Portsmouth judges rubber-stamped agreements that let out-of-state firms represented by a Virginia delegate buy millions of dollars worth of payments owed to sick or injured people, sometimes for a fraction of their value, according to a federal lawsuit.
Del. Stephen Heretick and his clients say the deals were legal, approved after court hearings held in accordance with state law.
But in the lawsuit, a Southwest Virginia man and his attorneys allege the large number of cases filed in Portsmouth and the scant court review they received show a conspiracy between Heretick and “complicit judges” who sometimes approved dozens of agreements on a single day.
The case revolves around “structured settlements” that let people collect lawsuit payouts over many years. Sometimes, however, recipients decide they don’t want to wait for their money.
That is where various companies – including several represented by Heretick – come in. They offer to buy some or all of the future payments in exchange for a smaller, but immediate, payment.
There are laws on the books to protect structured-settlement recipients from being taken advantage of. Before selling their payments, they must be advised in writing to seek independent professional advice, and a judge must determine the sales are in their best interest. But the suit claims Heretick, a Democrat who represents parts of Norfolk and Portsmouth, hatched a scheme to circumvent those safeguards with the help of multiple judges on the Portsmouth Circuit Court bench.
“The scheme evaded the state and federal requirements by creating what was, in name only, a judicial review process but which was, in reality, a rubber stamp for virtually every transaction brought,” the suit said.
No judges are listed as defendants in the lawsuit, which was filed in September in U.S. District Court for the Eastern District of Pennsylvania – where several of Heretick’s clients are based. On several occasions, however, the complaint mentions retired Portsmouth Circuit Judge Dean W. Sword by name.
Sword declined to comment on the suit and Heretick referred questions to an attorney, Mike Joynes. Other attorneys involved in the case either declined to comment or did not respond to requests.
Joynes said it was appalling that anyone made such allegations and that the actions described in the lawsuit show only Heretick and the judges doing their jobs.
“It’s pretty crazy to cast such aspersions,” Joynes said. “We have really good judges in the city of Portsmouth.”
The lawsuit revolves around Larry Dockery of Gate City, a former janitor at a particle board mill who lost an arm in 1988 in an industrial accident. He sued the manufacturer of the machinery that took his arm and reached a settlement worth $408,757.
The settlement called for the purchase of an annuity that would give Dockery a series of payments over the next 30 years. In addition to at least $1,200 a month, he was supposed to receive larger payments every five years that would culminate in a $135,000 payment in 2034, the suit said.
From 2002 to 2010, however, Dockery sold his future payments to companies represented by Heretick. The lawsuit outlines nine court orders in which Dockery gave up the rights to his money to 321 Henderson Receivables LLC, J.G. Wentworth Originations LLC, Seneca One Finance Inc. and Structured Settlement Investments LP.
Sword signed all of the orders, the suit says.
The lawsuit does not indicate how much Dockery was paid, stating only that the future payments had “a present value vastly more than the payments provided to Dockery.”
Documents provided by Heretick’s attorney show that, in the first deal, Dockery sold $75,000 in future payments for $36,298. The “discount present value” of those future payments was $58,439.70, according to the purchase agreement.
Dockery signed a form saying he needed immediate cash to pay for an unspecified educational program so he could find work.
The lawsuit said Dockery’s case was emblematic of a larger problem, in which company representatives pretend to befriend beneficiaries in hopes of persuading them to sign away their money. Lures include gifts and cash advances, the suit said, and even sporting events and nights at bars and strip clubs.
The suit said Heretick handled over 6,000 similar matters in Portsmouth Circuit Court – including several where neither the settlement recipient nor the would-be buyer had ties to the city or state.
According to a 2015 Washington Post article, Sword would routinely give Heretick a block of time – often one hour – to handle his structured settlement cases. Sometimes they would process dozens on a single day.
After Sword’s retirement, other judges continued the process, the suit said.
Joynes, Heretick’s attorney, said there was nothing wrong with that setup, which he described as common for attorneys handling large volumes of particular cases. He said blocking off court time to handle the cases made the process more efficient, both for Heretick and for those selling their payments.
Joynes added that Heretick gave the court the necessary documents in advance of each hearing, meaning judges would not need much time in court to review them.
The lawsuit noted a Washington Post article, published in December 2015 under the headline “The flawed system that allows companies to make millions off the injured.” The suit also noted how the state changed the law the following month to require the beneficiary reside in the city or county where the matter was filed.
The article, which also ran in The Virginian-Pilot, described the Portsmouth Circuit Court as operating like “an assembly line for the secretive industry of structured-settlement purchasing,” and cast Heretick and Sword as the ones at the controls.
The Post story highlighted the case of Terrence Taylor, who alleged in a 2015 lawsuit that companies tricked him into selling most of $31.5 million in payments he was expected to receive. A related lawsuit is still pending in Portsmouth Circuit Court, where Judge Johnny Morrison ruled in December that several of Taylor’s claims could proceed.
In court documents, attorneys for Heretick and the companies defended their handling of Dockery’s sales and others.
In an interview, Joynes said sellers such as Dockery signed their paperwork in front of a notary public and under oath. Heretick’s clients forwarded him the signed paperwork, and he only communicated with Dockery to let him know when court hearings were scheduled, Joynes said.
Attorneys for the companies Heretick represented attacked the lawsuit as light on detail, with lawyers for Seneca One Finance Inc. saying the complaint does not allege when or how Heretick, the companies and the judges hatched the purported scheme – nor what its terms might have been.
“In fact, plaintiffs do not allege that Attorney Heretick, the Purchaser Defendants, and the Portsmouth Judges agreed to anything at all,” the attorneys said.
Seneca lawyers said the lawsuit labels the judges complicit merely because they gave Heretick a regular block of time to handle the cases and, in many cases, approved the agreements after sellers waived their right to have an attorney or appear in court.
Dockery’s suit asks for unspecified damages. Heretick and several other defendants have filed motions asking a judge to dismiss the case. No hearings have been scheduled.
Dockery’s attorneys, Jonathan Auerbach and Jerome M. Marcus, want the case to proceed as a class action involving thousands of potential plaintiffs. A court will decide whether that happens.
Scott Daugherty, 757-446-2343, email@example.com