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Man wins lottery, loses in court

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A lottery winner who claims he was deceived when his lawyer teamed up with a finance company and persuaded him to take a lump sum for his annualized jackpot narrowly lost a split decision at the state Supreme Court Monday in a case that turned on how long victims have to sue.

In his suit against the finance company, John D. Flannery claimed — and the Supreme Court concluded — that he was given bad tax advice by attorney Glenn MacGrady and Singer Asset Finance to induce him to take a one-time payment of $868,500 for eight, annual lottery payments worth $1.2 million.

The decision may have cost Flannery nearly $500,000, including taxes owed and lost winnings.

But the court's majority, in a 4 to 3 decision, said that, under Connecticut law, Flannery didn't file a suit quickly enough to recover damages even though the record shows MacGrady and Singer connived against him. The court said the statute of limitations that applies in Flannery's case gave him three years to sue. By the time Flannery realized what had happened, retained a new lawyer and sued, five years had passed.

Flannery's new attorney, Thomas P. Willcutts of Hartford said the statute of limitations, when applied to circumstances such as those in Flannery's case, raises the possibility that those accused of improper behavior can escape damages if the behavior goes undetected for three years.

Willcutts said Flannery rejected numerous offers of lump sum payments until he was persuaded by what he thought was professional tax advice.

"People find it hard to believe that someone can win a lottery and be broke within a couple of years, through no fault of their own," Willlcutts said. "It's true. There is an industry that targets them with the objective of fleecing them. And often they succeed."

Flannery argued unsuccessfully in his appeal that his suit was timely because the ongoing nature of the alleged connivance between MacGrady and Singer delayed the start of the statute of limitations. The three dissenting justices agreed.

Singer's attorney said the company is no longer in operation and that its principals deny Flannery's allegations. MacGrady was not available.

Chief Justice Chase T. Rogers wrote the decision for the majority, which included Justices Richard N. Palmer and Peter T. Zarella and Appellate Court Judge Douglas S. Lavine, who sat on the case. Former Justice Flemming L. Norcott, Jr. wrote the dissent and was joined by Justices Dennis G. Eveleigh and Carmen E. Espinosa.

Flannery, of Iowa, won $3 million in the Iowa state lottery in 1988. He was to collect his winnings over 20 years in installments of $150,000. Willcutts said Flannery was immediately beset by so-called financial, tax and legal advisers, all promising to safeguard and increase his lottery winnings

Singer was among those soliciting Flannery. When Flannery brushed off Singer, the court said Singer steered him to MacGrady, then employed by the Connecticut law firm Pepe and Hazard. The court said MacGrady never told Flannery that his advice was "tainted by a conflict of interest."

"Specifically, MacGrady was acting at the behest of (Singer) to induce lottery winners to sell their installment payments to it by falsely advising them that they could gain sufficient tax advantages," according to the majority opinion. "Consistent with this strategy, (Singer) arranged for MacGrady to communicate with (Flannery), deliver the misleading advice and attempt to induce him to sell his installment payments to the defendant."

Flannery took MacGrady's advice on June 24, 1999 and sold his final eight installment payments, worth $1.2 million, for $868,500. The majority said the statute of limitations for a suit against Singer began running in September 1999, when Flannery paid Pepe and Hazard and ended his professional and fiduciary relationship with MacGrady.

In 2000, Flannery filed a 1999 tax return that listed the payment from Singer as a capital gain. Two years later the IRS disagreed. It said he owed an additional $163,523 in taxes. By then, MacGrady had parted company with Pepe and Hazard, but collected a fee for referring Flannery to a Florida lawyer representing, ultimately without success, other taxpayers with similar capital gains problems.

Flannery sued Singer in Connecticut in 2005.

Hartford Courant

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21 comments. Last comment 4 months ago by Teddi.
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mypiemaster's avatar - peace
He who dies with the most toys WINS!!!.

United States
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April 2, 2013
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Posted: June 17, 2014, 8:07 am - IP Logged

This is not justice, my friend, statute of limitations or not.

Seekand ye shall find -Matt. 7:7 ...Ask and ye shall receive -John 16:24 ...Give and it shall be given unto you -Luke 6:38 ...Be careful what you ask for!!! -Mypiemaster 1:1

Having Money Solves Problems That Not Having Money Creates Yes Nod ****John Carlton****

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    New Member
    Cary, NC
    United States
    Member #155761
    May 28, 2014
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    Posted: June 17, 2014, 8:16 am - IP Logged

    This is not justice, my friend, statute of limitations or not.

    I agree. This statue of limitation is hogwash. By the time you find out something is wrong, investigate to be able to make a charge, and then take this issue a lawyer to file paperwork (3 years my @ss). Wrong on day 1 is wrong on day 100. Why would anyone care about how long you take to seek justice when you obviously need to get the money to sue and do your homework to prove the wrong? 

     

    This is the bad guy trying to get away with bad things by lobbying for this 3 year period to catch me and prove it.

      dallascowboyfan's avatar - tiana the-princess-and-the-frog.jpg
      Oklahoma
      United States
      Member #82391
      November 12, 2009
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      Posted: June 17, 2014, 8:28 am - IP Logged

      I agree. This statue of limitation is hogwash. By the time you find out something is wrong, investigate to be able to make a charge, and then take this issue a lawyer to file paperwork (3 years my @ss). Wrong on day 1 is wrong on day 100. Why would anyone care about how long you take to seek justice when you obviously need to get the money to sue and do your homework to prove the wrong? 

       

      This is the bad guy trying to get away with bad things by lobbying for this 3 year period to catch me and prove it.

      I Agree!

      I Love Pink & Green 1908

        RedStang's avatar - lotto zpse7a2fd55.jpg
        Dutchess NY
        United States
        Member #121966
        January 21, 2012
        2674 Posts
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        Posted: June 17, 2014, 10:08 am - IP Logged

        He should of used a more reputable firm like Mohammed & Sons.

          Gleno's avatar - Lottery-001.jpg
          New Jersey
          United States
          Member #80354
          September 25, 2009
          290 Posts
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          Posted: June 17, 2014, 10:10 am - IP Logged

          Bad actors once again appearing on the scene. Not surprised to read that Singer Asset Finance is no longer in operation.

            noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
            Bay Area/ California
            United States
            Member #136482
            December 12, 2012
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            Posted: June 17, 2014, 10:17 am - IP Logged

            This is not justice, my friend, statute of limitations or not.

            There is no statute of limitations on Murder ONLY- as much as l can say that this guy got the short end of the stick, it was his responsibility to cross his "t" and dot his "I".. The fault lies with him as well, you need to be aware of predators out there seeking to seperate you from your money. What's the adage " a fool and his money are soon parted".

            *For a moment when l read JD- I thought of our bud down in Southern California, but figured his not that foolish to begin with.

              mrcraft's avatar - images3lp4 zps7dbb4a10.jpg
              Los Angeles, California
              United States
              Member #149499
              December 2, 2013
              818 Posts
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              Posted: June 17, 2014, 12:32 pm - IP Logged

              I think legal, tax, and financial advisers that seek out winners like in this case are akin to ambulance chasers.  The biggest mistake was choosing one of them.  Do your own research and hire reputable firms to represent your interests.

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                Kentucky
                United States
                Member #32652
                February 14, 2006
                5513 Posts
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                Posted: June 17, 2014, 2:52 pm - IP Logged

                "In 2000, Flannery filed a 1999 tax return that listed the payment from Singer as a capital gain. Two years later the IRS disagreed. It said he owed an additional $163,523 in taxes."

                Annuities were taxed as ordinary income then and still are today. It's difficult understanding why he thought a one time payment was taxed as capital gains when the first 12 installments weren't, but probably because Flannery was given really bad advice by his lawyer. An average CPA would have told him the payment wasn't taxed as capital gains and had he known that, he would not have sold to Singer.

                "referring Flannery to a Florida lawyer representing, ultimately without success, other taxpayers with similar capital gains problems."

                I always cringe when I read where jackpot winners should speak with a financial planner before deciding cash or payments because there are lots of planners just like MacGrady.

                  Get paid's avatar - Lottery-062.jpg
                  texas
                  United States
                  Member #152331
                  February 11, 2014
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                  Posted: June 17, 2014, 3:56 pm - IP Logged

                  If ur lucky enough to win millions of dollars,u have to be vigilant,proactive,an everything else.Do ur research,trust no one.If u win an they r seekin u out red flag.Do ur own research.Get with repeatable firms that have a good track record with dealing with lottery winners. Did I leave out anything.

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                    United States
                    Member #94618
                    July 24, 2010
                    4625 Posts
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                    Posted: June 18, 2014, 6:02 am - IP Logged

                    I think legal, tax, and financial advisers that seek out winners like in this case are akin to ambulance chasers.  The biggest mistake was choosing one of them.  Do your own research and hire reputable firms to represent your interests.

                    Exactly! How long would it take to make some calls and ask around?  Even my small credit union has a on-site tax guy that you can just walk into and ask about how this transaction would be taxed.  I am sorry but this one to me is totally on the winner.  Thumbs Down

                      Teddi's avatar - Lottery-008.jpg

                      United States
                      Member #142504
                      May 13, 2013
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                      Posted: June 18, 2014, 3:48 pm - IP Logged

                      I usually don't take the victim's side in these scam cases because it almost always boils down to their own greed and stupidity, but I side with the victim here. He got (or thought he got) independent experts all saying the same thing. If two or three unrelated advisors guide you to a certain course of action, I can't really blame him. He wasn't taking one person's word. 

                      And if a company has never been sued, never had red flags raised on their practice, how are you to know that they aren't reputable? Sometimes, no matter what you do or how much you research you can still get scammed. Madoff investors come to mind. Madoff was given a clean bill of health by everyone in the know. Sometimes the only thing you can do to mitigate your risk is to make sure there's some rainy day money tucked away.

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                        NY
                        United States
                        Member #23835
                        October 16, 2005
                        2838 Posts
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                        Posted: June 19, 2014, 2:11 am - IP Logged

                        "He got (or thought he got) independent experts all saying the same thing."

                        If you missed it, here's the smoking gun: "When Flannery brushed off Singer, the court said Singer steered him to MacGrady"

                        If he didn't think what Singer was offering was a good deal, why would he take advice from somebody they steered him to? They obviously shouldn't have deliberately misled him, but he made a stupid decision.

                        "It's difficult understanding why he thought a one time payment was taxed as capital gains when the first 12 installments weren't"

                        People think that because they're overly optimistic, and because they're selling the annuity.  If you sold some stock you'd had for 12 years you wouldn't expect to pay regular income tax on it just because you'd been paying it on the dividends you'd been getting, would you? He's not the first and he probably won't be the last, even though it was established a long time ago that regardless of how you collect the money lottery winnings are taxed as ordinary income.

                          Pita Maha's avatar - 940d8157 d1fb-4f70-a715-6ad04d915489.jpg
                          SW Florida
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                          Member #145678
                          August 11, 2013
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                          Posted: June 19, 2014, 12:29 pm - IP Logged

                          So it was simply the technicality of lapsed time that let the parasites and leeches get away with ripping off that man.  I also usually side against such people when it's due to their own greed but in this case the guy trusted the professionals that lottery winners are constantly advised to seek the services of. Few people understand the more intricate aspects of finance and tax so they can be easily bamboozled by lies, which they don't know are lies because it comes from so-called "professionals". 

                           

                          "It's true. There is an industry that targets them with the objective of fleecing them. And often they succeed."

                          The law doesn't help by putting short time limitations on going after them.

                            Teddi's avatar - Lottery-008.jpg

                            United States
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                            May 13, 2013
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                            Posted: June 20, 2014, 12:50 pm - IP Logged

                            "He got (or thought he got) independent experts all saying the same thing."

                            If you missed it, here's the smoking gun: "When Flannery brushed off Singer, the court said Singer steered him to MacGrady"

                            If he didn't think what Singer was offering was a good deal, why would he take advice from somebody they steered him to? They obviously shouldn't have deliberately misled him, but he made a stupid decision.

                            "It's difficult understanding why he thought a one time payment was taxed as capital gains when the first 12 installments weren't"

                            People think that because they're overly optimistic, and because they're selling the annuity.  If you sold some stock you'd had for 12 years you wouldn't expect to pay regular income tax on it just because you'd been paying it on the dividends you'd been getting, would you? He's not the first and he probably won't be the last, even though it was established a long time ago that regardless of how you collect the money lottery winnings are taxed as ordinary income.

                            No, I didn't miss that part. I just don't think it makes that much of a difference. If someone had told me to invest with Madoff and I wasn't much interested, if they then said to talk to an auditor at PriceWaterhouseCoopers, and that auditor told me that Madoff was a safe bet, I'd consider that advice as a secondary source from a person who is part of a longstanding and reputable company. 

                            A doctor can give you the names of specialists to get a second opinion on a condition, I don't think that a patient's first thought is that all the doctors are in cahoots.

                            So no, I'm not going to place 100% of the blame on the victim here. This wasn't like the Nigerian or Facebook lottery scam where the scams are obvious. This was subtle and well orchestrated.