[Senate Hearing 114-856]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 114-856

                      PENSION ADVANCES: LEGITIMATE
                        LOANS OR SHADY SCHEMES?

=======================================================================

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           SEPTEMBER 30, 2015

                               __________

                           Serial No. 114-13

         Printed for the use of the Special Committee on Aging
         
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        Available via the World Wide Web: http://www.govinfo.gov
        
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-679 PDF                 WASHINGTON : 2022                     
          
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                       SPECIAL COMMITTEE ON AGING

                   SUSAN M. COLLINS, Maine, Chairman

ORRIN G. HATCH, Utah                 CLAIRE McCASKILL, Missouri
MARK KIRK, Illinois                  BILL NELSON, Florida
JEFF FLAKE, Arizona                  ROBERT P. CASEY, JR., Pennsylvania
TIM SCOTT, South Carolina            SHELDON WHITEHOUSE, Rhode Island
BOB CORKER, Tennessee                KIRSTEN E. GILLIBRAND, New York
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
TOM COTTON, Arkansas                 JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                ELIZABETH WARREN, Massachusetts
THOM TILLIS, North Carolina          TIM KAINE, Virginia
BEN SASSE, Nebraska
                              ----------                              
               Priscilla Hanley, Majority Staff Director
                 Derron Parks, Minority Staff Director
                         
                         C  O  N  T  E  N  T  S

                              ----------                              

                                                                   Page

Opening Statement of Senator Susan M. Collins, Chairman..........     1
Opening Statement of Senator Claire McCaskill, Ranking Member....     2

                           PANEL OF WITNESSES

Louis Kroot, M.D., CMDR, USN, Retired, (accompanied by wife, 
  Kathie Kroot) Lexington, Kentucky..............................     5
Stephen Lord, Managing Director, Forensic Audits and 
  Investigative Service, U.S. Government Accountability Office, 
  Washington, D.C................................................     7
Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department, 
  Little Rock, Arkansas..........................................     8
Stuart T. Rossman, Director of Litigation, National Consumer Law 
  Center, Boston, Massachusetts..................................    10
Maria Cauwenbergh Walden, Director of Legislation and Policy, 
  Public School and Education Employee Retirement Systems of 
  Missouri, Jefferson City, Missouri.............................    13

                                APPENDIX
                      Prepared Witness Statements

Louis Kroot, M.D., CMDR, USN, Retired, Lexington, Kentucky.......    33
Stephen Lord, Managing Director, Forensic Audits and 
  Investigative Service, U.S. Government Accountability Office, 
  Washington, D.C................................................    37
Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department, 
  Little Rock, Arkansas..........................................    58
Stuart T. Rossman, Director of Litigation, National Consumer Law 
  Center, Boston, Massachusetts..................................    71
Maria Cauwenbergh Walden, Director of Legislation and Policy, 
  Public School and Education Employee Retirement Systems of 
  Missouri, Jefferson City, Missouri.............................    80

                        Questions for the Record

Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department, 
  Little Rock, Arkansas..........................................    87

                       Statements for the Record

Letter of Resignation to VFG from Jonathan Sheets................    91
Email to VFG from Jonathan Sheets................................    92
Consent Order with exhibits A through H..........................    93
National Law Consumer Magazine regarding military advertisement..   117
Letters regarding pension beneftis from the Public School & 
  Education Employee Retirement Systems of Missouri..............   119
The New York Times article regarding "Loans Borrowed Against 
  Pensions Squeeze Retirees".....................................   126
News article from Treasurer Clint Zweifel regarding pension 
  advances.......................................................   130

 
                      PENSION ADVANCES: LEGITIMATE.
                        LOANS OR SHADY SCHEMES?

                              ----------                              


                     WEDNESDAY, SEPTEMBER 30, 2015

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., Room 
562, Dirksen Senate Office Building, Hon. Susan M. Collins, 
Chairman of the Committee, presiding.
    Present: Senators Collins, Cotton, Tillis, McCaskill, 
Donnelly, Warren, and Kaine.

                 OPENING STATEMENT OF SENATOR 
                   SUSAN M. COLLINS, CHAIRMAN

    The Chairman. Good afternoon. The hearing of the Special 
Committee on Aging will come to order.
    Decades ago, the warning ``caveat emptor,'' buyer beware, 
was the best advice one could give to a consumer seeking to 
borrow money. Well, that advice is still valid today.
    There are laws that seek to ensure that consumers 
understand the obligations that they are taking on and that 
lenders have to play by the rules. Since the passage of the 
Federal Truth in Lending Act in 1968 and similar State laws 
around the Nation, credit providers have been required to 
disclose key terms of consumer credit agreements up front in 
easy to understand language. If you want to know what interest 
rate you will pay on a new credit card, you will find it in 
big, bold letters right there on the front of your application. 
Likewise, interest rates on car loans, personal loans, 
mortgages, and myriad other consumer loan products are clearly 
and conspicuously displayed, but as we will learn today, that 
is not true for so-called pension advances. Pension advances 
are agreements under which consumers, usually retirees, receive 
cash lump sums in exchange for part or all of their monthly 
pension check. The effective interest rate on these lump sum 
payments can be outrageous. One company charged nearly 120 
percent last year. That fact, however, is hidden in the pension 
advance agreements, which do not include the simple and clear 
disclosures required by law for consumer loans. Instead, these 
contracts are so convoluted that it is difficult for consumers 
to realize just how much their lump sum pension advance is 
really costing them.
    By way of comparison, I would like to direct your attention 
to this chart. Using the State of Washington as an example, 
this chart shows the average interest rate charged on various 
forms of consumer debt compared to the effective rates on 
pension advances. The first three bars from the left show 
interest rates on typical sources of consumer credit--4.3 
percent for car loans, 9.7 percent for personal loans, and 12 
percent for credit card debt.
    The three bars on the right are interest rates calculated 
by the Government Accountability Office, better known as GAO, 
on pension advances that one company sold in Washington State 
over the past three years. As you will see, the rates escalated 
to an astonishingly high 117 percent last year. All of these 
rates are higher than the State of Washington's usury rate of 
25 percent.
    As if these interest rates were not bad enough, many 
pension advance companies require their customers to sign 
complex documents whose terms can only be described as 
deliberately deceptive. Typically, customers are required to 
take out life insurance policies naming the pension advance 
company as the beneficiary.
    Most consumers simply do not realize that the rates that 
they are paying are so high. For example, one of my 
constituents did not understand that he was paying a rate of 54 
percent on his pension advance until his tax preparer told him 
that the deal just did not look right and advised him to 
contact the Maine Bureau of Consumer Credit Protection.
    Second, many of these consumers are financially vulnerable 
and desperate for cash. These pension advance companies exploit 
this desperation. They also use flashy, aggressive, and 
misleading advertising to encourage quick and uninformed 
decisions.
    It is extremely troubling that some companies aggressively 
target the patriots who have served our country, our veterans. 
They use websites displaying the uniform and wrapped in red, 
white, and blue, and run ads in military magazines. Federal law 
prohibits the assignment of pensions of enlisted military 
retirees, but pension advance companies too often ignore this 
prohibition, just as they ignore Federal and State laws 
requiring clear disclosure of interest rates on consumer loans 
and just as they ignore State usury laws that set a ceiling on 
the amount of interest that can be charged on consumer loans. 
Pension advance companies claim that these laws simply do not 
apply to them, arguing that their products are not consumer 
loans or assignments, but simply advances.
    Today's hearing builds on this Committee's ongoing 
investigation into pension advances and continues our efforts 
to protect America's seniors from shadowy schemes that threaten 
their financial security. I hope that any retiree considering a 
pension advance will think carefully before taking that step 
and will seek advice on other ways to obtain financial 
assistance.
    I look forward to hearing the testimony of all of our 
witnesses today.
    With that, I would like to turn to our Ranking Member, 
Senator Claire McCaskill.

                 OPENING STATEMENT OF SENATOR 
                CLAIRE McCASKILL, RANKING MEMBER

    Senator McCaskill. Thank you, Senator Collins, Chairman 
Collins.
    Retirement security and consumer protection are both large 
parts of this Committee's focus and mission under the 
leadership of Chairman Collins. Today's hearing presents an 
opportunity to look at an alarming practice that intersects 
both of these Committee priorities.
    The defined benefit pension plan is considered the gold 
standard in terms of retirement security. Although it is not as 
popular as it once was, those people retiring today with a 
defined benefit plan are incredibly fortunate. They get a fixed 
payment for life, so they cannot outlive their savings, and 
they did not have to figure out how to invest this money or how 
much to put aside, so they are saved from the burden that they 
may not have had the financial wherewithal to adequately care 
for themselves throughout retirement, nor do they have to worry 
about an economic downturn happening right before they cash 
out.
    Willie Sutton explained that he robbed banks because that 
is where the money is. Well, these seniors with defined benefit 
plans are similarly ripe targets for a different kind of crook. 
These fraudsters offering pension advances are undermining all 
the advantages of these defined benefit plans, making what had 
been a secure retirement suddenly very unsettled. Worse still, 
these folks are targeting some of the pillars of our 
communities--our firefighters, our teachers, our veterans.
    They are also finding unwitting victims among elderly 
investors looking for a safe investment at a time in their 
lives when they are looking for ways to earn a little bit of 
money without taking a large financial risk. It truly is an 
impressive scam that is able to take advantage of both sides of 
the financial transaction, the investor and the pensioner, but 
that is what these pension advance schemes have been doing.
    Today, we will hear firsthand from victims of these schemes 
as well as those in the public sector and consumer protection 
groups about their efforts to combat this problem. This 
Committee is also investigating the bad actors behind these 
schemes, and I commend Chairman Collins for using this 
Committee's investigative and oversight powers to go after 
these folks.
    Right now, there simply is not enough being done here, 
because it is a legal gray area. While we hear from our 
Arkansas witness about all the good work she is doing down 
there to protect the public, unfortunately, once she catches 
these guys, she cannot prevent the same bad actors changing 
their corporate name and putting down roots somewhere else to 
find new victims in other states.
    There is only one State in the country where pension 
advance companies are not trying to take advantage of teachers, 
veterans, and firefighters, and that, I am proud to say, is in 
my home State of Missouri. I want to commend the work of our 
State Treasurer Clint Zweifel, who joined Republicans in the 
Missouri General Assembly to push for this legislation last 
year. This bill received enormous bipartisan support with no 
one testifying against it.
    Among those who spoke on the bill is one of our witnesses 
today, Maria Walden, from the Public School and Education 
Employee Retirement Systems of Missouri, the largest defined 
plan in our State and one of the best plans in the country. She 
will talk about the legislation banning pension advances and 
the protections that cover her members.
    I am also pleased to say that, thus far, our State has not 
had any reports of pension advance companies coming to Missouri 
since the bill was signed into law. I am hopeful other states 
will follow Missouri's lead and protect those public employees 
who have spent their careers protecting us.
    Once again, I want to thank the Chairman for calling this 
hearing and for our witnesses for joining to discuss this 
problem today. I look forward to your testimony. Thank you.
    The Chairman. Thank you very much.
    We are now pleased to turn to our panel of witnesses. 
First, we will hear from Dr. and Mrs. Louis Kroot. He is a 
retired Navy physician from Kentucky, and he and his wife, 
Kathie, will share with us their personal experience in selling 
their pension to a pension advance company.
    Next, we will hear from Stephen Lord, the Managing Director 
at the Government Accountability Office, who will discuss GAO's 
investigation of the pension advance industry.
    We will then hear from Kaycee Wolf from the Arkansas 
Securities Department, and I would like to call on our 
colleague, Senator Cotton, for the introduction of Ms. Wolf.
    Senator Cotton. Thank you. I am pleased to introduce Kaycee 
Wolf, who will testify about the work she and her colleagues 
did fighting pension advance fraud in Arkansas.
    Kaycee is a University of Arkansas Law School alum and has 
helped to protect Arkansans for the past five years as an 
attorney with the Arkansas Securities Department. Her work with 
the Securities Department was not about preventing 
sophisticated parties from entering mutually beneficial 
agreements. Instead, as we will hear, her team spent thousands 
of hours successfully fighting outright fraud and blatant 
misrepresentation of contracts.
    Kaycee, thank you for appearing before us today. It is an 
honor for this Committee and Arkansas to have you here. 
Arkansas and I are proud of the work you and your team have 
done and hope it can be a model for the entire country.
    The Chairman. Thank you.
    We will then hear from Stuart Rossman, the Director of 
Litigation at the National Consumer Law Center, and I 
understand that Senator Warren would like to introduce this 
witness.
    Senator Warren. Thank you, Chair Collins.
    I am pleased to introduce one of our witnesses today, Mr. 
Stuart Rossman. As you said, Mr. Rossman is the Director of 
Litigation at the National Consumer Law Center in Boston, 
Massachusetts.
    I just want to say about Mr. Rossman, he is deeply 
knowledgeable about the law, but he also has a very thorough 
understanding about what is actually happening to people across 
this country. In other words, he knows his stuff, and we are 
lucky to have him here today.
    Thank you, Mr. Rossman.
    The Chairman. Thank you.
    Finally, I want to ask Senator McCaskill if she would like 
to add anything. You mentioned our final witness on this panel, 
Maria Walden. If you have anything you would like to add to 
what you said in your opening statement.
    Senator McCaskill. Well, as I mentioned in my opening 
statement, she is the Director of Legislation and Policy for 
the Public School and Education Employee Retirement Systems, 
and it is one of the finest pension programs in the country. I 
like to remind our teachers in Missouri that we are not high on 
the scale when it comes to salaries, but when I was an auditor, 
we were number one in the country in terms of pension benefits. 
Are we still number one?
    Ms. Walden. We are very close, Senator.
    Senator McCaskill. Yes. I know that we have one of the 
finest pension programs for people on the front line of every 
social ill that faces our country. I think we forget that it is 
teachers that we are asking to do so much more than teach in so 
many places in our country today, so well deserved, good 
pensions, I think, are something that we all need to in this 
country realize is an important part of financial security.
    I am proud of your organization and so glad that you are 
here today. Thank you.
    The Chairman. Thank you all for joining us. We look forward 
to hearing your testimony, and we are going to start with Dr. 
and Mrs. Kroot.

             STATEMENT OF LOUIS KROOT, M.D., CMDR, 
               USN, RETIRED, LEXINGTON, KENTUCKY

    Dr. Kroot. Chairman Collins, Ranking Member McCaskill, 
distinguished Senators on the Committee, thank you for the 
opportunity to appear before you today and to testify about our 
family's experience with pension advances. We are here today as 
husband and wife, because in our 34 years of marriage, we have 
always operated as a team and ours is a shared cautionary tale.
    For 22 years, I served our country in the Navy as a 
physician. When I retired as Commander, I intended to continue 
to work as a doctor, and I did so as an ER attending physician 
in several hospitals. Today, I continue to work as an ER 
attending at a VA hospital in Lexington, Kentucky.
    My wife, Kathie, has been at my side throughout most of my 
career and has done incredible work as an advocate for organ 
donation and as a dedicated volunteer at our synagogue.
    When I left the military, I planned to continue to provide 
for our family through work and through my military pension, 
but due to a perfect storm of unfortunate events, we were left 
with debt spiraling out of control. First, we received bad tax 
planning advice in moving funds from a 401(k) and incurred 
around $100,000 in unexpected fees and penalties.
    Second, we suffered over $10,000 in home repair from our 
basement flooding while our house was in escrow.
    Third, we incurred an enormous amount of medical expenses 
when it became necessary for our adopted special needs daughter 
to be repeatedly hospitalized for a serious psychiatric medical 
condition.
    We were financially desperate at that time and did not know 
where to turn. We had incurred an extraordinary and unexpected 
debt. We were looking for any way to pay off this debt.
    We had seen advertisements in military magazines for 
companies that gave lump sum payments for military pensions. We 
contacted one of these companies, Structured Investments, which 
was doing business under the name of Retired Military Financial 
Services, and they offered to provide us with a lump sum 
payment against my future pension payments. We jumped at the 
opportunity. We felt that the lump sum payment structured 
investments offered would allow us to pay off much of our 
existing debt.
    We understood at that time that we were taking an advance 
on moneys that were due from future retirement payments. We 
understood that there would be fees for this service. We did 
not realize how expensive it was going to be. We simply did not 
get out the calculator or see it as a loan. We were desperate 
and we panicked.
    In fact, we realized we had been taken to the cleaners by 
Structured Investments. We were shocked when the complex math 
in the contract was broken down by a reporter and explained to 
us that we were paying over 30 percent interest on our advance. 
The paperwork we signed did not disclose the interest rate. It 
did not break down how the numerous fees we were paying to 
Structured Investments raised our interest rate.
    An example of these fees are the thousands of dollars we 
paid for a life insurance policy on me, required for the 
advance by Structured Investments, listing Structured 
Investments as a beneficiary, and we needed to continue to pay 
this two years after the loan was paid off because we needed 
consent from them in order to stop the insurance policy.
    We ended up paying more in interest with our pension 
advance than we would have paid if we had simply paid off the 
interest over time on our existing debt load.
    Moreover, we learned after the fact that there were 
alternatives we could have used to reduce our debt load while 
avoiding paying the high fees charged by Structured 
Investments.
    We have fully paid off Structured Investments. Looking back 
on our experience, it is clear that we made a mistake. We 
should have been more aware of what we were buying. We also 
want to make clear that we accept that we signed the contract 
and we accept responsibility for that. We should have known 
better.
    As we said, ours is a cautionary tale and we want to make 
two points to those who may find themselves in a situation 
similar to ours. First, you have other options. You should 
explore those options and should resist the urge to reach for 
easy, immediate cash. Second, had we known what we now know, we 
never would have taken out the pension advance from Structured 
Investments with their unreasonable fees.
    We wish we could do everything over again and make better 
decisions. It is our fervent hope that by testifying today, we 
can prevent other individuals from making the same mistake we 
did.
    Thank you again for the opportunity to be here and we look 
forward to your questions.
    The Chairman. Thank you very much for sharing your personal 
experience. When people hear that a physician can be tricked by 
these convoluted contracts with the lack of disclosure, I think 
it is a cautionary tale to others, and by coming forward and 
being willing to share your story, I believe that you will save 
others from making the same mistake, so I very much appreciate 
your sharing your story with us today.
    Mrs. Kroot, do you have anything you would like to add from 
your perspective?
    Mrs. Kroot. No. We should have known better. I am a math 
major and I should have done the math.
    The Chairman. Well, I think the fact that these contracts 
could fool a physician and a math major probably tells you all 
you need to know about the lack of disclosure, the deception in 
the contracts, the hidden fees, the charges, and I think we 
will hear next from Mr. Lord that based on GAO's investigation, 
your experience is not at all uncommon, unfortunately. Thank 
you.
    Mr. Lord.

         STATEMENT OF STEPHEN LORD, MANAGING DIRECTOR,

        FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S.

       GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

    Mr. Lord. Thank you, Chairman Collins, Ranking Member 
McCaskill, and members of the Committee. I am really happy to 
be here to discuss our June 2014 report on pension advances and 
the status of agency efforts to implement our really important 
recommendations. This is a really important issue, because, as 
highlighted by Dr. Kroot, there are companies out there using 
aggressive marketing techniques to target those who are 
vulnerable and those in urgent need of cash.
    Today, I would like to discuss three issues. First, the 
number and types of companies marketing these types of 
products. Second, I would like to discuss how the terms of 
these products compare to other similar financial products, 
such as consumer loans, and finally, I would like to clarify 
the role of the CFPB and the Federal Trade Commission in 
overseeing these activities.
    First, regarding the overall numbers, at the time of our 
review, we identified 38 companies that offered lump sum 
pension advance products. While 18 of these companies were 
located in California, the remainder were spread across several 
other states and virtually all of them marketed these products 
on a nationwide basis through websites. I think that is one of 
the key points we revealed through our work, as well, and we 
found--interestingly, we found that at least 30 of these 38 
companies were affiliated in some manner with each other, and 
if you could turn your attention to, I called this our 
``connecting the dots'' chart. This is not obvious from a 
consumer perspective, because if you make phone calls or 
conduct website research, you are initially led to believe 
there are 38 companies out there operating independently. Yet, 
by virtue of our undercover phone calls and follow-up research, 
we were able to identify connections between these entities.
    For example, Dr. Kroot, the two companies he dealt with are 
exhibited in the upper left-hand corner. That is Company four, 
as well as Company five. Structured Investments is Company 
four, and Retired Military Financial Services is Company five. 
It was obvious--it was not obvious to him at first blush that 
they are related, but through our work, we were able to 
identify these connections.
    The bottom line is the lack of transparency can make it 
difficult to file a complaint if you are a consumer, because 
you really do not know who you are dealing with. Also, if you 
are considering making an investment in one of these companies, 
it is difficult to do any research to assess the reputability 
of these vendors before making a financial decision.
    A second key point is regarding the terms of these deals. 
As highlighted by Dr. Kroot, the terms do not compare favorably 
with other similar financial products. How did we determine 
this? We analyzed 99 offers provided by six companies in 
response to our undercover phone calls. They did not know we 
were GAO calling. They assume we were a consumer interested in 
investing in these, and we found, first, these products had 
effective interest rates that were significantly higher than 
the legal limits set by states on consumer credit, called the 
State usury limits, and these rates range from 27 percent to 46 
percent interest rates. As you can see, that is considered 
really high.
    Second, we also found that these lump sums offered through 
these companies were about half of what you would get through a 
defined benefits pension provider. If you were to get it 
directly from your pension provider, it averaged about half. 
The percentage was 46 to 55 percent, so again, you could see 
these terms were not really that attractive from a consumer 
perspective.
    In terms of disclosure, as also highlighted by Dr. Kroot, 
we found that of the 38 companies, most did not disclose an 
effective interest rate, so it is really difficult to assess 
what type of rate is being provided.
    The bottom line of all our analysis, that these were not a 
good deal for consumers and the companies appear to be 
operating in a regulatory gray area.
    There is some good news here. In terms of our report 
recommendations, CFPB has taken some recent enforcement action. 
In August of this year, it filed a complaint against Pension 
Funding LLC. That is one of the entities Dr. Kroot was dealing 
with, as well as one other related entity. They also have 
released, CFPB and FTC, some consumer advisories in this area, 
so it is encouraging that the regulatory agencies are taking 
some regulatory and enforcement action, as we recommended in 
our report.
    This concludes my prepared remarks and I look forward to 
answering any questions you have later. Thank you.
    The Chairman. Thank you very much.
    Ms. Wolf.

               STATEMENT OF KAYCEE L. WOLF, STAFF

           ATTORNEY, ARKANSAS SECURITIES DEPARTMENT,

                     LITTLE ROCK, ARKANSAS

    Ms. Wolf. Good afternoon, Chairman Collins, Ranking Member 
McCaskill, Senator Cotton, and other distinguished members of 
the Committee. I appreciate the opportunity to speak with you 
today about the investigation that the Arkansas Securities 
Department conducted against one such pension advance company, 
Voyager Financial Group, or VFG, and its owner, Andrew Gamber.
    What we found in our investigation is that although VFG was 
located in Little rock, Arkansas, it used a network of 
individual agents who were located throughout the United States 
as well as various websites with multiple domain names, 
different company names--that was mentioned by the GAO--under 
this one company, and so, it seemed like there were several 
different companies out there and it was all under the umbrella 
of VFG.
    Through these websites, they would try to locate pensioners 
who were interested in selling the right to their pension 
payments for a lump sum, and they would also look for buyers 
who were interested in paying a lump sum amount for a steady 
return on their investment. I believe some of the interest 
rates promised were between seven and nine percent, which was 
more than what the market was offering.
    Some of the investors also found out about this product 
through agents with whom they had already a professional 
relationship.
    VFG facilitated everything for the transactions on both 
sides. The pensioner and the investor never spoke and never 
dealt directly with each other. They always dealt with VFG and 
VFG's agents.
    Once a pensioner was located, VFG would place the pension 
up for sale and they would help the pensioner establish an 
escrow account. The pensioner would then submit paperwork 
provided by VFG to their pension company and the pension 
company would be instructed to forward the pension amount to an 
escrow account. In turn, once that money was in the escrow 
account, it was then directed to be forwarded to the investor 
each month.
    This is an important distinction, because at no time was 
the actual pension assigned. At no time did the pensioner 
relinquish control over his pension, and at no time did the 
investor have control over that pension. The reason why this is 
important is because the number one complaint that we received 
was the failure of VFG and its agents to disclose the redirect 
risk, and what I mean by this is because the pensioner 
maintained control of his account, because especially with 
military pensions it is illegal to assign away your pension, 
they could direct the escrow company to--or direct the pension 
company to redirect the funds back to a different account and 
no longer to that escrow account. If the pensioner got into 
financial trouble and had to file bankruptcy, the pension would 
get caught up in the bankruptcy and would no longer go to the 
escrow account, so from the investor perspective, they were no 
longer getting that monthly return. They were never warned that 
this was possible.
    The problem is, that a lot of the investors we saw were 
senior citizens looking for a safe, low-risk investment, and 
that is how this product was packaged to them, that this was 
safe. You would get a seven to nine percent return on your 
investment each month, and some of the investors were told it 
was government insured, which was patently false.
    Another miscommunication and blatant, outright lie from VFG 
was the failure to disclose the fees involved in these type of 
products, and you have heard some about that. VFG failed to 
disclose a fee breakdown on both sides of the transaction. A 
pensioner never actually knew what their pension sold for lump 
sum, and on the other side of the table, an investor never knew 
how much of that lump sum they paid actually went to the 
pensioner. They were told VFG would receive a fee, sometimes an 
administrative fee is how it was couched, and the investors 
were told, but most of your money is going to go to the 
pensioner, and that ended up not being the case because there 
was a failure to disclose the fees.
    What happened in reality was that VFG would receive the 
lump sum payment from the investor. They would cut themself a 
rather large commission off the top. Then they would forward 
all of the commissions on to the individual agents. I saw one 
contract that had as many as six individuals receiving 
commissions off of one sale.
    Then they would pay out administrative fees, such as the 
escrow fee and other various fees, and then along down the 
line, finally, the pensioner would receive a much smaller lump 
sum amount than what it was purchased for, and again, there was 
no detailed disclosure about that to either side, either the 
investor or the pensioner.
    Unfortunately, with the Arkansas Securities Department in 
its name, we are a securities regulator, so we were looking at 
this from the investor side and we were very limited in the 
type of regulatory action we could take. Fortunately for us, 
Arkansas State law is the risk capital test to be able to 
analyze it as an investment contract, and we determined that it 
was under our State test, and, therefore, it was a security, so 
we were able to take enforcement action against VFG. However, 
the risk capital test is not the analysis in every State, nor 
is it the analysis federally, so it does vary State to State 
whether this would be considered a security.
    Although we were able to shut down VFG, it is unfortunate 
that Mr. Gamber has not learned his lesson, because it seems 
that he has continued to flout authority and has developed 
other companies and looks to be doing the exact same thing, and 
we currently have an ongoing investigation against him and some 
additional companies.
    So, I want to conclude by thanking you for having me here 
to talk about our investigation and I look forward to any 
questions you have.
    The Chairman. Thank you very much.
    Mr. Rossman.

            STATEMENT OF STUART T. ROSSMAN, DIRECTOR

          OF LITIGATION, NATIONAL CONSUMER LAW CENTER,

                     BOSTON, MASSACHUSETTS

    Mr. Rossman. Thank you, Chairman Collins and Ranking Member 
McCaskill, Senator Warren, members of the Special Committee on 
Aging. I appreciate being invited to testify today regarding 
pension advances and to report on recent cases involving 
military pension assignments where I have been counsel of 
record on behalf of disabled and retired veterans of our armed 
forces.
    As Senator Warren noted, I am the Director of Litigation at 
the National Consumer Law Center. For the past 16 years, I have 
been responsible for coordinating and litigating cases at NCLC 
on behalf of income-and age-qualified individuals, and I 
testify today on behalf of NCLC's low-income and elderly 
clients.
    In May 2003, NCLC was researching consumer scams 
perpetuated on active military personnel and ultimately issued 
a report, but while we were investigating that report, we came 
across a separate issue. The Judge Advocate General Corps felt 
that some of the greatest abuses that they were seeing 
concerned the solicitation of retired military personnel to 
gain access to their pension payments. What we discovered was 
that companies and individuals were targeting veterans' 
benefits, usually by offering those up-front cash payments in 
return for several years of the veterans' monthly payments.
    Veterans receiving retirement and disability benefits are 
highly attractive targets for financial exploitation. I like to 
say that guaranteed streams of income are sort of like honey to 
bees. They are just naturally attracted to the fact that the 
money is there, and particularly where we are dealing with 
vulnerable populations that are relying upon their pensions for 
their safety net. Retirement and disability benefits are 
regular, dependable, and long-term, and it is very easy to 
automatically transfer the funds each month. In the military 
setting, it is done by way of allotments through the Defense 
Finance and Accounting Services.
    Veterans are also easy to reach through affinity marketing 
and advertising in targeted publications. More and more, it is 
now proliferated through the Internet. The companies engage in 
what we call lead generators. When Dr. Kroot was contacted by 
RMFS, that was a lead generator which then turned him over to 
Strategic Investments, which was, in fact, the lender, so they 
are actually serving as the agents, as we previously heard.
    And, finally, veterans may have perceived themselves to 
have--they usually have heavy debt burdens or poor credit as a 
result of the financial strains of their deployment and their 
frequent relocations.
    I want to talk about a specific case that we had. We 
represented Darryl Henry, who retired as a Chief Petty Officer 
after 20 years of military service and had both combined 
pension and disability payments of over $1,000 a month. When he 
went to purchase a home, he found out that because of the debts 
that he had had when he left the service, he did not qualify 
for a prime loan to purchase, and in trying to find a better 
option, he found an advertisement for Retired Military 
Financial Services, the same company that reached out to Dr. 
Kroot. They then referred him to the Structured Investors 
Company, once again, the same company, and I have included the 
ad as part of my testimony, and he got a lump sum set of 
payments, which if he as a Chief Petty Officer had figured out 
what the actual interest rate was, it was 28 percent, which is 
far above the California usury law would permit.
    I do want to point out that we keep on pointing out on the 
usury laws. Unfortunately, only approximately one-third of the 
states in our country have usury laws at this point, so the 
fact in California, he would have been protected under those 
circumstances, but in many states, that would not have been 
true.
    Mr. Henry was told that since the transaction was not a 
loan, his credit score did not make any difference. They 
actually used it as a way of selling it to him that he could 
improve his credit score by paying down his loans.
    Mr. Henry got in touch with us and we ended up bringing 
suit on behalf of him and other enlisted personnel in a case in 
California in Superior Court. We alleged that it was a contract 
that violated the usury statutes and was also a violation of 
the Truth in Lending. We also indicated that it was in 
violation of the Federal statutes both from the Department of 
Defense and Veterans Administration that prohibit assignments, 
putting them in a rock and a hard place. If they said it was 
not a contract and it was an assignment, if it was not an 
assignment, it was going to be a contract, and then if it was, 
in fact, a violation of either of those statutes, we claimed it 
was a violation of the California consumer protection statute.
    We actually tried the case in May 2011, and in August 2011, 
the judge issued his rulings, finding that, in fact, it was a 
violation of DOD and Veterans Administration regulations and, 
therefore, was a violation of the California consumer 
protection statute, and awarded our clients $2.9 million worth 
of damages.
    Unfortunately, in the interim, the California Division of 
Corporations had shut down SICO, mainly because our litigation 
had stopped their flow of income, and that subsequent to our 
getting the judgment against SICO and the two principals, they 
all filed for bankruptcy and received bankruptcy protection. 
Interestingly enough, one of the reasons why they do not want 
these to be contracts is because as contracts, they would be 
dischargeable as unsecured debts. Yet once we got the judgment 
against SICO and the individuals, they sought the protection of 
the bankruptcy courts to protect having to pay the judgments.
    Our client, Mr. Henry, ended up getting nothing out of the 
deal because he had paid off his loans already. A number of 
individuals who had been in the process of paying off their 
loans at least could stop at that point and we were able to 
save them funding.
    Mr. Henry told me that at least he stopped this company 
from doing these bad transactions. Unfortunately, and quite 
honestly, my clients here are the heroes here. The lawsuit that 
Mr. Lord was just referring to was filed a couple of weeks ago 
by the Consumer Financial Protection Bureau along with the New 
York Department of Financial Services was against a company 
called Pension Funding, and three of their managers were named 
as defendants in those suits, one of whom was Mr. Steven Covey, 
who used the bankruptcy laws in order to get out of the debt 
that he owed in my case back in 2011. The Pension Funding Group 
does not do military loans. He apparently learned enough of 
that lesson, but fortunately, the regulators in that case were 
able to step forward.
    I think the bottom line answer to this is that we certainly 
need full disclosure. We need to ensure that the usury laws are 
obeyed. We need to make sure that the various Federal and State 
agencies are enforcing the law. Individuals have the ability to 
use consumer advocates in order to protect their rights, but 
ultimately, preventing this from the very beginning is the best 
way to deal with this problem. There are many, many other 
alternatives that are much better than these loans.
    The Chairman. Thank you very much.
    Ms. Walden.

        STATEMENT OF MARIA CAUWENBERGH WALDEN, DIRECTOR

            OF LEGISLATION AND POLICY, PUBLIC SCHOOL

           AND EDUCATION EMPLOYEE RETIREMENT SYSTEMS

             OF MISSOURI, JEFFERSON CITY, MISSOURI

    Ms. Walden. Chairman Collins, Ranking Member McCaskill, and 
other distinguished Committee members, my name is Maria 
Cauwenbergh Walden. I am the Legislative Director of the Public 
School Retirement System and the Public Employee Retirement 
System of Missouri.
    There are over 575,000 Missourians that are now protected 
under the statewide law ban that prevents pension advances in 
the State of Missouri. Since 1946, PSRS/PEERS have worked to 
provide strong, stable, secure retirement benefits to over 
250,000 Missouri public school teachers and public education 
employees. We pay more than $2.5 billion annually in benefits 
to over 82,000 retirees. We continue to be a financially stable 
defined benefit plan for our members. We have over $37.4 
billion in assets. We are the largest public retirement plan in 
the State. If you combine all other 85 retirement plans in the 
State, we have more assets and more membership than all other.
    The quality of our plan design, as Senator McCaskill 
mentioned, has been nationally recognized by the Public Pension 
Coordinating Council. We are governed by a seven-member board 
of trustees. That system is an independent trust fund. The 
board is charged by law with the administration of those 
systems. Due to the independent nature of our trust fund, staff 
is limited in the ability to support matters of which the board 
have not yet taken an official position. The comments that I am 
making today are solely for informational purposes and require 
that the systems remain neutral on this issue.
    As the Chairman indicated, pension advances are financial 
instruments where an individual with a pension receives an up-
front lump sum payment in exchange for contracting away a 
portion of that individual's pension payment.
    During the fall of 2013, there were several national media 
reports on predatory practices of pension advances across the 
Nation. They started in Missouri in the boot heel and they 
worked their way up to Jefferson City. The news reports during 
that time stated the monthly payments made by the borrower can 
be subject to effective interest rates of 27 to 106 percent. In 
some cases, as was mentioned earlier, borrowers are required to 
take out a life insurance policy and name that pension advance 
as the sole beneficiary to ensure payment.
    In September 2013, State Treasurer Clint Zweifel went on 
record as being very concerned about the predatory practice of 
pension advance companies in Missouri. In an effort to protect 
Missourians, he established the Pension Advance Portal on his 
website to allow public pensioners the ability to report any 
concerns or problems they had faced.
    That same month, the systems held several internal meetings 
to discuss the impact of those pension advance companies on our 
own members. Any time we see any firm or organization that 
might attempt to take advantage of our members, we become 
concerned and we work toward ensuring that our members are 
aware of any potential challenges or pitfalls they might face.
    In light of the media reports of these type of services, we 
really took a proactive stance and updated our website to 
educate our members, and we also informed them of the current 
statutory provisions that were in place that would protect 
them. In addition, management notified our staff regarding 
pension advances to ensure that retirees would be informed of 
this type of practice during any of our educational meetings 
that we hold throughout the State.
    One of the challenges the system faced was educating 
members and the public on the statutory protections that were 
already in place. PSRS/PEERS members are covered by an anti-
alienation and an anti-assignment provision in statute. As you 
are aware, an anti-alienation clause is a provision in the 
governing documents for an arrangement such as a trust as ours 
that specifies that the beneficial or equitable owner of that 
property held in that arrangement cannot transfer the interest 
to a third party. Those provisions prevent PSRS/PEERS from 
paying benefit payments to anyone other than the retiree or 
from accepting an assignment of the retiree's benefit payment.
    Therefore, by statute, we are prohibited from paying 
benefit payments directly to a pension advance company, and 
many of our statewide plans provide similar protections in 
their statutes. However, after receipt of the benefit payment 
from PSRS/PEERS, a retiree can use his or her pension benefit 
in any manner. Therefore, a PSRS/PEERS retiree would be able to 
enter into a contract with a pension advance company as long as 
the contract did not require PSRS/PEERS to make that payment to 
anyone other than our retiree.
    On January 7th, at the request of State Treasurer Zweifel, 
Representative Tony Dugger and Senator Mike Cunningham 
sponsored House Bill 1217. It prohibited pension advances from 
being sold in Missouri to public pensioners. House Bill 1217 
specified that the right of a person to a public employment 
retirement benefit cannot be transferred or assigned at law or 
in equity. A pension assignee would be prohibited from using 
any device, scheme, transfer, or other artifice to evade the 
applicability and prohibitions of this provision. Any contract 
or agreement made in violation of these provisions would be 
considered void and all sums paid and collected by the assignee 
would be returned.
    During the legislative process, proponents of House Bill 
1217 testified that the bill served as a good consumer 
protection for all Missouri public pension retirees. Proponents 
testified that the bill prohibited a person's Missouri public 
employment retirement benefit from being transferred or 
assigned to a pension advance service and would keep the 
benefit for what it was meant to be, a retirement benefit. The 
bill created a ban on pension advance lenders and would ensure 
that pensions earned by teachers, our firefighters, our police 
officers, and other public servants would be protected from 
such a practice.
    One of the reasons cited for the need of this legislation 
was to protect all of Missouri's public pensioners, especially 
any of those members whose plans might not have an anti-
assignment provision.
    We had five groups that testified in support of the 
provision. There were no groups that opposed the legislation. 
It was approved by the Governor on July 9, 2014, went into 
effect that August. Since the implementation of this law, we 
are not aware of any retiree---of our retiree--who has been 
sold an income stream for all or part of his pension. We also 
have not received a request from a retiree to make a payment to 
a pension advance service or into an escrow account.
    Thank you so much for the opportunity to testify today. I 
look forward to answering any questions you may have.
    The Chairman. Thank you very much for your testimony.
    Dr. Kroot, what we have learned from your experience, from 
the testimony of Mr. Lord and Mr. Rossman, is that veterans are 
frequently targeted, probably because it is known that military 
retirees have pensions the way other public employees do, and 
so there is a regular stream of income. You mentioned that you 
saw an ad in a military magazine for one of these pension 
advances, and I want to put up a couple of examples of the 
typical ads that we are finding as part of our investigation, 
very patriotic looking.
    You also initially dealt with an organization that was 
called Retired Military Financial Services. Did that give you a 
sense of comfort that this was a legitimate offering?
    Dr. Kroot. Yes, it did, Senator.
    The Chairman. How long did you sign away your pension--for 
how long a period did you agree to sign away your pension?
    Mrs. Kroot. Senator, it was for eight years. If we failed 
to make a payment, then we would automatically go into a 10-
year repay.
    The Chairman. Eight years is a very long time. Can you tell 
us what portion of your pension that you agreed to give up for 
those eight years in return for the lump sum, approximately?
    Mrs. Kroot. Approximately? Currently, we are receiving a 
little over $3,000, like, $3,015 in retirement benefits. During 
the time that we were paying Structured, we would get a check 
from Structured every month for about $300. I would say between 
$2,500 and $2,700 was taken each month.
    The Chairman. Instead of getting your military pension 
check each month of about $3,500, you instead were getting 
$300?
    Mrs. Kroot. Yes, ma'am.
    The Chairman. That must have been so difficult for you.
    Ms. Wolf, I want to commend you for being very aggressive 
in closing down Voyager's operations in your State. In my past, 
I spent five years as the chief regulator overseeing the Bureau 
of Insurance, Consumer Credit Protection, Banking, and the 
Security Division. I was very interested--in the State of 
Maine, I am talking about--I was very interested to hear you 
talk about not only the effect on the military retiree or the 
person giving up the pension, but on the investor on the other 
end of the transaction. You looked at it as if it were a 
security, whereas the Consumer Credit Protection Bureau in my 
State would look at it as a consumer loan.
    My point, however, is this. You were able to close down 
this bad company in Arkansas and protect the people of Arkansas 
from this bad actor, but you pointed out he simply set up shop 
in another State. Does that mean that we need to have some sort 
of Federal regulation or legislation in this area?
    Ms. Wolf. Well, I certainly--it is very limiting, what we 
can do as a securities regulator, because you are right, we 
were looking at it from the investor standpoint, and 
unfortunately, with the nature of Mr. Gamber, and it sounds 
like from other types of pension companies like this, they do 
shut down in one State, and although Mr. Gamber, we believe, is 
still in Arkansas, he has formed companies in Texas and seems 
to be doing the exact same thing one State over, and that seems 
to be quite common.
    I cannot speak to Texas securities laws as well as other 
states' securities laws, and so strictly from a security 
standpoint, it varies State to State, and if there is not some 
type of overreaching protection otherwise in place, then we are 
limited to the action we can take.
    The Chairman. Obviously, Missouri has taken care of this, 
the only State in the Nation, by banning this kind of practice 
when it comes to public pensioners, but there are a lot of 
private sector people, as well. Although defined benefit plans 
have greatly declined, there are still some. In Missouri, Ms. 
Walden, is there any protection for those who are receiving 
private pensions?
    Ms. Walden. Not that I am aware of. The State law only 
addressed public pensioners.
    The Chairman. Mr. Lord and Mr. Rossman, I want to give you 
the opportunity to give us your recommendations on whether or 
not, given the ease with which people can move from State to 
State, the bubble chart that Mr. Lord put together showing the 
interlocking companies. We will start with Mr. Lord. What do 
you think Congress could do to help protect people in this 
area?
    Mr. Lord. Well, there are a couple things. It has been a 
long unsettled question on whether these constitute consumer 
loans or not and, therefore, should be subject to the Truth in 
Lending Act disclosure requirements. If there is some way to 
clarify that, number one.
    Also, just in terms of transparency, you could require in 
some respects more reporting about who these entities are or 
just have some sort of minimum reporting requirements that help 
enhance the transparency in this area. It is a very murky area. 
I know they are doing this--they structure these products 
deliberately by design so they fall outside some of the 
existing statute, but from a consumer perspective, it is 
simply--they do not have a lot of visibility.
    I think there is a clear Federal role in consumer 
education. There is a Financial Education Literacy Commission. 
It is vice chaired by CFPB. I think they could take additional 
steps to educate the consumer. Obviously, consumers are 
ultimately responsible for their own financial decisions, but I 
think they need to better understand the risk of these 
transactions going into them.
    The Chairman. It is clear that the companies are taking 
advantage of this murkiness, and the fact that in one State it 
is going to be treated as a security in order to get at them 
and in another as a consumer loan shows you some of the 
problems.
    My time has expired, so Mr. Rossman, I will get to you on 
the second round.
    Mr. Rossman. Fair enough.
    The Chairman. Senator McCaskill.
    Senator McCaskill. Thank you.
    Ms. Walden, one of the more disturbing parts of these 
schemes--I know this was applicable to your members--is the 
idea that your pension members do not have Social Security.
    Ms. Walden. Correct.
    Senator McCaskill. Even those that do are subject to the 
complicated rules under the windfall elimination provision, so 
for these people, selling off future income is even more 
dangerous because they do not even have Social Security to fall 
back on. How does this work with your plan? If someone signed 
up for a pension advance, assuming they were still legal in 
Missouri, would they typically, any of your members, any of 
them have Social Security income they could rely on?
    Ms. Walden. Some of them do. It depends on what they did 
prior to teaching. It also depends on what they do during the 
summer months. As you know, most teachers work year-round, but 
at the same time, they have a little bit of a break during the 
summer months. They can earn some Social Security benefits.
    Senator McCaskill. Are there any options that your 
pensioners have if they needed a substantial sum of money? Can 
they take a lump sum at any time from this system? Is that 
allowed in Missouri?
    Ms. Walden. The only allowing that we have is if a member, 
before they retired, we have an option called a partial lump 
sum. That allows a member to take a portion--it is either a 12, 
a 24, or a 36-month portion--and what it basically does is give 
them that pension for those years that they take and it reduces 
their overall--actuarially reduces the pension they receive, 
but they do get a lump sum, so if you have an individual who 
wants to pay off their house before they retire, they will work 
an additional three years and get that 36-month partial lump 
sum so they can pay off their house, and it is actuarially 
reduced, so it is a dime-for-dime transaction. There is no 
enhanced benefit for the system at all.
    Senator McCaskill. If something occurred unexpected after 
they had made their decisions about retirement, there is no 
options for them, perhaps, except something like these scam 
artists.
    Ms. Walden. They could potentially--in Missouri, it is not 
allowed at all for our teachers due to the law that was passed. 
Prior to that, most of our teachers will call in. We have an 
unbelievable member education system, and we touch teachers 
every day. The call volume is unbelievable. They call us when 
they have any kind of question, and what is great about it is 
we have that type of relationship with the teachers. Our 
teachers give 14.5 percent contribution rate. They love their 
retirement plan and they want to make sure what they are doing 
is protected, and so we get calls and that is where part of our 
education process was also to educate our staff, to let them 
know if they received any calls regarding this to, one, inform 
them of the problems that could result from it, such as we have 
seen earlier today.
    Senator McCaskill. Right, with Dr. Kroot.
    Mr. Rossman, these products remind me a little of life 
settlements or payday loans in the sense they allow a consumer 
who is desperate and feels pressure and needs cash in exchange 
for promises of something that would happen in the future. 
These industries are regulated in some capacity, although there 
is certainly a concern with both products, but there is a 
market out there for people who need a large sum of money. Do 
you think pension advances should be regulated like those 
products for people who really need the money, with some sort 
of interest rate cap? I mean, are we making a mistake by 
outlawing these a opposed to just making them behave like moral 
human beings?
    Mr. Rossman. That would be a good start. I think that, 
first of all, you have to distinguish between the payday 
lenders and the other products, predatory products, that are 
out there. What is unique about these pension advance 
companies, and it was a great surprise to us, was that they are 
much smaller in size. Many of the other predatory lenders are 
now publicly held companies, and these were pretty much thinly 
capitalized corporations that had absolutely no skin in the 
game. What we found out with each of these entities, and I do 
not know if Mr. Lord found the same experience, was that they 
only loaned out what they were able to get in from investors, 
so the individuals who were running the show----
    Senator McCaskill. That is like a bookie.
    Mr. Rossman. Yes, exactly.
    Senator McCaskill. They are just taking the ``vig.''
    Mr. Rossman. They are just taking the ``vig,'' exactly, 
and, so, the other issue----
    Senator McCaskill. I do not know how I knew that word, I 
just want to say for the record.
    I just want to put that on the record. I do not know where 
that came from.
    Mr. Rossman. I come from Boston, so I know exactly what you 
mean.
    Senator McCaskill. You know exactly what it is.
    The Chairman. I do not. I come from Maine.
    Mr. Rossman. I think that the other thing that is 
significant is that most of the predatory loans that we usually 
see out there are in the $5,000 to $10,000 range. As I think 
Mr. Lord said, and we found certainly in our reports, we were 
seeing averages of $45,000 to $50,000 and upwards over 
$100,000, which is a much bigger sum.
    Look, we understand that individuals run into difficult 
times financially, like the Doctor was testifying. There are--
certainly each--in my case in the military, each of the 
branches of the military have relief funds to help people in 
cases of emergency. There is also the possibility to use the 
guaranteed stream of income in order to secure a loan from a 
more responsible and regulated source. You could go to a credit 
organization or a savings and loan to be able to take out the 
loan and then secure it. The key here, though, is that you are 
controlling your funding, and that is not the case with these 
companies. You literally lose control over your pension over 
that time.
    I thought that the Doctor was absolutely correct, and we 
had found the same situation, that if, in fact, you tried any 
way to get yourself out of the transaction, you were penalized 
with a two-year addition. That is two years, in their case, of 
almost $3,000, so looking at a $25,000 penalty. It is 
outrageous. It is unconscionable. It is a sharp practice that 
really cannot be tolerated.
    So, I do not know that regulating that makes a great deal 
of sense. I think that providing other alternative products are 
important.
    The last thing I want to just ad on this, Senator, is the 
fact that we are dealing here with an Internet product now. It 
is very different than when we started this back in 2003.
    Senator McCaskill. Right.
    Mr. Rossman. You know, you are saying they went from 
Arkansas to Texas, half the time, you have no idea where this 
company is located.
    Senator McCaskill. Right. This is an IP address.
    Mr. Rossman. Exactly.
    Senator McCaskill. Right. Thank you very much. Thank you, 
Madam Chair.
    The Chairman. Senator Tillis.
    Senator Tillis. Thank you, Madam Chair. I made a personal 
note to go on the Internet and look up what a ``vig'' is.
    Senator McCaskill. Oh, come on. I do not believe you. You 
know what a ``vig'' is.
    Senator Tillis. Dr. Kroot, first of all, thank you for your 
service in the Navy and thank you for your continued service 
for our veterans. I wanted to get to the--you were required to 
take out a life insurance policy, I think, for $180,000. This 
is after you have agreed to pay about $230,000 back for a 
$91,000 loan. What is the nature of the requirement that you 
have now in terms of keeping that life insurance policy 
current? I mean, are they paying it at this point and you have 
to keep it--I need to understand a little bit about that 
ongoing obligation.
    Dr. Kroot. We paid for this and it was paid up, and when 
we----
    Mrs. Kroot. It was a term life insurance and the term ends 
in October. We were unable to stop paying it until the end of 
the term because we needed permission from Structured to stop 
paying it.
    Senator Tillis. Thank you, and I am sorry for what you went 
through.
    Ms. Wolf, I had a question for you. The Operation Voyager 
in Arkansas, it sounds like this--I think it is fair to call 
him a thief--he would originate some of these loans and then 
distribute them and sell them. I am trying to get a sense of 
what his business operation. It sounds like he would do a loan 
for Dr. Kroot, identify people that would buy the product that 
he has sold, and did he continue to service these loans? Did he 
have a business operation, or did he wash his hands of it after 
he transferred it or distributed it?
    Ms. Wolf. Originally--well, pretty much, he washed his 
hands of it. What would happen is the company would, through an 
agent, say, in Florida, would find a pensioner who went to the 
website and filled out the information that wanted to sell 
their lump sum--their pension for a lump sum. This person in 
Florida, usually a military veteran, put the amount that they 
were looking to sell it for or the amount of money they needed 
and the amount of money that they got each month from their 
pension.
    Voyager would then package these and put a purchase price 
on them, unbeknownst to the pensioner, and through another 
network of agents would find a buyer who was willing to pay 
that amount of money for, say, $1,000 a month for six years 
coming in, but Voyager would facilitate all the paperwork 
between the parties and would kind of stay out of it. They 
would facilitate everything----
    Senator Tillis. Yes, but who--I was trying to get a sense 
of who is actually doing the servicing of the loan, though, 
because there is still that process of, I guess, processing the 
pension payments, providing some disbursement back to the 
person who is providing the loans. I was trying to figure out 
or get a better understanding of the underlying business 
enterprise that exists for the life of the loan.
    Ms. Wolf. Voyager would set up an escrow account for the 
lump sum payment, but then they would have the pensioner set up 
an escrow account for a certain amount of time to direct the 
pension, so there was never actually a loan. They would just 
have the pensioner direct that money into the escrow account 
for a certain amount of time, and that is where the issue came 
from, because the pensioners would then turn around and either 
redirect the money back to themselves or have to file for 
bankruptcy and get caught up in the bankruptcy. There was never 
the--or, the money to the pensioner would be distributed at the 
very beginning----
    Senator Tillis. Okay.
    Ms. Walden [continuing]. and--yes.
    Senator Tillis. Mr. Rossman or Mr. Lord, or anyone else who 
may want to contribute, the law that was passed by Vermont, is 
that a best practice law? Is that something that all states 
should consider, or is there a best practice baseline out there 
that as we discuss what we may do at the Federal level, that we 
should be encouraging our respective states to take up?
    Mr. Lord. Unfortunately, I do not know enough about the 
Vermont specifics to comment on, other than they do have a law 
that pertains to this issue.
    Mr. Rossman. The problem--the Vermont law is a good law, 
there is no doubt about that. The problem is that because of 
the situation of the Internet--it stops at the State line. 
States can only do so much to protect their citizens from 
people coming from outside the jurisdiction, and I think that 
the proposal of having a Federal system that would guarantee 
uniformity across the country would be a very good one, because 
there is going to always be a situation where they are going to 
be able to find a jurisdiction to be able to hide out, so to 
speak, in order to market their bad wares.
    Senator Tillis. Thank you very much, and thank you all for 
the work that you are doing. Again, Dr. Kroot, thank you for 
your service to our country.
    The Chairman. Thank you.
    Senator Warren.
    Senator Warren. Thank you, Chair Collins. I want to thank 
you for holding this hearing today. This is really important, 
and thank you, Ranking Member McCaskill, for doing this, and 
thank you to all the witnesses for coming. We really appreciate 
your coming and telling this story. I know it is hard to do 
that, but it is very important that we understand what is 
happening here.
    I just want to see if I can pull this together so we have 
kind of got it all in one place, so defined benefit pensions, 
the steady, guaranteed income stream throughout retirement, we 
know these pensions are disappearing and the Americans who 
still have them know that they are lucky to have these 
pensions, but now there is this interconnected industry that is 
targeted to getting their hands on pensions. These pension scam 
companies turn a profit by offering retirees cash in exchange 
for a fixed amount of the buyer's future pension, as you 
testified to, plus, of course, interest and fees, and according 
to a 2014 report from the nonpartisan Government Accountability 
Office, and also as we have learned today from Senator Collins, 
these loans can have pretty shocking fine print, for example, 
effective interest rates over 100 percent, and to make sure 
that they get paid no matter what, these companies require the 
retirees often to buy a separate life insurance policy to cover 
the loan if the retiree dies and the pension stops, so it is a 
great deal for the companies running the pension scam. No risk 
and a hundred percent-plus interest rates on this.
    I just want to pull a couple of the pieces apart here. Mr. 
Rossman, as the Director of Litigation at the National Consumer 
Law Center in Boston, you have seen the damage that these 
predatory pension scams do firsthand, and I want to ask about 
some of the details. Who is the typical victim of this kind of 
scam?
    Mr. Rossman. The typical victim of the scam, you are going 
to have someone who has a guaranteed stream of income-----
    Senator Warren. Who does that tend to be?
    Mr. Rossman. You will be including in here you are going to 
have retired military personnel, you are going to have disabled 
military personnel, State, municipal, and Federal Governmental 
employees who are covered, and then in our case, those 
individuals who are covered by ERISA will very often have--and 
ERISA does have protections for anti-assignability----
    Senator Warren. So, military, teachers----
    Mr. Rossman. Teachers----
    Senator Warren [continuing]. firefighters----
    Mr. Rossman [continuing]. firefighters, exactly.
    Senator Warren. All right. Now, lots of states have 
consumer protection laws prohibiting loans with exorbitant 
interest rates, usury laws, and then there is the Federal Truth 
in Lending Act to protect consumers from loans like this, as 
well, so how can this be legal?
    Mr. Rossman. In our case, every single page of the contract 
was stamped on the bottom of the page with a rubber stamp that 
said, ``This is not a loan.'' ``This is not a loan.'' Now, I 
must tell you, after having done this for 20 years, if it 
quacks like a loan and it waddles like a loan and it smells 
like a loan, it is probably a loan----
    Senator Warren. It is probably a loan.
    Mr. Rossman [continuing]. but they went to great lengths in 
order to avoid having typical contract loan language and 
discounting that it was a loan.
    One of the things that was rather interesting, though, and 
we caught them on, is that there were a number of cases early 
on where people tried to discharge in bankruptcy and we were 
able to get the bankruptcy records where the same company came 
running in and saying, ``No, no, no, it is not a loan. It is an 
assignment.'' Then when we got in California, we said, ``Wait a 
minute, Your Honor. They were just in bankruptcy court saying 
that this was an assignment. Now they are saying it is not a 
loan. It has got to be something.'' You have got them on the 
horns of a dilemma.
    Senator Warren. I want to pursue that, but I just want to 
make sure. The reason they say it is not a loan----
    Mr. Rossman. Is because, first of all, you want to avoid 
the usury statute----
    Senator Warren. They are trying to avoid laws that govern 
loans.
    Mr. Rossman. Loans----
    Senator Warren. Second?
    Mr. Rossman [continuing]. including Truth in Lending, and 
second, they want to avoid having it discharged in bankruptcy--
--
    Senator Warren. That is right, so they do not want to have 
to make the disclosures.
    Mr. Rossman. That is correct.
    Senator Warren. They do not want to comply with the laws 
around loans, so they go over to the other side and they say 
they are not loans, they are assignments.
    Mr. Rossman. Mm-hmm.
    Senator Warren. Let me ask that question, then. If these 
are assignments, are they then legal?
    Mr. Rossman. In certain cases they are not, and that is 
where the cloudiness comes. If it is military pay for a retired 
veteran, for enlisted personnel, you are protected by the 
Military Pay Act, but if you are, unfortunately, like the 
Doctor, a commissioned officer, you are not protected. All 
disabled veterans are covered under the VA by anti-
assignability. Virtually every Federal and State employee 
statute--pay statute--includes provisions for anti-assignment 
provisions, as well, and as I said, ERISA in many cases 
prevents it, but that is not a majority of the pensions that 
are still out there.
    Senator Warren. For some people, it is the case----
    Mr. Rossman. That is----
    Senator Warren [continuing]. that it does not matter 
whether it is a loan or an assignment. It is not legal----
    Mr. Rossman. That is correct.
    Senator Warren [continuing]. either way.
    Mr. Rossman. You have got them on the horns of a dilemma.
    Senator Warren. That is right. For some, assignment is 
still legal, and this is just a place where the law has not 
given full protection.
    Mr. Rossman. That is correct.
    Senator Warren. It sounds like we are starting to get some 
action on this. Five years ago, Congress passed Dodd-Frank, 
created the Consumer Financial Services Bureau to try to 
prevent companies from cheating consumers, and as someone 
mentioned earlier in their testimony, the CFPB has now 
partnered with the New York Department of Financial Services to 
file two suits against two of the largest pension scam 
companies for using these deceptive marketing practices to dupe 
retirees into borrowing from their pensions. Obviously, a good 
first step, but we need to do more. There is no excuse for 
this. It is time to put a stop to these scams.
    Thank you, Madam Chair.
    The Chairman. Thank you.
    Senator Kaine.
    Senator Kaine. Thank you, Madam Chair, and thanks to all 
the witnesses. This is, sadly, eye opening, and especially the 
specter of ads targeting veterans with sort of flag waving and 
patriotic themes and pictures perpetrated by scam artists. It 
just makes you sick to your stomach. I mean, I am really 
discouraged at this.
    A couple of questions I was going to ask you. Maybe I will 
start with Ms. Wolf, so Andrew Gamber, he had had a previous 
history before getting into this pension advance area. He had 
permanently lost his license as an insurance broker for grossly 
misleading his customers, according to the Committee briefing 
for this. I guess he was in a field where there was a regulated 
environment and he had engaged in activities that caused him to 
have his license pulled.
    Ms. Wolf. Right.
    Senator Kaine. I guess it is an indication that this kind 
of falls in the cracks, these pension advance, because he could 
go from a regulated area, losing his license, to setting 
something like this up without a license.
    Ms. Wolf. Right.
    Senator Kaine. Is that just the quirks of all the different 
State laws and how this kind of financial product is treated, 
or maybe more often not treated under State law?
    Ms. Wolf. I would think so, but also, Mr. Gamber seems to 
not really have a conscience and not really care what the laws 
are. He was--his license was revoked in 2009 from the Arkansas 
Insurance Department. He was not regulated as a broker-dealer 
or an investment advisor under our act, but that is not to say 
that he was not selling securities, because it was a security 
under Arkansas law, we were able to take action. I do want to 
point out, his license was revoked in 2009. He formed VFG in 
2010.
    Senator Kaine. Mm-hmm.
    Ms. Wolf. We took action against him in 2013 and 2014, and 
now he has formed a new company, and so he is definitely 
finding ways to skirt the law and finding those gray areas to 
exploit.
    Senator Kaine. The GAO report is interesting, because I 
think your study indicated with this bubble chart that the 
pension transactions are concentrated in these two large 
groups, and one was Mr. Gamber, and we talked about him, and 
the second, Future Income Payments Group, is run by Steven 
Kohn, whose earlier business endeavors prior to his involvement 
in the pension advance business led to him being convicted of 
Federal criminal counterfeiting, so, you have got the two main 
groups. One is being run by somebody who has lost his license 
because of misrepresentations to insurance clients, and the 
other is being run by somebody who had been convicted of 
Federal criminal counterfeiting, and these are the two main 
groups that are doing this in the country right now.
    Mr. Lord. Well, unfortunately, you have several unsavory 
characters operating in these business lines. From a consumer 
perspective, again, it is very difficult to really know who you 
are dealing with, because that is not revealed on the company 
website, so again, from a disclosure perspective, that is why 
we raised that as an issue in our report.
    Senator Kaine. Again, from sort of a regulatory problem, if 
you have got, you know, folks who have been in different sort 
of financial capacities and one has been suspended, his license 
is, because of insurance challenges, and the other has been 
convicted of Federal criminal counterfeiting, but nevertheless 
they can do this kind of a business, this suggests that there 
is sort of, like, a gap in which they are trying to fit their 
work in a less regulated area.
    Mr. Lord. Yes.
    Senator Kaine. It is amazing that we would have less 
regulation for these kinds of pension transactions than we 
would for insurance. I mean, insurance is really important. 
Pensions are really important, too, and that that would be a 
gap is something that is notable.
    I want to take the Kroots' testimony--and I really 
appreciate you coming and sharing the experience, and I often 
find these hearings are really valuable because people are 
willing, thank God, to come share what has been a painful 
experience and we can learn from it. Thank you for being 
willing to do that, but they talked about--and I am going to 
ask the other witnesses to kind of help me with this question. 
They talked about the challenge they were dealing with. They 
had a challenge with medical bills for a daughter. They had a 
challenge with some housing expenses. These are the kinds of 
things that people run into every day, and one of you 
indicated, there are many alternatives that are better than 
these kinds of loans, so be sort of generic advisors to seniors 
or veterans that are confronted with financial needs like they 
described. You have got some real legitimate concerns. You see 
these kinds of ads in the paper about maybe take advantage of 
this 800 number, or get on this website to get help. What are 
the better alternatives? We are having hearings like this to, 
you know, educate people. What are the better alternatives that 
folks should explore? And I just would love to have any of you 
talk about that, and again, we are not talking about a 
particular circumstance.
    Mrs. Kroot. Right.
    Senator Kaine. We are just generally--and, Mrs. Kroot, you 
want to jump in first, so please.
    Mrs. Kroot. Yes. One of the things that happened with us in 
Structured, we took this money out to pay the IRS, and at the 
end, when the loan was concluded, we were given a list of who 
we could pay and who we could not. The IRS was not on it, so we 
paid those other ones and we had to finally call the IRS, who 
has worked with us on a payment plan for the $100,000.
    Senator Kaine. Mm-hmm.
    Dr. Kroot. I wish to put on the record, the IRS was 
extraordinarily cooperative in coming up with a payment plan 
that was not a burden to us.
    Senator Kaine. Mm-hmm.
    Mr. Rossman. Senator, one of the things that is important, 
and we were talking before about why they were treated as loans 
or assignments, one of the pitches that these companies will 
make is that because it is not a loan, you do not have to worry 
about your credit score. Many of the people who are in dire 
financial straits, it is because their credit scores have 
deteriorated to the point where they cannot have access to 
prime loans and other sources of funding, and what they are 
saying is that since this is not a loan, we do not care about 
your credit score. Yes, you have got the U.S. Government paying 
you off, so what are you going to worry about? And you have got 
insurance covering you, as well.
    I think that you are dealing with a community which has 
difficulties because of their credit scores and they are 
looking for options. There are a number of things. If you are 
dealing with credit cards, for example, working with the credit 
card companies or dealing with a nonprofit----
    Senator Kaine. Credit counseling----
    Mr. Rossman [continuing]. a credit counselor----
    Senator Kaine. Right.
    Mr. Rossman [continuing]. to help you work out a plan to be 
able to pay off is certainly better.
    As I said beforehand, you do have this guaranteed stream of 
income which, although you do not want to lose control of it, 
you can still use it as a collateral as part of a good plan in 
order to pay down your debts in order to be able to secure 
funding against it but while maintaining control of the funding 
and not turning it over to someone else.
    I would say the final area, at least in the military, is 
that the JAG Corps was very upset because there are various 
programs set up within the military with relief funds--Naval 
Relief, Air Force Relief, Army Relief--to be able to work with 
their veterans to help them in distress.
    I think the thing that is so disturbing to me in the 
military area is that these thieves are stealing what are 
essentially tax dollars that are being paid on pensions, 
stealing them from veterans who have served their country, and 
then expect us to be able to take care of those veterans 
afterwards because, of course, we are not going to abandon them 
when they do not have the ability to take care of their own 
needs, so where is--there is just no justice in there 
whatsoever. Everyone is being victimized and these thieves are 
ripping us all off at the same time.
    Senator Kaine. Madam Chair, I think Ms. Wolf was going to 
answer for me, too, and I know I am over time, but is that 
okay? Ms. Wolf, were you going to weigh in?
    Ms. Wolf. I will keep this very brief. Not necessarily an 
alternative, but I do want to thank Dr. and Mrs. Kroot for 
coming forward, because as a securities regulator, a lot of 
times, we do not hear about these scams until someone is brave 
enough to pick up the phone and call us, because we do not--we 
are not on the front lines every day, and so, one of the most 
important things is that if you are in doubt or you hear about 
a new company, especially these companies that are very good at 
tricking you and making you think they are one entity but they 
are really another, call your local State agency, and whether 
it is an Attorney General's office or the securities 
department--a lot of times you do not know which agency would 
regulate what--they are very good about working together and 
referring cases. If ever you have a question, call your State 
regulator and ask and see if they are regulated or if they have 
had complaints on this company, and that way, you at least can 
know going forward--hopefully know what you are getting into.
    Senator Kaine. Great. Thank you, Madam Chair.
    The Chairman. Thank you.
    Mr. Rossman, I want to give you a chance to answer the 
question that I posed about what we should do about this. 
Obviously, states can take action. Litigation can be filed. 
Regulation can be implemented at the State level. There are new 
laws, lawsuits filed, et cetera, but I am so outraged by what 
has happened to the Kroots and so many others, particularly, as 
you said, those who have served our country, or served our 
states and cities and are now being taken advantage of, and it 
is evident that these transactions fall in a very gray area, as 
Mr. Lord said, so do we try to get Federal legislation passed? 
Do we amend the Truth in Lending Act to have better disclosure, 
at least? What is your suggestion for us?
    Mr. Rossman. Well, the simple practical responses are that 
there are many laws already that are not being enforced, and I 
would love to be able to see them being enforced. I would love 
to have the Department of Defense, for example, monitor these 
allotments that, if they are being placed into separate escrow 
accounts, that it should send up some red flares to find out 
what is going on and whether or not there has been a violation 
of the laws.
    I thought, Senator Tillis, your comment was rather 
interesting, because in the case with Dr. Kroot with RMFS, 
which was the lead generator, they were the agent that was out 
there trying to solicit for Strategic Investments, they are 
owned by the same people. It is the same ganif who is the guy 
who had been convicted for Federal law, and then turned around 
and avoided liability through bankruptcy court, getting his 
judgment discharged.
    I am a former prosecutor. I would like to see some RICO 
claims brought against these folks and maybe some jail time. As 
I said beforehand, they are the worst of the worst since they 
have literally nothing invested in these cases whatsoever. They 
are taking investors' money. They are taking the money that 
belongs to the taxpayers and to the pensioners. They are taking 
their cut for providing no service whatsoever and then they are 
returning into the dark where they can get away with this time 
and time again, and it is about time that someone stopped this 
kind of behavior with something more than a slap on the wrist.
    Beyond that, just clearly disclosure, so people understand 
the product that you are getting, so you have the Schumer Box 
equivalent for pension loans that clearly identifies the 
interest that is being charged. I think that, certainly, having 
anti-assignment provisions that extend beyond public officials 
but would apply to all pensioners would be very, very helpful, 
as well.
    The Chairman. Thank you. That is very helpful, and I want 
to remind everyone that RMFS, which you mentioned, was Retired 
Military Financial Services. If you saw that name, you would 
think it was a completely legitimate organization, particularly 
if the ad appeared in a military magazine, and I think that is 
why the Department of Defense needs to be more proactive in 
warning its military retirees that these schemes are out there.
    I hope that the hearing that we have had today will help to 
heighten public awareness, and that is why I am so particularly 
grateful to Dr. and Mrs. Kroot for coming forward, but for all 
of you sharing your personal experiences in this area.
    I want to ask my colleagues if anyone has a final question 
that they would like--yes, Senator Tillis.
    Senator Tillis. Thanks again for all of you being here 
today.
    The one thing that just strikes me about--and I really do 
think there is a criminal enterprise there. We have got some of 
the bad actors we named here, but there are a lot of people in 
this process or this chain that probably also need to be smoked 
out, as well.
    It does not seem to me--is there any possible way that 
after you get these agreements in place that you could actually 
have any kind of defaults?
    Mr. Rossman. Certainly not in the ones that we were looking 
at, no.
    Senator Tillis. The one thing--I think that this is 
extraordinary. We can have our discussions about some other 
lending practices and what is a fair rate, but at least some of 
their rates are driven by loss ratios that they have to manage 
to be able to provide a service, but this is completely 
independent of that discussion, whether it is payday or 
residential lending or whatever else. This is just purely 
criminal activity, where they are getting a guaranteed rate of 
return, charging an exorbitant interest rate, all upside, and 
actually, to the point here, if you miss a payment, even 
greater upside, zero downside. It is a criminal practice that 
we need to work to eliminate.
    Mr. Rossman. You are absolutely right.
    Senator Tillis. Thank you.
    Chairman Collins. Thank you.
    Senator McCaskill.
    Senator McCaskill. I just have one question.
    Mr. Lord, I have found time and time again in doing 
oversight that one of the biggest enemies of oversight is a 
whole lot of cooks in the kitchen that have a piece of it, and 
because then when there is something bad going on, everybody 
does like this. Well, why is not--I mean, to Mr. Rossman's 
point, things are not being enforced, but, you know, we have 
got FTC, we have got CFPB, we have got SEC. Then you have got 
Treasury, you have got PBGC, you have got DOD, you have got VA.
    If we were to work on a legislative action around these 
scams, where should we place primary responsibility for 
oversight for these products?
    Mr. Lord. Well, I think CFPB--I mean, their authority is 
already well established and clear. To me, it is just a matter 
of exercising it. I think the good news is they took 
enforcement action on two of the 38 companies we referred to 
them, but my question to them is, well, what about the 
remaining 36, to the extent they are independent entities? I 
think it is more----
    Senator McCaskill. It is like shooting fish in a barrel. 
These two guys should go to jail, like, immediately. Do not 
pass go. One of them has already been in jail, I believe. Yes.
    Mr. Lord. I mean----
    Senator McCaskill. I am shocked, just shocked.
    Mr. Lord. I am not sure they need more authority, but it is 
what are they doing with the authority they already have.
    Senator McCaskill. Do you believe that the primary 
authority now is at CFPB?
    Mr. Lord. Well, it is shared with FTC. They also have an 
enforcement role in this area, but if you--I mean, those are 
the two key agencies, and again, in terms of consumer 
education, Treasury chairs the so-called FLEC----
    Senator McCaskill. Right.
    Mr. Lord [continuing]. Financial Literacy and Education 
Commission, but CFPB, they are the vice-chair, so----
    Senator McCaskill. Yes.
    Mr. Lord [continuing]. they have a role in that, as well.
    Senator McCaskill. Maybe we need to direct an inquiry to 
the CFPB and to the SEC, or the FTC, and talk to them about 
what is their plan----
    Mr. Lord. Yes.
    Senator McCaskill [continuing]. of going after these guys.
    Mr. Lord. They will talk a lot about the consumer 
education, but I----
    Senator McCaskill. Yes. No, no, no, no----
    Mr. Lord [continuing]. clarify the enforcement side----
    Senator McCaskill. We need some deterrent here.
    Mr. Lord [continuing]. so the FTC----
    Senator McCaskill. Yes. People need to go to jail. Thank 
you, Mr. Lord.
    Mr. Lord. Thank you.
    The Chairman. I want to thank our excellent panel of 
witnesses for appearing today. You have really increased our 
understanding of what truly is an unconscionable scam so 
frequently directed against patriots who have served our 
country or those on the front lines in municipal and State 
governments, and we are going to continue this investigation. 
This is a first of a series of hearings as we begin to delve 
even deeper into these schemes.
    I want to thank each and every one of you for being here 
today, and again, particularly my thanks to the Kroots for 
coming and sharing your personal story. I can assure you that 
because of your willingness to share a very painful episode in 
your life, that you will, in fact, prevent others from making 
the same mistake, so thank you for coming forward, and my 
thanks and gratitude to all of our witnesses.
    The Committee members will have until Friday, October 9th, 
to submit additional questions for the record, which we will 
send your way if there are some, or any additional statements.
    The posters that have been displayed will also be included 
in the hearing record.
    The Chairman. Again, my thanks to our expert panel, to my 
Ranking Member Senator McCaskill, and to all the Committee 
members, including the ever-faithful Senator Kaine, who comes 
to all of our hearings, for participating in today's 
investigation and hearing.
    This concludes the hearing. Thank you.
    [Whereupon, at 3:57 p.m., the Committee was adjourned.]
    
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                        Questions for the Record

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