LITIGATION FUNDING FREQUENTLY ASKED QUESTIONS

Transcription

1 LITIGATION FUNDING FREQUENTLY ASKED QUESTIONS 1. WHAT IS THE LITIGATION FUNDING PROGRAM? In simple terms, it is a mutually agreed upon contract between a legal marketing firm and another party, a Funder. A Funder provides a specified amount of money in exchange for a contract which pledges to pay the Funder their initial funding back plus a 'premium' - a specific amount of money at a prescribed time. 2. COMPARED TO TRADITIONAL INVESTMENTS, EVEN OTHER NON-MARKET CORRELATED ALTERNATIVES, THE RETURNS SEEM ALMOST TOO GOOD TO BE TRUE. HOW CAN THESE CONTRACTS BE SO LUCRCATIVE? It should be made very clear that the litigation funding program is NOT an "investment." It is a contract between a Funder and a legal marketing firm. The firm has made the decision to pay the Funder a specific amount based upon the value of the services provided in return for the Funder's front-end assistance in the form of the funds provided. 3. WHAT IS THE MINIMUM FUNDING INCREMENT, THE AMOUNT RETURNED TO THE FUNDER FROM THE LEGAL MARKETING FIRM AND AT WHAT PRESCRIBED MATURITY PERIOD? A minimum funding Example : Minimum Funder Receives Funding Amt. At Maturity Maturity Period Pre-paid Forward Contract: $10,000 $20, months or up to $25, months 4. CAN A FUNDER PURCHASE MULTIPLE CONTRACTS? Yes. A Funder may purchase as many $10,000 contracts as he/she desires. If a Funder wishes to fund $100,000 he/she would purchase ten $10,000 contracts.

2 5. HOW IS A FUNDER S MONEY UTILIZED? Funds are used to identify, acquire and vet claimants and package claim files. Claimants have suffered specified medical damages due to the unexpected consequences related to defective products or the negligence of pharmaceutical or medical device companies. The costs associated with finding and processing these plaintiffs are quite high. Television, radio, newspaper, magazine and other advertising expenses used to identify and vet potential plaintiffs is substantial. Vetting costs include obtaining medical records, paying for claimants medical examinations and in some cases, even revisionary surgeries. Therefore, it makes prudent financial sense for the legal marketing firm to share the costs and also be willing to pay the funder the specified amounts shown in our example above, when those lucrative settlements are realized. 6. HOW ARE FUNDERS' MONIES PROTECTED? From the first day of participation a client s funds are guaranteed by contract. Should any funder want the purchased cost of his/her funding contract(s) returned before the funding date of the contract, he/she simply contacts the legal marketing firm in writing and the funds will be returned within 30 days, usually sooner. In this event there is no early redemption fee. The principal only is returned, with no pro-rated, partial return on that original contract principal funding. This is re-iterated in detail again in PLC s Informational Packet. 7. WHY DOESN T THE LEGAL MARKETING FIRM FUND THE ACQUISITION COSTS THEMSELVES? These costs are substantial on the front end and the firm makes its money on the back end, when settlements are paid. While they could take on these front-end costs or even borrow them from a legal lending firm or a bank, it makes more sense and is much more efficient to use leveraged dollars by allowing funders to participate. This strategy also allows the firm to locate more plaintiffs. 8. IF A FUNDER CHANGES HIS/HER MIND BEFORE FUNDING OCCURS, CAN HE/SHE GET THEIR MONEY BACK? Yes. When a Funder, for any reason, requests in writing his/her principal back, even after a 3-day right of rescission, the legal marketing firm, in its contract with the Funder, agrees to return the principal amount(s) to the funder by the process of effectively "selling" the Funder's contract to another Funder. Again, details are provided in PLC's Informational Package.

3 9. HOW DOES THE PROCESS WORK IN PLAINTIFFS' CLAIMS AGAINST THE MEDICAL MANUFACTURERS AND PHARMACEUTICAL COMPANIES? Individuals who have used or are using medical devices or certain drugs that have proven harmful and who have suffered damages are entitled to compensation from those companies. In many cases, these companies have already lost suits and have been ordered to set aside considerable sums of money (millions and, in some cases, over a billion dollars) into settlement trust accounts earmarked specifically for damaged parties. In these cases there are no further courtroom trials, no appeals and cases are presented as to their merit vis a vis the guidelines directed by the courts in the final settlement. When qualified plaintiffs are identified and vetted by the legal marketing firm, a case file is prepared. Once the original suit has been adjudicated and settlement parameters have been established, that file is presented. When accepted by the settlement board both the litigating firm is paid. The litigating law firm pays its plaintiff and then pays its referring legal marketing company partner (PLC). Subsequent to these actions PLC pays the Funder according to the terms of the contract the firm has with the Funder. The Funder receives his/her original (principal) funding back plus a premium, the amount contractually owed him/her by PLC. 10. CAN THE LEGAL MARKETING FIRM MAKE SUFFICIENT MONIES FROM THESE SETTLEMENTS TO BE ABLE TO PAY THE FUNDER, AS PROMISED? Yes. The referring legal marketing firm receives a significant share of the settlement from the partner litigating law firms it works with. The referring legal marketing firm (PLC) is able and willing to pay the funder his/her premium in exchange for providing them with the up-front monies to assist in the identification, acquisition, vetting and claim package preparation for the plaintiffs who ultimately receive their share of the settlement funds, paid to them by the litigating law firm. 11. IS THE MONEY PAID TO THE FUNDER BY THE LEGAL MARKETING FIRM CONSIDERED SHARED LEGAL FEES? No. The share of the settlement funds the referring legal marketing company (PLC) are deposited into the firm s settlement fund account. The Funder receives his/her principal back plus a pre-determined, fixed dollar premium amount as specified in the contract executed up front, between the Funder and the firm. Each contract represents a plaintiff assigned to a Funder. The amount is specifically stated in the Funding contract, entered into up-front, when the Funder executes a contract with the legal marketing firm and transfers the funds to same.

4 The legal marketing firm is simply using the Funder s money for its marketing costs and has dedicated the first $20k (contract maturity value) from their share of the settlement funds allocated to their partner litigating law firm who presented the case, to the Funder. 12. WHAT ARE SOME OFTHE MEDICAL DEVICE AND PHARMACEUTICAL PRODUCTS THAT HAVE RESULTED IN LAW SUITS AND CASES LOST BY DEFENDENT COMPANIES? >YAZ/Yasmin is an oral contraceptive from Bayer Healthcare Pharmaceuticals. Side effects reported, among others, include conditions linked to heart attack, pulmonary embolism and blood clots. >TVM is a trans-vaginal mesh from American Medical Systems and Johnson & Johnson. Some of the reported side effects include infection and bleeding, bowel and blood vessel perforation. >Paxil/Zoloft is a depression treatment from GlaxoSmithKline. Reported side effects include birth defects. There are a plethora of other examples including ACTOS and Risperdal, easily accessed via an internet search. One can simply search for "Companies named in pharma and medical device individual tort litigation cases" and readily see just how many of these issues there are. Your Consultants likely also have a list they will be happy to share. 13. WHO IS THE FIRM THAT IS PROMOTING THIS PROGRAM? The legal marketing firm is Prometheus Litigation Capital (PLC). PLC s administrative offices are located at 1130 S. Flower St., Unit 401, Los Angeles, CA To learn more about Prometheus, visit their website at Should you wish to place a funding order direct on their site, your Consultant will provide you with a password to access this menu area ( Place Funding Order ) on their site and walk you through the short, simple process. 14. ARE OTHER LAW FIRMS or LEGAL MARKETING FIRMS INVOLVED IN MEDICAL INDIVIDUAL TORT LITIGATION CASES ON A MASS BASIS? Yes, of course. However, PLC is one of a very few legal marketing firms firms that has put together a prepaid forward contract program in which private Funders can participate.

5 15. IS IT LIKELY THAT THIS OPPORTUNITY WILL REACH CAPACITY AND EXPIRE AT SOME POINT? It is highly unlikely that capacity will become an issue anytime soon. Anyone can (and should) Google individual tort litigation involving pharmaceutical and medical device companies and discover for themselves the enormity of this legal arena. These types of cases are widely prevalent now and will continue to be as long as there are pharmaceutical and medical device companies creating new and innovative drugs, medicines, devices and technologies. As each product is introduced to the public, unexpected side effects and negative consequences inevitably occur. Each of these large medical companies fully realizes their risks and budgets monies for the settlement of these types of suits. It is not unusual for these companies to allocate hundreds of millions of dollars and more for such eventualities. For these companies it is the nature of their trade and a necessary and expected part of doing business. 16. DO THESE CONSIDERABLE RETURNS VIOLATE ANY USURY LAWS? No. There are no promissory notes involved, no loan documents and no similarity to a loan. Usury laws do not apply here in the absence of there being any element of a loan. The type of program PLC utilizes as a legal marketing company, is called a prepaid forward contract. 17. IS THE LITIGATION FUNDING PROGRAM CONSIDERED A SECURITY? No. This transaction is not a security and not governed by the SEC. Funders are participating in PLC s prepaid forward contract arrangement and there are no parts of that transaction that have any elements of securitization, etc. To re-state this, Funders are participating in a legal marketing firm s efforts in plaintiff identification, acquisition and vetting costs (marketing expenses) and for that are receiving a fixed amount (principal and premium) at a specific period of time, pre-established by contract. There is no securitization taking place, ergo, no security created. These are simply prepaid forward contracts executed between a legal marketing firm and a Funder with a pre-determined pay-out at the end. In addition, the contracts issued by PLC to its Funders are secured by a lien against its client settlement account at its bank. 18. HOW IS THE MONEY THE FUNDER RECEIVES TAXED? On this topic, it is highly recommended that each prospective or existing Funder check with his/her tax advisor(s). Many tax professionals hold the well-based opinion that the prepaid forward contract is a capital asset and that the gain received by the Funder at maturity would be taxed as a long term capital gain. PLC takes no position on this.

6 Notes: In the event that the settlement of the assigned case extends beyond 24 months, the law firm will pay an additional % per month, simple interest, accrued each month until final payment is made, up to a maximum of 36 months from original case funding. Neither Synergy Financial & Consulting Group nor any of the independent Consultants that Synergy engages with in the process of educating prospective Funders about the opportunities existing in the area of litigation funding, offer tax, legal or investment advice. Synergy and the independent Consultants whom it engages with always recommend that all potential Funders execute their own due diligence and consult their own advisors.