Beyond Structured Settlements

ELNY Shortfall Payees Seek Review by NY's Highest Court

Attorneys representing Executive Life of New York (ELNY) structured settlement shortfall payees (Objectors) have filed a Motion for Leave to Appeal dated March 8, 2013 and a supporting Memorandum of Law with the New York State Court of Appeals (Court of Appeals).

This Motion, requesting review by New York's highest judicial authority, seeks to reverse a February 6, 2013 decision by the Appellate Division of the Supreme Court of the State of New York, Second Department (Second Department) which rejected an earlier legal challenge to the ELNY Order of Liquidation and Approval of the ELNY Restructuring Agreement signed by New York State Supreme Court Judge John M. Galasso on April 16, 2012.

In addition to attorney Edward Stone and the Christensen & Jensen law firm, the ELNY shortfall payees' appellate legal team now includes Michael J. Hutter, Jr., a law professor at the Albany Law School of Union University. Professor Hutter's online biography states he "has argued over 275 appeals in all of New York's appellate courts and many of the cases in which he represented the prevailing party are considered to be landmark decisions."

The ELNY shortfall payees consist of approximately 1456 structured settlement payees whose benefits under the ELNY Restructuring Agreement will be reduced up to 66 percent with an average per payee present value reduction of approximately $632,310 and a total present value reduction of approximately $920,642,947.

The issues being presented to the Court of Appeals requesting their review are the same issues the Second Department rejected:

• Due Process - "Did inadequate notice and the denial of information to Objectors, along with the selective application of the Civil Practice Law and Rules, deny Objectors a fair hearing as required by principles of due process?"
• Immunity - "Did the Supreme Court exceed its subject matter jurisdiction or otherwise err in granting immunity to the Receiver and others in their personal capacities, where such immunity is not provided for by statute, is inconsistent with the common law, and is unsupported by evidence?"
• Injunction - "Did the Supreme Court exceed its jurisdiction or otherwise err in permanently enjoining claims against the Receiver and others in their personal capacities, where such injunction is not provided for by statute or the common law, and no evidence was adduced at the hearing?"

Why should the Court of Appeals grant the ELNY shortfall payees' Motion seeking leave to appeal? Their attorneys argue the distribution and protection of Article 74 assets is a matter of public importance and the Second Department decision warrants leave to appeal for the following reasons:

• The Second Department's decision to authorize immunity and enjoin suits against the Receiver in his personal capacity "undermines the public's interest in protecting policyholders and receivership assets."
• The Second Department's decision is inconsistent with the Court of Appeals' previous ruling in Dinallo v. DiNapoli, "which implicitly recognized that an Article 74 Receiver is no different than any other court appointed private Receiver."
• The immunity and injunction provisions included in the ELNY Liquidation Order "exceed the subject matter jurisdiction conferred upon the Supreme Court and is inconsistent with the provisions of Article 74."

In addition, the ELNY shortfall payees' attorneys argue the Court of Appeals should grant leave to appeal "to determine whether the limited notice and the denial of information to Objectors, along with the selective application of the Civil Practice Law and Rules, provided Objectors a fair hearing as required by the principles of due process" for two reasons:

• First, under New York law, "leave to appeal is not required to appeal constitutional issues."
• Second, even absent this express right, "the issue of whether an Article 74 proceeding, or any court proceeding, is conducted in accordance with principles of due process is a matter of public importance and concern."

For S2KM's complete reporting about the ELNY liquidation and an Executive Life timeline, see the structured settlement wiki. 

For S2KM's summary of arguments presented earlier to the Appellate Division of the Supreme Court of the State of New York, Second Department by attorneys representing Benjamin M. Lawsky,  Superintendent of the New York State Department of Financial Services, and the ELNY shortfall payees, see:

• Due process
• Immunity
• Injunction

ELNY Class Action Dismissed

Attorneys representing Executive Life of New York (ELNY) shortfall victims have voluntarily dismissed an ELNY class action lawsuit without prejudice preserving their right to refile claims and tolling the statute of limitations.

The dismissal of the ELNY class action lawsuit follows:

• Contempt Order Issued - Judge M. Galasso sanctioned attorney Edward Stone and representatives of the Christensen & Jensen law firm for civil contempt February 25, 2013 for filing the ELNY class action lawsuit in the United States District Court Southern District of New York in violation of existing ELNY anti-lawsuit injunction orders.
• Anticipated Appeal of Contempt Order - Stone and Christensen & Jensen responded January 28, 2013 with a press release announcing their plan to pursue an appeal of the contempt order with the Appellate Division of the Supreme Court of the State of New York.
• Appeal of Liquidation Order Denied - The Appellate Division of the Supreme Court of the State of New York, Second Department denied an appeal February 6, 2013 challenging the ELNY Order of Liquidation and Approval of the ELNY Restructuring Agreement signed by Judge Galasso on April 16, 2012.

Attorney Stone has informed S2KM Limited the voluntary dismissal of the ELNY class action was a "strategic decision" attributable to Judge Galasso's contempt order which left open the possibility of additional fines for continued legal efforts to protect ELNY shortfall payees. Judge Galasso's contempt order provides in relevant part:

"Should [Superintendent Benjamin M Lawsky] accrue additional legal expenses, such as in filing a motion to dismiss the federal complaint upon a successful appellate result, [Stone and Christensen & Jensen] may be subject to an additional fine."

Judge Galasso acknowledged in the contempt order: "This Court is not empowered to dismiss the federal complaint outright."

Stone and the Christensen law firm maintain that the blanket immunity and permanent injunction granted by Judge Galasso in the ELNY liquidation order go beyond what Article 74 of the New York Insurance Law allows and that Judge Galasso's contempt order violates the United States Constitution.

In a letter written to United States District Judge Jesse M. Furman prior to the voluntary dismissal of the ELNY class action lawsuit, attorney Roger Christensen quoted from the 1964 decision of the United States Supreme Court in Donovan v. City of Dallas: "Early in the history of our country, a general rule was established that state and federal courts would not interfere with or try to restrain each others proceedings. That rule has continued substantially unchanged to this time."

Christensen's letter continued: "It could not be more clear that a state court cannot enjoin a federal action or use contempt proceedings to preclude citizens' attempts to have their claims heard in federal court."

For S2KM's complete reporting about the ELNY liquidation, including related litigation and an Executive Life timeline, see the structured settlement wiki.

Attorneys to Appeal ELNY Contempt Order

Attorney Edward Stone and representatives of the Christensen & Jensen law firm, who are representing Executive Life of New York (ELNY) structured settlement shortfall payees in multiple legal actions, have responded to a contempt order issued January 25, 2013 by New York State Supreme Court Judge John M. Galasso with a press release announcing their plan to pursue an appeal with the Appellate Division of the Supreme Court of the State of New York.

Judge Galasso's contempt order against the ELNY shortfall payee attorneys followed their filing of an ELNY class action lawsuit in the United States District Court Southern District of New York (federal court) which Judge Galasso ruled was a violation of existing ELNY anti-lawsuit injunction orders.

Stone and Christensen & Jensen filed the ELNY class action November 8, 2012 against Benjamin M. Lawsky, Superintendent of the New York Department of Financial Services, (Superintendent) and his predecessors, in their “non-regulatory” capacities as ELNY receivers, claiming breach of fiduciary duty and fraudulent omission among other allegations. The class action complaint also named Metropolitan Life Insurance Company and Credit Suisse Group, AG as defendants.

Judge Galasso's contempt order also included a fine, payable by the ELNY shortfall payee attorneys to the Superintendent, for costs, disbursements and reasonable attorney’s fees the Superintendent has incurred defending the federal class action and for pursuing the contempt application plus potential additional legal expenses if the Superintendent achieves a favorable result in the ELNY appeal. For purposes of the fine, the Superintendent's attorney fees are capped at $5000.

Representing 18 ELNY shortfall payees, Stone and Christensen & Jensen have also appealed Judge Galasso's April 16, 2012 ELNY Liquidation Order. Oral arguments in the ELNY appeal have concluded and a decision is expected shortly.

Press Release - distributed by Stone and Christensen & Jensen on January 28, 2013: 

"GALASSO CONTEMPT DECISION - VIOLATES UNITED STATES CONSTITUTION; PUNISHES VICTIMS; WASTES ELNY ASSETS

New York State Supreme Court Judge John M. Galasso decided to hold attorneys for structured settlement victims in civil contempt for filing a class action lawsuit in the United States District Court for the Southern District of New York despite acknowledging that "This Court is not empowered to dismiss the federal complaint outright".

We are disappointed that Judge Galasso interprets the injunctions as broader in scope than the immunity provisions contained in the various orders issued in connection with the failed rehabilitation of The Executive Life Insurance Company of New York dating back to 1991. On the other hand, we agree that Galasso is not empowered to dismiss the federal complaint and we look forward to the day when the victims of this tragedy will have a chance to shed light on what actually transpired with ELNY over the past 21 years. We intend to do everything we can to shed light on what led to this insurance industry failure of epic proportions.

For more than 21 years, victims have been kept in the dark while assets set aside to provide for their long term needs were squandered on the Superintendent's watch. We asked the Superintendent to look into the single largest failed effort at "Rehabilitation" in the history of the State of New York and he refused. We regret Superintendent Lawsky's decision to pursue contempt sanctions and we obviously interpret the injunctions differently than Judge Galasso does. We plan on pursuing an appeal on substantive and constitutional grounds with the Appellate Division."

Additional Resources

For additional S2KM reporting about the ELNY contempt proceeding, see:

• Superintendent Seeks ELNY Contempt Order
• ELNY Payees' Attorneys Respond to Contempt Motion
• ELNY Contempt Order Issued

For S2KM's complete and continuing ELNY reporting, see the structured settlement wiki.

ELNY Contempt Order Issued

New York Supreme Court Judge John M. Galasso has ordered legal counsel for three Executive Life of New York (ELNY) structured settlement shortfall payees in civil contempt for filing an ELNY class action lawsuit in the United States District Court Southern District of New York (federal court) in violation of existing ELNY anti-lawsuit injunction orders.

Despite issuing the contempt order, Judge Galasso acknowledged:

• "This Court is not empowered to dismiss the federal complaint outright"; and
• "The results of the pending [s]tate appeal may also impact the viability of the federal action."

ELNY Class Action and Appeal

Attorney Edward Stone and representatives of the Christensen & Jensen law firm, the attorneys subject to the contempt order, filed the ELNY class action lawsuit November 8, 2012 in federal court against the Superintendent and his predecessors,  in their “non-regulatory” capacities as ELNY Receivers, claiming breach of fiduciary duty and fraudulent omission among other allegations. The class action complaint also named Metropolitan Life Insurance Company and Credit Suisse Group, AG as defendants.

Attorneys for the Superintendent filed a Notice of Motion January 18, 2013 with the United States District Court to:

• Stay the ELNY class action lawsuit pursuant to the Burford abstention doctrine; or, alternatively,
• Dismiss the ELNY class action complaint in its entirety with prejudice pursuant to Federal Rule of Civil Procedure (FRCP) 12(b)(6).

Questions concerning immunity and due process, which are also raised in the pending ELNY appeal, were not subjects of the contempt proceeding. Oral arguments in the ELNY appeal have concluded and a decision is expected shortly.

Fine Imposed

Judge Galasso's January 25, 2013 contempt order also imposes a fine, payable by the ELNY shortfall payees’ legal counsel to Benjamin M. Lawsky, Superintendent of New York's Department of Financial Services (Superintendent), for costs, disbursements and reasonable attorney’s fees the Superintendent has incurred defending the federal class action and for pursuing the contempt application plus potential additional legal expenses if the Superintendent achieves a favorable result in the ELNY appeal.

The ELNY contempt order indicates Judge Galasso will determine the amount of the fine without a hearing upon receipt of an affidavit in support of the Superintendent's attorney’s fees, costs and disbursements along with a proposed judgment. For purposes of the ELNY contempt fine, the Superintendent's attorney fees will be capped at $5000.

Three Injunctions

Three ELNY injunctions were at issue in the contempt proceeding: injunctions contained in the ELNY Rehabilitation Order (1991) and the ELNY Rehabilitation Plan Approval (1992) as well as an injunction in Judge Galasso's April 16, 2012 ELNY Liquidation Order. The injunction in the Liquidation Order states:

"All persons are enjoined and restrained from commencing or further prosecuting any actions at law or other proceedings against ELNY or its assets, the Receiver or the New York Liquidation Bureau, or their present or former employees, attorneys, or agents, with respect to this proceeding or the discharge of their duties under Insurance Law Article 74."

The ELNY Liquidation Order also discharged the Superintendent, as Rehabilitator, and his agents, employees, etc., from any liability for their acts prior to the approval of the ELNY Rehabilitation Plan in the performance of their duties related to the ELNY rehabilitation. That discharge was in addition to any statutory or other immunity to which they might be entitled.

Judge Galasso's Reasoning

• The Superintendent's motion for contempt must be considered within the context of the Court enforcing its own directives.
• Counsel for plaintiffs should to be held in contempt if, by commencing the federal lawsuit against the Superintendent, an order has been disobeyed.
• New York insurance law permits a judge to issue injunctions or orders during an Article 74 rehabilitation or liquidation to prevent interference with the Receiver or the plan.
• The ELNY orders are a matter of public record, clearly expressed and unequivocal.
• The Superintendent, and his predecessors are prejudiced by being sued.
• The ELNY class action contention that no harm or waste will inure to the ELNY estate as a result of the federal action is not supported by the ELNY shortfall payees' arguments that:
  • The federal claims are against the Superintendent and his predecessors in their personal capacity; and/or
  • The federal complaint does not seek damages payable from the ELNY estate assets or prevent the ELNY Liquidation Order from proceeding as directed.
• On their face, the allegations in the federal complaint are neither "ultra vires" nor illegal.
• Naming the Superintendent and his predecessors, in their non-regulatory capacity, as defendants in the federal complaint without clearly prosecuting them in their individual capacities "appears to be a deliberate obfuscation in an effort to avoid a charge of violating the mandates of the state injunctions still in force." (emphasis added)

Additional Resources

For additional S2KM reporting about the ELNY contempt proceeding, see:

• Superintendent Seeks ELNY Contempt Order
• ELNY Payees' Attorneys Respond to Contempt Motion

For S2KM's complete and continuing ELNY reporting, see the structured settlement wiki.

ELNY Victims Hold Press Conference

Responding to injustices they attribute to Benjamin M. Lawsky, Superintendent of Financial Services for the State of New York (Superintendent), in his capacity as Receiver of Executive Life Insurance Company of New York (ELNY), and his predecessors and their agents, a group of ELNY structured settlement shortfall payees and their attorneys held a press conference today at the Hotel Pennsylvania in New York City.

Added January 9, 2013: Among several news organizations that attended the press conference, the New York Daily News has now published its first ELNY article.

Added January 13, 2013: See also this ELNY article from the Courthouse News Service.

Contempt Motion

The alleged injustices include a recent Motion filed by the Superintendent's attorneys with the Nassau County New York State Supreme Court to:

• Enjoin three ELNY structured settlement shortfall payees and their legal counsel from proceeding with a class action lawsuit in the United States District Court Southern District of New York;
• Hold in contempt of court the shortfall payees' legal counsel; and
• Require their payment of the related costs and attorney's fees incurred by the Superintendent.

The stated purpose of the Superintendent's motion is "to punish the accused for a contempt of court, and such punishment may consist of fine or imprisonment, or both, according to the law."

S2KM Summaries

• For the structured settlement shortfall payees' legal response to the Superintendents' contempt motion, see this prior blog post.

• For ELNY class action allegations of post-1991 ELNY mismanagement and non-disclosure set forth in the ELNY class action, see this prior blog post.

• For 2012 ELNY retrospective summary, see this prior blog post.

Press Conference Comments

In addition to the structured settlement shortfall payees, two of their attorneys, Edward Stone and Roger Christensen, spoke during the press conference.

“What is most shocking to victims", Stone stated, "is that the structured settlement funds set aside for future medical expenses and care were wasted by folks charged with protecting their interests. When New York State took over ELNY in 1991, the company was financially in the black, but decades of neglect and fiscal mismanagement by the NYLB led to this horrible scenario for victims. For the state to give these suffering victims a legal ultimatum and then sue them for asking for justice is unconscionable in my view. Billion dollar deficits are not created overnight.”

Christensen, whose law firm Christensen & Jensen has previously secured major victories against insurance companies, added: “The wasting of ELNY assets that has been perpetrated here in New York State against these victims and the legal intimidation the superintendent is now seeking to impose upon them must not be tolerated in a democratic and supposedly moral society. If we must, we will take this fight to the highest levels of our nation’s legal systems to obtain justice for nearly 1,500 ELNY victims scattered across all 50 states and three foreign nations. The superintendent is now asking us to be held in contempt for what he and his predecessors should have been doing all along, protecting these good people. They put their trust in the leadership of New York State and were betrayed.”

There are a total of 1,457 ELNY shortfall victims across all 50 states, the District of Columbia, and three countries. The largest proportion of victims hail from: California, New York, Florida, New Jersey, Texas, Pennsylvania, Ohio, Washington, Nevada, North Carolina, Michigan, Arizona, Louisiana, Maryland, Illinois, Georgia and Connecticut.

Complete ELNY Coverage

For S2KM's complete and continuing reporting about the ELNY liquidation, including an Executive Life timeline, see the structured settlement wiki.

ELNY Payees' Attorneys Respond to Contempt Motion

Should Benjamin M. Lawsky, Superintendent of New York's Department of Financial Services, acting as Receiver for Executive Life of New York, (Superintendent) receive a "free pass" for all actions taken by Lawsky, his predecessor Superintendents and their agents during the past 21 years with respect to the Executive Life of New York (ELNY) rehabilitation and liquidation no matter how egregious and regardless of whether or not those actions were taken in good faith and/or constituted illegal conduct under Article 74 of New York's insurance law?

Motion for Contempt Order

That is the central strategic question posed by attorney Edward Stone and the Christensen & Jensen law firm (ELNY shortfall attorneys) in their Memorandum of Law responding to a Motion filed last month by attorneys representing the Superintendent with the Nassau County New York State Supreme Court to:

• Enjoin three ELNY structured settlement shortfall payees and their legal counsel from proceeding with a class action lawsuit filed November 8, 2012 in the United States District Court Southern District of New York;
• Hold in contempt of court the shortfall payees' legal counsel; and
• Require their payment of the related costs and attorney's fees incurred by the Superintendent.

Characterizing the Superintendent's Motion for a Contempt Order as a "SLAPP" ("strategic lawsuit against public participation"), the ELNY shortfall attorneys argue in their Memorandum of Law that the Superintendent's Motion should not be condoned and that the Superintendent "is presumably wasting estate assets to avoid a proper inquiry into malfeasance by his predecessors and agents,continuing a disturbing pattern."

ELNY Class Action

In their class action Complaint, the named ELNY shortfall payees and their attorneys assert causes of action against the Superintendent and his predecessors, in their personal capacity: 1) for breach of fiduciary duty and fraudulent concealment in not conducting the rehabilitation of ELNY in good faith; 2) for self-dealing; 3) for material misstatements; and 4) for fraudulently concealing and failing to disclose material information regarding ELNY’s financial status. See the ELNY Allegation Timeline for S2KM's re-configuration of selected allegations of malfeasance from the class action complaint.

Superintendent's Contempt Argument

In their Memoradum of Law supporting their Motion for Contempt, the Superintendent's attorneys argue:

• The ELNY class action lawsuit violates an injunction provision in the ELNY Liquidation Order signed by New York State Supreme Court Judge John M. Galasso on April 16, 2012; and
• "It is literally hornbook law that [a] violation of an injunction constitutes a contempt.'”

The ELNY Liquidation Order injunction: “enjoins and restrains [all persons] from commencing or further prosecuting any actions at law or other proceedings against ELNY or its assets, the Receiver or the New York Liquidation Bureau [NYLB], or their present or former employees, attorneys, or agents with respect to this proceeding or the discharge of their duties under Insurance Law Article 74.”

ELNY Shortfall Payees' Argument - In their Memorandum of Law Responding to the Motion for Contempt

The ELNY class action lawsuit does not violate the ELNY Liquidation Order injunction because:

• The ELNY payees' attorneys "tailored their Complaint specifically and conservatively to avoid any claim against ELNY or its assets and any claim properly precluded by the injunction or immunity provisions of the April 16th Order of this Court, acting within its subject matter jurisdiction."
• Their Federal class action lawsuit:
  • "[I]s not an in rem suit against the ELNY estate or its assets;
  • "[D]oes not concern how ELNY was run prior to being placed into rehabilitation or seek any damages payable from estate assets;
  • "[D]oes not affect or even seek to prevent the Court’s Order of Liquidation and Restructuring Agreement from proceeding;
  • "[D]oes not seek to hold the Receiver liable for any conduct of administering the business and assets of ELNY while acting in good faith with appropriate care in compliance with the Court’s prior Order of Rehabilitation."

The Superintendent's Motion for a Contempt Order should be denied because:

• The ELNY class action lawsuit is outside the scope of the ELNY liquidation.
• The ELNY liquidation court's subject matter jurisdiction is limited to administration of the ELNY estate.
• The ELNY Liquidation Order's injunction provision cannot be broader than the scope of judicial immunity.
• The injunction provision should be interpreted and enforced consistent with the purpose and provisions of New York insurance law Article 74.
• The claims made in the ELNY class action lawsuit seek to hold the Superintendent and his agents liable in their personal capacities for bad faith conduct.
• The ELNY liquidation court should not hold the plaintiffs in the class action lawsuit or their attorneys in civil contempt.
• The injunction does not clearly and unequivocally bar suits against the Superintendent in his personal capacity.
• Positions taken by the ELNY shortfall payees in the ELNY appeal are not admissions, but rather the proper way to protect their rights.

ELNY Appeal

The ELNY Order's injunction, and its related grant of immunity, are simultaneously being contested in an ELNY appeal filed May 30, 2012 with the Appellate Division of the Supreme Court of the State of New York, Second Department. Oral arguments for the ELNY appeal occurred November 15, 2012 but no decision has been announced. This S2KM blog post summarizes the injunction arguments in the Superintendent's appellate brief and the ELNY shortfall payees' appellate reply brief.

Continuing ELNY Coverage

For S2KM's complete and continuing coverage of the ELNY liquidation and related lawsuits, see the structured settlement wiki.

 

Structured Settlements in 2012 - 4

Executive Life of New York

At one time or another, each of us may have become acquainted with individuals who have overcome personal injuries and successfully transformed their disabilities and special needs into special lifetime accomplishments. Kyle Walsh, profiled in a 2012 S2KM blog post, is one such individual. The late Randy Snow, featured in a 2008 S2KM blog series, was another.

Structured settlements are supposed to provide economic security for people with serious injuries and disabilities - to help them rebuild their lives and, in many cases, to achieve special lifetime accomplishments. Instead of an all-cash personal injury settlement, structured settlement recipients accept a promise of future periodic payments.

What happens, if and when, that promise is broken? What happens when a structured settlement funding company, and the regulators and guaranty system responsible for protecting the structured settlement recipients, fail to make and/or insure full payment?

These questions are highlighted by the Executive Life of New York (ELNY) liquidation - the dominant structured settlement story of 2012 and one of the most important developments in the history of the United States structured settlement industry.

The story of ELNY, as well as its affiliate Executive Life of California (ELIC), and their parent company, First Capital Corporation (FEC), is long and complex. For background of events prior to ELNY's 1991 receivership, S2KM recommends Gary Schulte's 1992 book "The Fall of First Executive".

Significantly, neither the 1991 ELNY Rehabilitation Order nor the 1992 Order approving the ELNY Rehabilitation Plan declared ELNY to be insolvent. When then New York's Insurance Commissioner Salvatore Curiale seized control of ELNY on April 16, 1991 and placed it in receivership, he stated: "The company is currently neither in an insolvent or impaired condition. . . . I have not petitioned the Court to make a finding of insolvency. ELNY is a company well able to meet its current obligations."

Exactly twenty-one years later, on April 16, 2012, following 11 days of hearings at the Nassau County New York Supreme Court, presiding Judge John M. Galasso approved an Order of Liquidation and a Restructuring Agreement for ELNY as proposed by the Superintendent of the New York State Department of Financial Services (Superintendent), as ELNY's Receiver, and the National Organization of Life and Health Guaranty Funds (NOLHGA).

The result of the ELNY Liquidation Order and Restructuring Plan, even following contributions from state guaranty funds and voluntary life insurance company contributions, is a $900 million shortfall allocated entirely (and arguably inequitably) to more than 1400 ELNY payees out of a total of approximately 9700 current ELNY payees. The remaining ELNY payees expect to receive 100 percent of their promised future payments. The average individual shortfall is estimated to exceed $600,000 present value. Although an ELNY Hardship Fund has been created, it has not yet been funded.

An appeal was filed May 30, 2012, on behalf of 18 ELNY structured settlement shortfall payees, challenging the ELNY liquidation order and restructuring agreement on the basis of due process. The appeal also alleges that immunities and injunctions granted under the liquidation order are improper. Oral arguments occurred on November 15, 2012 in Brooklyn before the Appellate Division of the Supreme Court of the State of New York, Second Department. No decision has been announced.

Another legal challenge to the ELNY liquidation order occurred June 14, 2012 when attorneys for several liability insurers filed a Motion asking Judge John Gallasso to "clarify and/or correct" his April 16, 2012 ELNY Memorandum Decision. The motion indirectly raises the issue of whether qualified assignments extinguish the liability of defendants and/or liability insurers for shortfall payments resulting from the ELNY liquidation? Judge Galasso denied the Motion without further explanation. 

In a subsequent development, somewhat related to the liability insurers' motion, the ELNY website announced an ELNY Facilitation Plan to assist owners of ELNY structured settlement annuities (SSAs) make supplemental payments to ELNY SSA payees and to coordinate those payments with the ELNY benefit payments scheduled to be made by the Guaranty Association Benefits Company (GABC) under the ELNY Restructuring Plan approved by Judge Galasso on April 16, 2012 as part of the ELNY liquidation order.

The same attorneys who filed the ELNY appeal, Edward Stone and representatives of the Christensen & Jensen law firm, filed a class action lawsuit November 8, 2012, on behalf of ELNY shortfall victims, against Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, and his predecessor ELNY Rehabilitators, as well as MetLife and Credit Suisse. The class action allegations provide a critical litany of mismanagment and non-disclosure during the 21 years ELNY's estate was being supervised by these defendants.

In response, attorneys representing Benjamin M. Lawsky, in his capacity as ELNY's Receiver, filed a Notice of a Motion with the Nassau County New York State Supreme Court requesting oral argument on January 4, 2013 at 9:30 a.m. or as soon thereafter as the parties may be heard:

• to enjoin three ELNY structured settlement shortfall payees and their legal counsel from proceeding with a class action lawsuit in the United States District Court Southern District of New York;
• to hold in contempt of court the shortfall payees' legal counsel; and
• to require their payment of the related costs and attorney's fees incurred by the Superintendent.

Although the ELNY liquidation has so far received limited coverage in the mainstream media, specialty insurance experts and analysts have not been silent. Examples:

• Peter Bickford - In his article titled "The Elephant in the Court Room" (summarized here by S2KM), Bickford argues New York’s receivership system has failed ELNY, its policyholders and beneficiaries, as well as the insurance industry and its customers due to a lack of basic accountability standards. Although the ELNY restructuring plan may solve the immediate ELNY problem (at the expense of the remaining ELNY shortfall victims), Bickford maintains it does not address the broader, underlying systemic defects inherent in the New York life insurance receivership system. Without an act of the New York legislature, according to Bickford, "there will be no life insurance guaranty fund coverage in New York" following ELNY. Bickford's article also provides succinct summaries of objections raised by ELNY shortfall victims and ELNY legal issues which he states "could linger in the courts for years"
• LifeHealthPro - In an article titled "The Complete ELNY Saga: 21 Years of Mismanagement, Corruption, Broken Promises and Shattered Lives", (summarized here by S2KM), the authors assign primary blame for ELNY insolvency to the NYLB which they describe as "a rogue agency known for its codes of secrecy and characterized by many who spoke for this story as ineffective and mismanaged at best, and a snake pit of corruption at worst". In a companion article (reviewed here by S2KM), writer Warren Hersch asks: "is the structured settlement process in need of reform"?  In a follow-up oped article titled "Governor Cuomo I'm Calling You Out", (summarized here by S2KM), Bill Coffin, LifeHealthPro's Group Editor, charges New York Governor Andrew Cuomo with personal responsibility to clean up the "ELNY debacle".

The final results of the ELNY liquidation will depend upon the outcome of the continuing litigation highlighted in this article. It also remains to be seen what reforms, if any, will result from the failed ELNY receivership process.

In conclusion, it should also be noted that ELIC-related litigation continued in 2012 (Garamendi v. Altus Finance S.A.) when a federal jury in Los Angeles rejected a claim by California's Insurance Commissioner that, but for a conspiracy by French investor group Artemis S.A.:

• ELIC's original conservator (then California insurance commissioner John Garamendi) would have accepted an alternative bid in 1991 by state insurance guaranty associations; and
• The alternative bid would have retained profits from ELIC's junk bond portfolio for the benefit of policyholders including ELIC structured settlement recipients.

For S2KM's complete and continuing reporting about the ELNY liquidation, see the structured settlement wiki.

This blog post completes S2KM's series "Structured Settlements in 2012":

• Part 1 - Primary market
• Part 2 - Settlement planning
• Part 3 - Secondary market
• Part 4 - Executive Life of New York

Superintendent Seeks ELNY Contempt Order

Attorneys representing Benjamin M. Lawsky, Superintendent of Financial Services for the State of New York (Superintendent), in his capacity as Receiver of Executive Life Insurance Company of New York (ELNY), have filed Notice of a Motion with the Nassau County New York State Supreme Court requesting oral argument on January 4, 2013 at 9:30 a.m. or as soon thereafter as the parties may be heard:

• to enjoin three ELNY structured settlement shortfall payees and their legal counsel from proceeding with a class action lawsuit in the United States District Court Southern District of New York;
• to hold in contempt of court the shortfall payees' legal counsel; and
• to require their payment of the related costs and attorney's fees incurred by the Superintendent.

The purpose of motion, according to the notice, "is to punish the accused for a contempt of court, and such punishment may consist of fine or imprisonment, or both, according to the law."

Class Action Lawsuit

The named ELNY shortfall payees, Jeanice Dolan, Daniel A. Malin, and Keith Vincent, (objector plaintiffs) through their legal counsel, Edward S. Stone, and Roger P. Christensen, Karra J. Porter, and Kristen C. Kiburtz of Christensen & Jensen, P.C. (objector legal counsel), filed the class action lawsuit November 8, 2012 naming as defendants the Superintendent in his non-regulatory capacity as ELNY's Receiver, including predecessor ELNY Receivers (Receiver), Metropolitan Life Insurance Company (MetLife) and Credit Suisse Group, AG (Credit Suisse).

This S2KM blog post re-configures selected allegations from the class action complaint into an ELNY "allegation timeline". A copy of the class action complaint is posted on the structured settlement wiki.

ELNY Appeal

Previously, on May 30, 2012, the objector legal counsel, on behalf of 18 ELNY shortfall payees, filed a Notice of Appeal (ELNY appeal) with the Appellate Division of the Supreme Court of the State of New York, Second Department, challenging the Executive Life of New York (ELNY) Order of Liquidation and Approval of the ELNY Restructuring Agreement signed by New York State Supreme Court Judge John M. Galasso on April 16, 2012.

The oral arguments in the ELNY appeal occurred November 15, 2012 and a decision is expected before 2012 calendar year end.

• This S2KM blog post summarizes the Appellant/Objectors' appellate allegations that no statutory or common law basis existed for Judge John Galasso's "extraordinarily broad grant of injunctive relief" to protect the Superintendent and his agents, including the New York Liquidation Bureau (NYLB).
• This S2KM blog post summarizes the injunction arguments in the Superintendent's appellate brief and the ELNY shortfall payees' reply brief.

Preemptive Correspondence

Prior to filing the December 8, 2012 Notice of Motion seeking to enforce injunctions and a contempt order, attorney Steven M. Bierman, representing the Superintendent, and objector legal counsel exchanged preemptive letters, copies of which S2KM has reviewed.

In response to attorney Bierman's threats to file a motion "to enforce the Receivership Orders and to obtain an order of contempt", the objector legal counsel replied in part:

• "[W]e view your recent letter on behalf of the Superintendent as an attempt at intimidation and as further evidence of complicity by the Superintendent in the long-standing cover-up regarding the aborted rehabilitation of ELNY and the illegal wasting of its assets. As you know such wasting was in direct violation of the Supreme Court's orders."
• "[I]f you do elect to initiate contempt proceedings, you can anticipate a cross motion raising, among other things, the Superintendent's violation of the Supreme Court's orders, which are serious and numerous."
• "[W]e are puzzled by the current position taken by Superintendent Lawsky. While it was proper to name him in the subject complaint, he is currently in a position to distance himself from the failings of his predecessors under whose watch the critical failings occurred."
• "[W]e are willing to explore with you the possibility of Superintendent Lawsky's joining with us in protecting and asserting the rights of the shortfall payees."

Legal Memorandum in Support of Motion

In support of their motion to enforce the court's injunctions and for a contempt order, attorneys for the Superintendent also filed a Memorandum of Law from which selected excerpts follow:

• "During the rehabilitation and liquidation proceedings of ELNY under Article 74 of the Insurance Law, and consistent with Insurance Law § 7419, this Court has entered various antisuit injunctions—in 1991, 1992 (which were continued by this Court’s order on December 17, 2010), and 2012—that 'enjoined and restrained [all persons] from bringing or further prosecuting any action at law, suit in equity, special or other proceeding against [ELNY] or its assets, or the Superintendent of Insurance of the State of New York and his successors in office as Rehabilitators thereof, or their agents'.”
• "In their pending appeal, those objectors and their counsel recognized the force of these injunctions, stating that this Court 'granted the Receiver’s request to permanently enjoin the bringing of any claims against the Receiver or others, including claims in their personal capacities.' They also conceded that '[l]eave of the court must be obtained to sue a receiver in his or her representative, as opposed to individual, capacity.'”
• "Notwithstanding their admissions that the Court enjoined 'the bringing of any claims against the Receiver,' three of the objector-appellants, Jeanice Dolan, Daniel A. Malin, and Keith Vincent ..., through their counsel Edward S. Stone and Roger P. Christensen, Karra J. Porter, and Kristen C. Kiburtz of Christensen & Jensen, P.C. ..., recently filed a putative class action in the United States District Courtfor the Southern District of New York that violates this Court’s anti-suit injunctions."
• "It is literally hornbook law that '[a] violation of an injunction constitutes a contempt.'”
• "Here: (1) this Court’s anti-suit injunctions expressly enjoined actions against the Superintendent as ELNY’s Receiver, (2) the Objector Plaintiffs and Counsel unquestionably violated these injunctions by filing suit in federal district court, (3) Counsel for the Objector-Plaintiffs admittedly had knowledge of the Court’s injunctions, and (4) the Superintendent has been prejudiced because, inter alia, he has had to retain counsel, to analyze the claims, and to begin preparing a responsive pleading to the federal court complaint against him, which has distracted from his work and that of his staff in orderly liquidating ELNY."
• "Disobedience of a court order is 'sufficient to sustain a finding of civil contempt, regardless of motive, where . . . it was calculated to or actually did defeat, impair, impede, or prejudice the [other party’s] rights.'”
• "Counsel for Objector-Plaintiffs’ refusal to comply with the anti-suit injunctions has caused the Receiver to incur costs and expenses, including attorney’s fees (both in analyzing and preparing a response to the Complaint and in bringing this contempt action)."
• "Accordingly, the Court should include such costs and fees as part of a contempt order and require Counsel for Objector-Plaintiffs to pay to the Superintendent the full amount of his costs and attorney’s fees that are incurred as a result of their contempt."

For S2KM's complete ELNY reporting and an Executive Life timeline, see the the structured settlement wiki.

ELNY Allegation Timeline

The Executive Life of New York (ELNY)  class action lawsuit , filed November 8, 2012 by attorney Edward Stone and representatives of the Christensen & Jensen law firm, on behalf of ELNY shortfall victims, against Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, and his predecessor ELNY Rehabilitators (Superintendent and/or Rehabilitator), MetLife and Credit Suisse, substantially expands the historical allegations of post-1991 ELNY mismanagement and non-disclosure. 

What follows is S2KM's re-configuration of selected allegations from the class action complaint into an ELNY "allegation timeline".

For persons seeking more comprehensive understanding of alleged mismanagement of ELNY during its 21 year rehabilitation, S2KM recommends reading the ELNY class action complaint which is posted on the structured settlement wiki. The following S2KM blog posts provide additional critiques of the New York Liquidation Bureau's (NYLB) role in ELNY insolvency:

• Elephant in the ELNY Courtroom - S2KM's summary of Peter Bickford's article.
• NYLB Role in ELNY Disaster -  highlighting allegations in the National Underwriter article "The Complete ELNY Saga"

ELNY Class Action Allegation Timeline

April 16, 1991

• New York's Insurance Superintendent Salvatore Curiale states: "[ELNY] isn't insolvent and has ample cash on hand to pay life insurance death benefits and meet annuity payments."
• Curiale further states: "The company is currently neither in an insolvent or impaired condition. . . . I have not petitioned the Court to make a finding of insolvency. ELNY is a company well able to meet its current obligations."

April 23, 1991

• ELNY Rehabilitation Court enters an Order of Rehabilitation which prohibits "all" persons, including the Rehabilitator, from "doing or permitting to be done any act or thing which might waste the assets" of ELNY.
• Under ELNY's Order of Rehabilitation, no more than 30 percent of ELNY's assets can be invested in common stock at any given time. This 30 percent cap is 50 percent higher than the percentage allowed by active insurance companies.
• Consistent with normal practice, Superintendent Curiale, ELNY's Rehabilitator, delegates most of his ELNY rehabilitation duties to the New York Liquidation Bureau [NYLB], directed by a Special Deputy Superintendent who in 1991 is Kevin Foley.

May 17, 1991 - In a letter to ELNY policyholders, the Superintendent confirms the sole basis for ELNY's rehabilitation has been the risk of policy surrenders. The letter further states the Superintendent is "presently analyzing the assets and liabilities of ELNY[.]"

June 7, 1991 - NYLB files a petition, which the Rehabilitation Court approves to retain First Boston Corporation (First Boston) as ELNY's exclusive financial advisor.

• The court also approves an investment advisory and management agreement with a First Boston affiliate providing for the payment of multi-million dollar fees.
• First Boston (and its successor/purchaser Credit Suisse) subsequently invests ELNY's assets in violation of its contractual obligations, in violation of the court's order, in violation of its representations to the NYLB and the court, and in violation of its fiduciary duties to ELNY shortfall payees.
• Instead, First Boston and Credit Suisse engage in a pattern of risky investments that generate high management fees and place ELNY's assets at considerable risk.
• Note: Credit Suisse acquired First Boston Corporation in 1990 but did not phase out the First Boston name until 2006.

June 1991 - The Superintendent contacts the Life Insurance Guaranty Corporation of New York (LIGCNY) to discuss the disposition of ELNY. MetLife, the largest domiciled insurance company in New York, has a lead position in LIGCNY and receives information about ELNY that is not available to other insurers generally or to the public.

Between June and November 1991

• NYLB enters into discussions with MetLife. Deputy Superintendent Foley is the principal person representing NYLB in these discussions.
• Under an agreement ultimately approved by the Rehabilitation Court, MetLife receives more than $1.5 billion of ELNY's traditional whole life, term life and single premium deferred annuity books of business plus $1.5 billion of ELNY's highest-quality assets.
• NYLB takes several steps to prevent competitive bids from other insurers.
• The products transferred to MetLife include 52,748 single premium deferred annuities and 80,891 life insurance policies. This large book of business allows MetLife to increase its assets by more than $1 billion at essentially no risk.
• In addition to receiving cash, MetLife is allowed to pick and choose from among ELNY's bonds and to charge "substantially higher surrender charges" than allowed under the ELNY contracts.
• Part of the agreement with MetLife includes retention of MetLife to service ELNY's remaining SPIAs (including structured settlement annuities) with a monthly fee of $5.50 per payee if payments begin before the last day of any month and $2.50 per payee if payments have not begun.
• Under this arrangement, ELNY's true liabilities are ascertainable only by NYLB and MetLife, the only entities with access to the annuity contracts.

October 9, 1991 - In a letter to ELNY policyholders and annuitants, the Superintendent reiterates the original ELNY takeover was due to surrender requests and further states: "it remains our belief that ELNY policyholders, annuitants and contract holders will receive 100% of the amounts due them under any of the options chosen as part [of] the rehabilitation plan. ... Please be assured that your money is being well protected and conservatively invested by the Rehabilitator."

January 21, 1992 - In a letter to ELNY policyholders and annuitants, the Superintendent states he is proposing a transfer of assets to MetLife and that "[t]he contemplated exchange and reinsurance agreements [with MetLife] would place you in a substantially similar position as you were at the time of the entry of the Rehabilitation Order."

March 26, 1992 - To implement the agreements with First Boston and MetLife, NYLB submits a proposed ELNY Rehabilitation Plan which the court approves.

• First Boston represents to the court the only possible course of action is to transfer virtually all of ELNY's investment grade assets to MetLife in exchange for MetLife assuming ELNY's obligations to only part of its policyholders.
• First Boston and NYLB represent that with First Boston's management of ELNY's assets, it is more than 90% certain the remaining ELNY assets will be sufficient to meet 100% of ELNY's obligations.
• Superintendent Curiale represents that, following "an extensive and detailed analysis ... Petitioner, as Rehabilitator, determined that the transaction proposed in the Plan would not impose any unwarranted or unreasonable risks on ELNY's SPIA holders, creditors or shareholders."
• Deputy Superintendent Foley states that, after the transfer, "we will make continued full payment" to annuitants, that he is "fully confident that these payments can and will be made," and that it is a "100 percent guarantee."
• NYLB represents that ELNY's remaining assets and liabilities will be approximately equal after the transfer of assets to MetLife. In fact, after the highest-value assets are transferred to MetLife, ELNY's remaining assets are less that its fixed liabilities by at least $300 million.
• From 1992 until 2010, the NYLB never files any reports with or otherwise updates the ELNY Rehabilitation Court with respect to ELNY's annuities.

April 13, 1992 - In a letter to ELNY policyholders and annuitants, the Superintendent states the proposed transfer of assets to MetLife "best protects all classes of ELNY policyholders and provides security, value, fairness, timeliness and practicality."

During 1992 - The Superintendent conducts "an extensive and detailed," "careful and exhaustive," "comprehensive" "full study" of ELNY's assets and liabilities and afterward reaffirms that ELNY is solvent.

• Following the transfer to MetLife, ELNY retains 23,666 annuity contracts in force and approximately $3.3 billion of assets.
• Foley acknowledges, under the deal, MetLife received "extremely high quality assets" and ELNY was left with lower-quality assets.
• Foley predicts the ELNY rehabilitation process will take "four or five years" or possibly less.
• NYLB asks Milliman & Robertson [M&R] to render actuarial opinions regarding the sufficiency of ELNY's remaining assets based upon certain assumptions and investment strategies.
• M&R does not audit or independently verify any of the information or assumptions provided to it.
• Based upon the assumptions provided by NYLB and First Boston, NYLB represents:
  • "[T]he investment strategy adopted by [the Superintendent] does not impose any unreasonable risks on ELNY's SPIA holders, creditors or shareholders."
  • "[I]n more than 90 percent of 500 randomly generated interest rate scenarios under ... base case assumptions, ELNY's SPIA obligations are satisfied in full."
  • "Under the M&R study, the projected cash flows from the remaining assets [are] sufficient to meet 95% of the SPIA obligations under approximately 99% of the scenerios tested using ... base case default, recovery, yield and rate of return assumptions."

1996 - NYLB for the first time refuses unrestricted access by the New York State Comptroller's office (Comptroller) to its records and personnel.

• The Comptroller reports: "During our work, Department and Bureau officials prevented auditors from examining relevant records related to the liquidation of one estate and employee personnel-related records. Our audit was precluded from interviewing agency managers and operating personnel without senior management present, thereby creating an environment where those individuals could not speak freely."
• Prior to its takeover of ELNY, NYLB had generally cooperated with audits requested by the Comptroller's office.
• For example, no limitations were placed on the Comptroller in 1976, 1984, or 1990.
• In 1994, the Comptroller performed a follow up audit limited to items that had not been reviewed in 1990.

1998 - Common stock comprises 38 percent of ELNY's portfolio exceeding the 30 percent limit set by the 1991 Order of Rehabilitation. 

1999

• A NYLB representative states it could take up to 100 years before ELNY is finally liquidated.
• Former Deputy Superintendent Foley begins employment with MetLife as its Vice President of External and Internal Communications.

2000

• Common stock comprises as much as 44 percent of ELNY's investment portfolio.
• ELNY's common stock portfolio loses hundreds of millions of dollars, nearly one-third of its value.

2001

• In a meeting with a potential ELNY investor representative, the then Deputy Superintendent states: "Why would we want to sell [ELNY] when we can sit here and clip coupons all day."
• ELNY's common stock portfolio drops another 13 percent.

2002 - ELNY's common stock portfolio drops another 19 percent.

2004 - The NYLB refuses a Comptroller request to perform a comprehensive audit to include a review of ELNY's assets and liabilities.

July 23, 2004 - The Comptroller issues subpoenas related to the proposed NYLB audit.

November 17, 2004 - The Superintendent files suit to quash the subpoenas.

June 30, 2005 - A New York Supreme Court quashes the subpoenas, and the Comptroller appeals.

Late 2005 or early 2006

• Then-New York Attorney General Eliot Spitzer campaigns for Governor on an anti-corruption platform.
• NYLB officials approach NOLHGA and the two entities begin working on a plan to liquidate ELNY without informing the Rehabilitation Court or ELNY's policyholders and annuitants of ELNY's insolvency.
• Under this plan, more than 1400 ELNY annuitants would suffer reduced payments of up to 66 percent.

August 2006 - Then-Special Deputy Superintendent Jody Hall, who has responsibility for NYLB, is fired for suspected corruption. She later pleads guilty and is convicted.

November 2006 - Governor-elect Spitzer identifies an investigation of the NYLB as an important priority for his administration.

2007

• On at least three occasions prior to 2007, groups of potential investors advise the Superintendent of an interest in purchasing ELNY's assets and liabilities. On each occasion, the Superintendent directly interposes impediments to the performance of due diligence and other investment-related activities.
• NYLB personnel begin contacting insurance companies and others, such as purchasers of structured settlement payment rights, demanding they contribute money to shore up ELNY or face punitive actions by the New York Department of Insurance.

January 2007 - Governor Spitzer appoints Mark Peters as the new Superintendent.

March 6, 2007 - The New York Appellate Division rules the Comptroller can enforce its subpoenas against NYLB.

May 2007 - Superintendent Peters announces NYLB will be subjected to a "top to bottom" audit by an independent auditor for the first time in NYLB history. The auditors discover the NYLB's financial records are in complete disarray requiring the NYLB to "reconstruct" the financial records of all 60 estates under its supervision.

October 11, 2007 - In Dinallo v. DiNapoli , the New York Court of Appeals holds that, in his capacity as rehabilitator/liquidator of insurance companies, the Superintendent is not a state officer. Therefore, acting as the Superintendent's agent, the NYLB is not a state agency and is not subject to audit by the New York State Comptroller.

December 2007

• NYLB personnel inform Governor Spitzer that a deal has been reached with insurance companies and others assuring 100 percent payment to ELNY policyholders and/or annuitants.
• Unknown to Governor Spitzer, no deal has been reached. Instead, the NYLB is still working privately with NOLHGA on the plan to liquidate ELNY.
• Governor Spitzer announces an "agreement in principle" for ELNY, subject to approval by ELNY's Rehabilitation Court. The agreement is designed to:
  • Continue paying all ELNY annuitants 100% of their benefits;
  • Provide protection for approximately 11,000 ELNY annuity recipients including structured settlement recipients.
• The announced plan, whereby various insurers and guarantee associations apparently agree to pay $650 to $750 million to help fund $2 billion of future ELNY payments, never materializes.

October 2008 - Independent auditors discover NYLB has been understating ELNY's shortfall by more than $1 billion for years. Examining ELNY's estate as of December 31, 2006, the auditor concludes ELNY's liabilities exceed its assets by $1.26 billion.

March 18, 2009 - without notification to ELNY policyholders and annuitants, Judge Daniel Martin signs an Order allowing NYLB to:

• Replace Credit Suisse as ELNY's investment advisor with Wellington Management Company and Goldman Sachs Asset Management; and
• "[F]rom time to time amend the [Investment] Guidelines set by the Rehabilitator in consultation with his new financial advisors if the Rehabilitator deems it beneficial to ELNY."

December 17, 2010 - State Supreme Court Judge Galasso orders the Superintendent to present the Court with a proposed order and plan of liquidation for ELNY on or before July 1, 2011 after the Superintendent confers with the New York Life Insurance Company Guaranty Corporation and other interested parties.

June 23, 2011 - The Superintendent files a motion to postpone the deadline for filing a proposed order and plan of liquidation for ELNY from July 1, 2011 to August 10, 2011 "in order to present a comprehensive and consensual proposed Plan of Liquidation that maximizes the potential benefits for ELNY's structured settlement and other annuitants."

August 8, 2011 - Counsel for the Superintendent advises the court the Superintendent 'is not in a position to submit a consensual proposed order and plan of liquidation on or before August 10, 2011" as previously promised. Instead, he anticipates the Superintendent doing so on or about August 26, 2011.

October 3, 2011 - Governor Andrew Cuomo creates the New York Department of Financial Services by consolidating the New York Insurance and Banking Departments. The Superintendent of Financial Services becomes the court appointed fiduciary and Receiver/Rehabilitator of ELNY as well as other impaired and insolvent insurance companies in New York.

December 2011 - NYLB:

• Files an ex parte motion stating its intent to liquidate ELNY.
• Notifies ELNY shortfall payees for the first time that their benefits will be cut.

March 2012 - Following a hearing, Judge Galasso determines ELNY is insolvent and approves the liquidation plan and restructuring agreement upon which NYLB and NOLHGA have been collaborating since 2006.

• Under the plan, ELNY shortfall payees face a potential loss of benefits exceeding $920 million.
• During the hearing, NYLB successfully prevents shortfall payees from exploring the causes of ELNY's insolvency.
• The order approving the ELNY liquidation plan and restructuring agreement is currently being appealed.

 

Calling Out Governor Cuomo

Doubling down on a recent investigative article he co-authored about Executive Life of New York (ELNY) ("The Complete ELNY Saga "), Bill Coffin, Group Editor in Chief for Summit Business Media’s LifeHealthPro.com, has published a follow-up op ed article ("Governor Cuomo, I'm Calling You Out") in which he urges New York Governor Andrew Cuomo to "make this right. Fix ELNY before its payees must endure their harsh payment cuts."

In his most recent article, Coffin repeats a charge he and his co-authors made earlier: "The New York Liquidation Bureau [NYLB] .... is the cause of all this mess." For S2KM's summary of Coffin's NYLB allegations, see "NYLB Role in ELNY Disaster".

According to its Mission Statement: NYLB "acts for the Superintendent of Financial Services as the court appointed fiduciary and Receiver of impaired and insolvent insurance companies, to maximize assets and resolve liabilities, return rehabilitated companies to the marketplace or distribute the proceeds of the company in a timely manner to creditors."

Benjamin M. Lawsky is New York's Superintendent of Financial Services. Lawsky reports directly to Governor Cuomo and is currently a defendant in an ELNY class action lawsuit  filed November 8, 2012 by attorney Edward Stone and representatives of the Christensen & Jensen law firm.

Coffin's earlier co-authored ELNY article suggested the New York state government or the insurance industry could (and should) clean up the "ELNY debacle". In his most recent article, Coffin charges Governor Cuomo with personal responsibility.

"The simple truth", according to Coffin: "[Governor] Cuomo could fix ELNY if he wanted to. If he thought fixing ELNY would help his chances for a Presidential run in 2016, ELNY would already be fixed..... The insurance industry in the state could simply be ordered to pay that amount."

So why, Coffin asks, has Governor Cuomo not taken action? "Is it because [Governor] Cuomo cannot stomach the notion of making the rest of the industry in the state pay for the actions of an irresponsible few? ... [If] that is the case, then there is always the possibility of paying for ELNY with other general fund monies..... [A]t the very least, [Governor] Cuomo could ensure that any and all fines levied by the Department of Financial Services (Ben Lawsky) go first to ELNY before going anywhere else."

Coffin concludes his appeal to Governor Cuomo by observing: "There is a difference between doing the easy thing and doing the right thing. Show your constituents that you know the difference, or be called out as being just as much a part of this long-running failure as everybody else who has had a chance to fix ELNY and come up short."

For S2KM's complete and continuing reporting about the ELNY liquidation, see the structured settlement wiki.