A South Carolina attorney pleaded guilty to using a network of financial advisors and insurance agents to sell military personnel a scam cash flow scheme in return for the assignment of their retirement and disability benefits, the U.S. Department of Justice announced today.
Candy Kern, 55, of Anderson, S.C., and the managing partner of a small South Carolina-based law firm, plead guilty to conspiracy, for controlling the bank accounts of veterans and nearly $14 million in illegally assigned veterans’ benefits, while Kern’s law firm earned $1,446,336.
Veterans who purchase the scam investment lost approximately $31.4 million, the Department of Justice said.
According to the DOJ, from approximately 2012 through 2021, Kern used her law firm and a network of advisors and agents to facilitate the fraudulent scheme, which targeted vulnerable and elderly investors seeking a safe cash flow in retirement.
The advisor network sold structured cash flow interests in a number of businesses to veterans and provided an up-front cash payment in exchange for the assignment of the veterans’ monthly pension and/or disability payments under the false pretense that the flow of repayments by veterans over time would translate into a return for the retiree-investors, the DOJ said in a statement today.
Many of the victims were in acute financial stress and could not afford their repayment terms, losing their benefits, the agency 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,” said Brian Boynton, the principal deputy assistant attorney general and head of the Justice Department’s Civil Division.
According to the DOJ and unbeknownst to the veterans or the retirees, “the pension assignment contracts were in fact void, as it is illegal to assign a pension under federal law—a fact Kern knew but never disclosed during the execution of any contract,” the DOJ said.
Over time the scheme collapsed, as veterans were unable to repay their “obligations” under the contract or opted not to do so upon learning that federal law prohibited pension assignments.
Despite the invalidity of the contracts, Kern pursued enforcement actions against veterans who defaulted, securing numerous default judgments against veterans in absentia.
“The District of South Carolina has been at the forefront of prosecuting fraud related to veterans’ pensions and associated investment scams,” said U.S. Attorney Adair F. Boroughs for the District of South Carolina.
“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. My office will continue its efforts to protect our veterans and to bring perpetrators to justice,” she added.
It could not be determined if Kern will pay financial renumeration to victims or received any other penalties. A call to the First Assistant U.S. Attorney for the District of South Carolina, which prosecuted Kern, was not returned by deadline.
The FBI, Veterans Benefits Administration’s Benefits Protection and Remediation Division and the Defense Finance Accounting Service assisted in prosecution, the DOJ said.