Fleecing Veterans Draws Disbarment
The South Carolina Supreme Court has disbarred an attorney
Respondent provided legal and escrow services through her law firm, Upstate Law Group (ULG), in connection with an illegal structured cash flow business wherein the investor (buyer) purchased future payments of a veteran (seller). Respondent represented the buyers in these improper transactions. The future payments came from either a pension, paid to the veteran by the Defense Finance Accounting Service, or disability benefits, paid to the veteran by the Department of Veterans Affairs. However, these payments were unassignable pursuant to federal statute.
As a result of Respondent’s involvement in the illegal structured cash flow business, on or about September 7, 2017, ODC received a news article about a federal lawsuit against Respondent for inducing veterans to sell their retirement benefits or disability benefits for a lump sum. On or about February 1, 2019, ODC received a complaint from a life insurance agent whose clients had stopped receiving payments pursuant to their veterans’ contracts. On or about May 12, 2020, ODC received a complaint from a South Carolina lawyer representing veterans who had assigned their military benefits in exchange for payments and who Respondent sued when they defaulted on the contracts to sell their military pensions.
In 2018, the Securities Division of the Arizona Corporation Commission filed an enforcement action alleging that the income stream investments involved in Respondent’s scheme were unregistered securities that were prohibited by federal and state law. Respondent and ULG were among the named parties, and both Respondent and ULG were ordered to pay restitution totaling $2,943,438 plus administrative penalties totaling $560,000.
In a separate civil action, on January 1, 2021, the federal district court in South Carolina entered an order permanently restraining Respondent from brokering, offering or arranging purported sales of pensions and disability benefits; any related collection activity; and engaging in any financial services business in the state of South Carolina. The federal court also entered a judgment against Respondent and the other defendants, jointly and severally, in the amount of $725,000.
On May 1, 2023, Respondent pled guilty to violating 18 U.S.C. § 371, admitting she participated in a conspiracy with objects of mail and wire fraud.
Sanction
We find disbarment is the appropriate sanction for Respondent’s egregious misconduct. Accordingly, we accept the Agreement and disbar Respondent from the practice of law in this state.
Stars and Stripes reported on the crimes
A South Carolina attorney who used her law firm to orchestrate a $31 million fraud scheme targeting veterans and the elderly faces up to five years in prison after pleading guilty this week to conspiracy.
Candy Kern, 55, carried out a nationwide scam from 2012 to 2021 that took advantage of cash-strapped veterans and clients who were seeking a secure retirement investment, the Justice Department said in a statement Wednesday, the same day as the plea agreement.
The scheme offered veterans cash in exchange for temporary rights to their pensions and disability payments, usually until their loans were repaid with interest. Kern was the managing partner at the law firm and “served as the banker, legal counsel, and debt collector” in the scheme, which bilked victims out of $31.4 million, according to the DOJ.
Despite knowing that the contracts were illegal, Kern and her associates persuaded retirees to fork over the money lent to the veterans, saying the payments would eventually yield returns, the Justice Department statement said. She filed lawsuits against those who defaulted, even though the contracts were void.
Over time, some veterans realized that the pension assignments were illegal and stopped paying, according to the statement.
This led to the collapse of the scheme after more than eight years.
Kern and an undisclosed number of associates pocketed over $1.4 million, the DOJ said.
“This elaborate scheme preyed upon and exploited some of our most vulnerable populations, and when it collapsed, it left thousands of veterans in financial ruin and scores of retiree-investors without adequate resources to retire,” Brian Boynton, head of the Justice Department’s civil division, was quoted in the statement as saying.
Kern surrendered her law license in 2021. As part of her plea deal, she agreed to help prosecutors in their ongoing investigation.
“It is reprehensible that a former member of the South Carolina state bar would participate in such a scheme and use her standing as a lawyer to give victims a false confidence,” Adair Boroughs, the U.S. attorney for the District of South Carolina, said in the statement.
The date of Kern’s sentencing was not provided in the statement. Besides prison time, she also faces a $250,000 fine.
(Mike Frisch)