The men and women who fought for our nation have been targeted in financial scams by companies across the country. After leaving the military, some found themselves desperate enough for money to trade the future benefits they earned for lump sums up front — at exorbitant rates and minus fees.
The practice is illegal, according to judges in six states. Thousands of investors — a college professor, factory workers and a Vietnam veteran among them — lost money when veterans stopped paying. But the people who arranged the transactions made millions.
Greenville, South Carolina, has emerged as the national epicenter for prosecution of the practice. A yearlong investigation by The Greenville News has found that it’s gone on since before the internet in at least 33 states, but this could mark a new era as criminal and civil cases head to court and one man faces 20 years in jail.
Here are seven key takeaways from our investigation.
The architects of the schemes to buy and sell military benefits used websites to target veterans. Investors frequently were lured by presentations over steak dinners at fancy restaurants.
Since 2011, judges in Arkansas, California, Minnesota, Oregon, South Carolina and Virginia have ruled that these types of transactions violate state and federal laws. State and federal regulators agreed that the practice is against the law.
California businessman Scott Kohn and three of his associates face federal charges in Greenville of conspiracy to commit wire fraud and mail fraud. It is the first time anyone has faced criminal charges relating to the buying and selling of military benefits.
One of Kohn’s associates has agreed to plead guilty to conspiracy to commit mail fraud.
Both state and federal courts in Greenville have also handled civil cases relating to a smaller enterprise connected to lawyer Candy Kern-Fuller of Easley, South Carolina, and her law firm, Upstate Law Group.
Interest rates that reached as high as 240% often left veterans unable to make their payments. Compounded by fees incurred with the transactions, the debt left some in dire straits and caused others to default on their agreements.
When veterans could not make the payments, investors often wound up losing their money — retirement savings gone, legacies wasted.
Since 2015, at least 14 states banned the benefit-buying businesses run by Scott Kohn. As regulatory pressure ramped up, his enterprise used money from new investors to pay previous investors, according to an indictment.
Connecting investors with veterans required little more than a phone and a computer. Salespeople pitched the idea of quick cash, cheap returns and the notion that everyone involved in the transactions would win. In the end, typically, the people operating between the veterans and the investors made the most money.
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