Guest Blog Post by Gloria Grening Wolk MSW
A PLETHORA OF SLAPP LAWSUITS
by Gloria Grening Wolk MSW
When I became a consumer advocate and author who exposed fraud in the viatical and life settlements industry I did not have a clue it would result in being SLAPPed with a series of lawsuits. Today, most of the principals of these companies are (a) in prison, (b) defending themselves against criminal indictments, or (c) under federal investigation.
Strategic Lawsuits Against Public Participation (SLAPPs) are lawsuits brought against those who communicate with their government or speak out on issues of public interest. SLAPP filers don’t go to court seeking justice. Rather, SLAPPs are intended to intimidate those who disagree with them or their activities by draining the target’s financial resources. SLAPPs are effective because even a meritless lawsuit can take years and many thousands of dollars to defend. Following is a summary of the years I struggled to preserve my First Amendment rights against plaintiffs with massive war chests.
The First SLAPP Lawsuit: Life Partners Inc.
In 1997 my first book about the viatical settlement industry was released to the public. It was intended to advise terminally ill people about the abuse and fraud that could victimize them, when they sold their life insurance. Aware that many concepts were new to most readers, and most readers were suffering serious, disabling illness, I intentionally cut compound sentences to single ideas.
One chapter was written differently–as a story. It was entitled, “Brian Pardo: Grateful for AIDS.” The title referred to the founder and CEO of Life Partners, Inc. of Waco, Texas, one of the largest viatical and life settlement firms. Among the reasons for the title: Pardo’s new viatical business enriched him after his previous business venture landed him in hot water and then bankruptcy.
The previous business, a solar utility company, was charged in 1989 by the SEC with financial fraud. The case settled out of court, with Pardo promising he would never again violate securities laws. Three years later Pardo’s new viatical company, Life Partners Inc. (LPI) was thriving, he was living in a mansion in Texas, he employed and paid substantial salaries to his wife and daughter and, in time, his son-in-law, and he was again violating securities laws.
In 1992 Pardo and LPI were issued cease and desist orders by North Dakota Securities Commissioner Glenn Pomeroy for an investment scheme that violated state securities law and disclosure requirements.
There are thirty-nine references in the end notes to that chapter. Among the references was a 1996 article published in the magazine, POZ. “Let the Seller Beware” described Pardo as “one of the industry’s blackest sheep.” It also summarized the then-new SEC lawsuit against Pardo and his new company, LPI. “The Securities and Exchange Commission (SEC) has sued Pardo and his company for a raft of securities-law violations. The SEC claimed that Life Partners sold interests in policies it had viaticated as though they were unregistered securities, misled viators and investors (it claims to be the largest viatical settlement company but isn’t), and didn’t disclose Pardo’s previous run-ins with the securities and banking laws.”
The same title was used by the Washington Blade, which described and named AIDS patients who sold policies to LPI, and concluded these were “shady business dealings.”
Pardo is one SLAPP-happy entrepreneur. He sued the North Dakota securities commissioner, Pomeroy, and he sued the SEC attorney, Leo Orenstein. Other lawsuits followed against regulators who tried to impede Pardo’s rush to riches. Among them: the California insurance commissioner and an attorney at CDI (who notified MetLife that LPI was not licensed to transact viatical business in California); insurers (MetLife and LINA) for refusing to transfer policies to LPI because the company was not licensed in the state of the insured; the insurance commissioner of Virginia, after Virginia brought an action against LPI for violating state law–transacting business without a license and underpaying a terminally ill insured.
Although each of Pardo’s SLAPP suits against regulators was dismissed–eventually–the tactic worked. It consumed substantial time and resources. It sent out a warning to others. The result: Years passed before any government entity had the courage to tackle Pardo and LPI. SLAPP lawsuits enabled Pardo and LPI to operate above the law.
Now, at long last, Pardo and LPI are, again, pestered by an SEC investigation. They are further encumbered by numerous civil lawsuits in courts around the nation, some filed as class actions. The stock price has plummeted. The Wall Street Journal enjoys chronicling these activities.
During the silent years, the years in which LPI’s SLAPP suits and deep pockets earned them immunity, I continued to warn the public–terminally ill people and investors. I have several file boxes of documents from victims of Life Partners. My first book did not merit retaliation but when my second book, “Viatical Settlements: An Investor’s Guide,” was published in 1998, I became a target of Life Partners. Once that ended, their cohorts resumed the battle to silence me.
The warnings in “Viatical Settlements: An Investor’s Guide” were directed to investors who were solicited to buy what Pardo called “fractionalized shares” of viaticated life insurance. The book detailed the various types of fraud that, over time, were named “clean-sheeting,” “dirty-sheeting,” “wet ink,” “warehousing,” “stacking,” and Stranger Owned Life Insurance (STOLI).
Early in 1999 Life Partners, Inc. filed a SLAPP suit against me in state court in Waco, Texas, charging me with defamation. I learned about it when a Waco reporter phoned. He asked how I felt about being sued for $3 million. I told him if ever I’m worth $1 million, I would give a party and invite the world.
I was not served.
Days passed. Weeks passed. I was not served. Early in February a friend contacted the court to order a copy of the complaint for me. He was instructed to send a written request with credit card information. He did. The complaint was not sent.
On March 5,1999 a summons and complaint were delivered by certified mail to my business address in Laguna Hills, California. The complaint stated “defamation” and nothing else. Not one word described what was alleged as defamatory. Not one word attempted to establish jurisdiction in Texas. At that time, I was a neophyte about law, about jurisdiction, about SLAPP lawsuits. I began to search for a lawyer.
Unknown to me, Pardo had gone to his favorite court and favorite judge, an elderly man known to be hard-of-hearing, and filed a default action. The hearing was held on April Fool’s Day, 1999. Intentional?
Pardo and LPI were represented by Scott Peden, an attorney, general counsel, and president of LPI. Much later I received a copy of the transcript–a gift from an attorney I assisted pro bono. I laughed so much while reading it my dogs became excited, thinking it was play time.
I laughed to realize everything I ever heard about Texas courts was true. Hearsay is allowed (among other things). Pardo testified that my first book–the one with the chapter about him–defamed him. He admitted he never read a word and never saw a copy of the book. He was told by others.
Pardo testified as an expert. Peden asked the judge if he should qualify Pardo as an expert. The judge said, “No.” He said no because, he explained, “I don’t know anything about this, upside to downside.” That was the start of my legal-inspired hysteria.
The judge “found” Wolk “displayed no expertise in the field of viatical settlements through either of her books” or the web site. Never mind that I was never given opportunity to display anything. And LPI’s favorite state court judge opined that the allegations of plaintiff’s complaint were admitted. All this, and the judgment, were based on the default hearing. Does “kangaroo court” come to mind?
The hearing concluded with the judge’s ruling. Among the damages: Five thousand in attorney fees; actual damages of $1.5 million with post-judgment interest at the rate of ten percent per annum until paid; punitive and exemplary damages of $1.5 million with the same interest.
Additionally, I was ordered to turn over to Pardo every undistributed copy of both books and remove from my web site all statements to which he objected. This order extended to everyone affiliated with me. Amazon? Barnes and Noble? Pardo also asked the court to confiscate all my books that were in libraries or stored at my home. That request was denied. The judge thought it would be difficult to get California to permit them to invade my home, and it would be difficult to confiscate library books.
I did get an attorney. He did get the default reversed. The judge ordered a new trial and the plaintiff was ordered to amend the allegations: “enumerate in quotations each and every statement it contends Defendant made that is defamatory and, in addition, identify the specific source of each such statement.” The amended complaint, filed July 13, 1999, asked for $5 million in damages. It quoted out of context a number of phrases and misrepresented other statements.
My attorney, Britton D. Monts of Dallas, Texas, was denied a special appearance. Monts appealed. He wanted to challenge jurisdiction–I had not visited Texas in more than twenty years, I did not direct my web site or book sales to Texas, etc. LPI cross-appealed, ostensibly to prevent a new trial.
Monts contacted LPI’s counsel by phone and by mail, citing relevant case law and statutory authority to demonstrate conclusively the lack of jurisdictional basis for LPI’s appeal. When LPI refused to dismiss its appeal, Monts filed a motion to dismiss the cross-appeal. Under Texas law orders granting new trials are interlocutory orders that cannot be appealed. Monts also sought sanctions–five hundred dollars in attorney fees–for LPI’s frivolous appeal. On June 23, 1999 the appellate court denied LPI’s appeal, granted Mont’s motions to dismiss–but denied sanctions.
Monts dismissed his own appeal and did not challenge jurisdiction. My web site did reach Texas and, although my books were not sold in Texas they could be ordered for delivery in Texas–which is exactly the way LPI obtained a copy, according to the sales slip they introduced as evidence. Moreover, in 1999 there was little case law related to the internet. On the basis of this, I worried that LPI might file subsequent lawsuits against me, one after another, in the remaining forty-nine states, or anywhere in Europe or Asia.
The lawsuit displayed other hallmarks of SLAPP lawsuits–any tactic to run up the costs of defense. When finally the case settled, LPI insisted on a confidentiality clause. That taught me another lesson. I learned never to agree to confidentiality. Since that time LPI has violated that clause but I am silenced. They can choose to misrepresent the terms but if I attempt to address this, they will sue me. They know I cannot afford to sue them.
In 2001 Forbes published “Death Wish,” which later was used as evidence in a viatical lawsuit filed by the state of New York against another viatical company. But Life Partners took umbrage at how LPI was characterized. In a letter sent to Forbes and signed by R. Scott Peden, general counsel, LPI stated it was “incensed at the lack of journalistic integrity displayed by your reporter, Carrie Coolidge, in the above-referenced article.” Among the demands made by LPI: “An immediate and prominent statement that disavows any reliance upon or incorporation of any statements published by Gloria Wolk.”
Although I detest the expression, “needless to say,” it is appropriate here. Forbes did not capitulate to any of LPI’s demands.
At this writing, LPI has finally met their match. Battered by a combination of the SEC, civil filings, Forbes, the Wall Street Journal, and the web site www.seekingalpha.com, it is apparent that nothing I ever published about Life Partners or Pardo was defamatory.
The Need for a Federal Anti-SLAPP Statute
SLAPP suits threaten the First Amendment rights of defendants, are expensive to defend, and may deprive the public of essential information. Equally important: SLAPP suits drain resources from our courts. Neither state nor federal courts can afford the time and expense of litigating lawsuits that have no merit.
Life Partner’s SLAPP began in January 1999 and was dismissed June 30, 2000. By then I was defending another SLAPP, this one filed by Accelerated Benefits Corporation in state court in Broward County, Florida. At the same ABC filed a similar SLAPP suit against Kiplinger’s Personal Finance, based on an article about viatical settlements in which they referred to my books and website as “a one-stop resource.”
The following year, 2000, when ABC’s principals, Jess and Keith LaMonda, realized they were losing these lawsuits, they filed new defamation lawsuits: one against Kiplinger’s and another against me. This time they filed in Orange County, Florida. They knew I had a Florida attorney—hired because of their first lawsuit. They did not contact him, they did not serve him with the new complaint, and they filed for a default.
Their attorney wrote up the order for the judge to sign. Obviously, it was submitted for signature on a day when the judge rushed through dozens of seemingly simple orders and did not read the text. The text prohibited me from selling my first book anywhere in the world, including through the internet. The LaMonda brothers sent the order to my web host and told him to shut down the web site. He did—until days later, July 4, 2000, when the state of Florida issued orders against ABC, alleging fraud.
My Broward County attorney drove four hours to Orange County and informed the judge about the situation. The judge was furious. Even if he agreed that my books should not be sold, he had no jurisdiction outside of Florida. It was clear the LaMondas and their attorney had tricked him. The judge quickly dismissed that lawsuit.
Five years later, in 2005, the Department of Justice indicted the LaMonda brothers. They were found guilty in 2007 and sentenced to twenty years (C. Keith LaMonda) and thirteen years (Jesse LaMonda). In 2006 the SEC sued their companies and placed them in receivership.
Then there is the infamous Mutual Benefits Corporation. When I wrote about this company I used their name, sometimes abbreviating it as MBC. Their SLAPP suit was filed in federal court in south Florida in May 2003. They charged me with trademark infringement—even though their trademark was not registered with Florida nor with the federal government, even though they claimed their name and initials were their trademarks. How can anyone warn about a company without using their name? This seemed too silly to file, but it was filed and it was litigated.
Again, I hired an attorney. One year later MBC dismissed their suit. The following year the SEC shut down MBC. Then the Department of Justice indicted the principals and an array of others, including attorneys. Other than the principals, all who were indicted are now in prison. The principals continue to battle the criminal lawsuit.
In 2001 Scott Wilbanks, a viatical broker, filed a SLAPP suit against me in state court in San Francisco—and included as co-defendant my web host service. It echoed Life Partner’s complaint, stating nothing more than “defamation,” and making no effort to establish jurisdiction.
This time I hired bottom-of-the-barrel lawyers, believing their false claim of familiarity with California’s anti-SLAPP statute. They did not try to learn; they never contacted any First Amendment organization for advice; they blew it. That SLAPP dragged on for four years before it settled. Today, Wilbanks no longer is in the viatical industry by his choice.
Every government action against these companies was too late to benefit me. Because I am stubborn, because no on else takes the risk of exposing unindicted con artists, and because I am proud of our First Amendment I will not be silenced.
But until we have a federal anti-SLAPP statute, these meritless lawsuits will continue to consume court resources at an alarming rate. Nothing else will deter SLAPPers. Their deep pockets allow them to drag out litigation in order to run up costs to the defendant—and they write off their own legal costs as a business expense.
When consumer advocates are at risk, the public is at risk. If we are silenced by the economics of defending a meritless lawsuit, the public will suffer from the dearth of information needed to avoid becoming victims.
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