Large Estate May Pass to New York State

“He was a very smart man but he died like an idiot,” is the frank and harsh assessment made by Paul Skurka concerning his friend and fellow Holocaust survivor, Roman Blum, who died last year at the age of 97 without a will. Blum had no known heirs and no surviving members. Blum’s estate is valued at almost $40 million. It is the largest unclaimed estate in New York State history, according to the state comptroller’s office. The public administrator handling the case has hired a genealogist to search for relatives. If none are identified, the money will pass to New York State.

Mason D. Corn, his accountant and friend for 30 years told the New York Times, “I spoke to Roman many times before he passed away, and he knew what to do, how to name beneficiaries.” Julie Satow, “He Left a Fortune, To No One, N.Y. Times, Apr. 28, 2013, MB. P. 1. “Two weeks before he died, I had finally gotten him to sit down. He saw the end was coming. He was becoming mentally feeble. We agreed. I had to go away, and so he told me, ‘O.K., when you come back I will do it.’ But by then it was too late. We came this close, but we missed the boat.”

According to the N.Y. Times, Blum’s funeral was attended by a small number of mourners, most of them elderly fellow survivors or children of survivors.

In her article, Satow provides an interesting description of Mr. Blum’s early years in the U.S.:

In 1949, the Blums came to New York and settled in Forest Hills, in Queens. There, they joined a tightknit community of survivors, many of whom they knew from the Zeilsheim camp.

“They all lived the same type of lifestyle, going to the bungalow colonies together, the Catskills, everything was done as a group,” said Jack Shnay, a child of survivors who grew up in Forest Hills with the Blums. “Initially, they all lived in apartments in Rego Park; then they starting buying or building private homes.”

“Every weekend was a party,” said Charles Goldgrub, the child of survivors and Mr. Blum’s godson, who also grew up in Queens. “They had survived Hitler so they thought they would live forever.”

On weekends, the survivors would often gather to play high-stakes poker and drink plum brandy. They rarely discussed their wartime experiences, but sometimes, as a group and tipsy, they would grow emotional. Mr. Blum’s favorite tune was the 1968 single by Mary Hopkin, “Those Were The Days,” recalled Michael Pomeranc, a hotelier who grew up in Forest Hills and whose parents, also survivors, were close to the Blums. “He was always singing that song, and especially if he’d had a bit to drink, he’d try to get everyone to join in with the lyrics,” Mr. Pomeranc said.

Blum’s circumstances indicate that, given the opportunity, he could have identified charities that he found to be doing meaningful work. Many people who don’t have a will, don’t because they simply have never gotten around to addressing the matter. Local business professionals can generally identify competent estate planning lawyers. Modifications to wills may be made through “codicils.” Waiting to devise a plan for the distribution of assets may result in no plan at all.

“Pension Advances” Threaten Retiree Savings

Retirees are being solicited by certain companies to obtain “pension advances,” which regulators say are really disguised loans. The New York Times has determined that pension advances carry (after factoring in fees) interests rates ranging from 27 percent to 106 percent. Jessica Silver-Greenberg, “Loans Borrowed Against Pensions Squeeze Retirees,” New York Times, Apr. 28, 2013, p. A1.

Ads for the pension advances tout to military retirees and others: “Convert your pension into CASH”; “You have put your life on the line for Americans to protect your way of life. You deserve to do something important for yourself.”

According to the New York Times, legal aid offices in Arizona, California, and New York have reported a surge in complaints from retirees about the products.

The New York Times reports:

Pitches to military members must sidestep a federal law that prevents veterans from automatically turning over pension payments to third parties. Pension-advance firms encourage veterans to establish separate bank accounts controlled by the firms where pension payments are deposited first and then sent to the lenders. Lawyers for retirees have challenged the pension-advance firms in courts across the United States, claiming that they illegally seize military members’ pensions and violate state limits on interest rates.

To circumvent state usury laws that cap loan rates, some pension advance firms insist their products are advances, not loans, according to the firms’ Web sites and federal and state lawsuits. On its Web site, Pension Funding asks, “Is this a loan against my pension?” The answer, it says, is no. “It is an advance, not a loan,” the site says.

The advance firms have evolved from a range of different lenders; some made loans against class-action settlements, while others were subprime lenders that made installment and other short-term loans.

P. A4.

One former Marine, Ronald Govan of Snelville, Georgia, states, “I served this country and this is what I get.” The N.Y. Times reported that Govan paid an interest rate of more than 36% on a pension-based loan.

S&P’s Defense: “We Weren’t Really Serious”

In response to a DOJ civil lawsuit that the company committed fraud when it asserted that its ratings were independent and objective, Standard and Poor’s Rating Services has claimed that the assertions were mere “puffery.”

Whether or not the argument is legally viable, the Wall Street Journal notes that the position degrades the reputation of the firm. See Jeanette Neumann, “S&P Has Unusual Defense,” Wall St. J., Apr. 22, 2013, p. C1. In the Wall Street Journal article, Samuel Buell, a law professor at Duke University, questioned what the point of a rating agency is if the firm contends that its ratings are “puffery.”

Forms of mere “puffery” generally include comments by businesses that they are “the best in town,” and have “the lowest prices.” Judges have long regarded these types of assertions as a form of permitted boasting by businesses and upon which a fraud claim cannot be made. However, if the ratings agencies contend that their ratings should be regarded as mere “puffery,” then, as Prof. Buell notes, one has to wonder why rating agencies even exist? S&P seems to be carrying out a legal Houdini act – claiming in court that their representations are not to be depended upon, but on Wall Street that their comments are credible and important. We will see if the street remembers the rating agency’s courtroom assertions.

Securities Brokers to Disclose Financial Incentives for Switching Firms

For years, brokers with sizeable books of business (large and well-funded client bases) often moved between firms in order to receive robust up-front bonuses. The bonuses often measure between $750,000 and $1 million. The bonuses are generally paid to brokers in the form of “forgivable loans” – for each year that the broker is employed by the new firm a portion of the bonus is forgiven (the entire amount is generally extinguished after five years). Clients are generally told that the broker’s move was spurred by a desire to improve client account services or to obtain better research. Until now the clients have never been told the truth behind the move, or for that matter, been informed at all regarding their bottom-line value to the broker. That may be changing. On April 15, 2013, the Wall Street Journal reported that securities regulators are widely expected to start forcing stockbrokers to disclose to clients when they receive big dollars in connectio with a move to a new firm. The disclosure may cause clients to be more circumspect about moves that are touted as being made for the client’s benefit. My own experience in handling securities matters is that at least 90% of clients follow departing brokers to their new firms. Perhaps now, clients will begin to question the logic of such. Also, the circumstances may spur a discussion between the client and broker about the fees and costs being paid by the client. A large client who is informed that the broker is being paid handsomely simply because the client has hitched his wheel to the broker may extract greater price concessions for following the broker to the new firm, or conversely, with the current firm for staying put.

Author: Mark Krudys, a former SEC Enforcement Division attorney and securities federal prosecutor who regularly represents clients in disputes with brokerage firms.