payment on the customer’s behalf, he says.
Buying the rights to a structured settlement requires court approval, Bracy says. The company goes to state district or county court andfiles an application for approval of a structured settlement payment transfer.
“It is not an adversarial proceeding,” Bracy says.
The judge reviews the individual’s reason for wanting a lump-sum payment and the terms of the agreement, then determines whether to approve the agreement. Bracy says he uses outside counsel for litigation and to handle transfer agreements.
Bracy was recruited for his current position by the company’s former GC, Earl S. Nesbitt, who now is a partner in Nesbitt, Vassar, McCown & Roden in Addison. Nesbitt says he knew Bracy in 1999 when Bracy was working with lobbyists on tax legislation on behalf of Bracy’s then-employer, Spokane, Wash.-based Metropolitan Mortgage & Securities Co. Inc.
“I thought he was excellent at analyzing situations, whether it be a lawsuit or a legislative challenge or a PR thing, and coming up with a battle plan,” Nesbitt says. “He is very good at strategy.”
About two months after hiring Bracy as associate general counsel, Nesbitt left the company to start his own firm; Bracy uses Nesbitt’s firm as outside counsel for litigation and settlement transfers.
Bracy says he also turns to Jeffrey S. Lowenstein, a partner in Bell Nunnally & Martin in Dallas, for litigation and settlement transfers. Lowenstein says Bracy is an expert on the law about purchasing annuity payments. “He knows the case law, the statutes, everything,” Lowenstein says.
Bracy has a network of lawyers nationwide to handle local bankruptcy and probate cases, as well as obtain court approvals for settlement transfers.
Bracy also began a blog about four years ago targeted to industry professionals.
“I’m trying to raise the company’s profile with advisers, attorneys and consultants who might be able to advise their clients and customers on structured settlement options.” he says.
Bracy grew up in Santa Ana and Orange City in Orange County, Calif. His father, a retired Navy cook, died when Bracy was 6 years old. His mother worked in a state hospital admissions department.
After earning a bachelor’s degree in political science in 1988 at the University of California, Irvine, Bracy was helping a friend study for the Law School Admission Test. He started reading the questions and thought “I can do that.”
He took the LSAT, applied to law school and obtained a J.D. from the University of Houston Law Center in 1992.
“It was very fortuitous,” he says. “I just stumbled into it [law]. It just happened to fit me. I was very lucky.”
His first job after graduation was as a commercial litigation associate with now-defunct Armogida & Associates in Houston. In 1994, Bracy decided to go solo as a commercial litigator.
In 1998, he and law school friend Kent Hanszen formed Bracy & Hanszen, which they grew to a business and commercial litigation firm of six lawyers. In 1999, Bracy was recruited by a former college roommate, a vice president for Metropolitan Mortgage & Securities, to become the company’s legislative counsel and manager of government relations. Metropolitan Mortgage was a $2.6 billion company with nine subsidiaries, Bracy says.
“I would be overseeing legislation in state [legislatures] and Congress affecting all these businesses,” he says. “It was a great opportunity I literally could not turn down.”
In 2001, Bracy joined Fort Washington, Pa.-based Coventry Financial, a family-owned financial services company, as director of government relations. He says he was with the company for less than a year when he and about a third of the company’s employees were laid off. A telephone call to Alan Buerger, chief executive officer and co-founder of Coventry, was forwarded to the company’s marketing director, Sheylea Brusca, who did not respond prior to presstime on July 28.
Bracy contacted Nesbitt, who was then GC of Settlement Capital. Nesbitt previously had tried to recruit him to work for the company andhired Bracy as associate general counsel. Bracy became GC when Nesbitt left the company to start a firm.
What does Bracy like best about his job?
“It’s an easy answer,” he says. “I know the industry like the back of my hand. It’s great to have a lot of depth of knowledge of one thing. When I was in commercial litigation, which I liked fine, you learned a little bit about a whole bunch of things. Now I know nearly everything about one tiny area.”