SEC claims Florida attorney defrauded disabled trust clients

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  • Defendants accused of profiting off nonprofit investment trusts

(Reuters) - The Securities and Exchange Commission sued a Florida attorney and his settlement management company on Monday, accusing them of lying to disabled plaintiffs to secretly reap fees from managing $46 million in settlement payouts.

According to the complaint filed in Orlando federal court, Jason Lazarus, both an attorney and chief executive of Synergy Settlement Services Inc, falsely said a non-profit foundation would manage pooled investment trusts to help disabled individuals retain their public benefits.

The SEC says the foundation was a shell company that funneled business to Synergy. The lawsuit seeks fines and disgorgement.

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The agency further alleged that Synergy improperly spent the funds of deceased trust beneficiaries on business expenses and to sponsor beach parties and other events thrown by lawyers and legal groups to develop business.

Lazarus, Synergy and Anthony Prieto, an investment advisor who serves as Synergy's president and whom the SEC also sued, did not immediately reply to requests for comment on Monday.

SEC Miami Regional Office Director Eric Bustillo said in a statement that the defendants "betrayed the trust of their victims."

Orlando-based Synergy offers a range of services to maximize and protect settlements, and has worked with more than 1,000 law firms in 50 states, according to its website.

To receive Medicaid and Social Security benefits, individuals face strict asset and income limits. Those who are owed settlements can retain their benefits by designating the funds to an irrevocable trust managed by a non-profit, according to the SEC.

Synergy advertised that service to personal injury lawyers, offering two trusts managed by a nonprofit called Foundation For Those With Special Needs Inc, according to the complaint.

The SEC alleges that the foundation had no employees and did not manage the trusts, which had 380 beneficiaries. Instead, Synergy, Lazarus and Prieto used the foundation to funnel $775,000 in fees back to the company, the agency alleged.

The agency further accused the defendants of failing to disclose mutual fund fees to trust clients.

The SEC settled related allegations against True Link Financial Advisors, which acted as investment advisor to the trusts, and its chief executive Kai Stinchcombe on Monday. True Link agreed to pay $200,000 and Stinchcombe $20,000. Neither admitted wrongdoing.

The case is SEC v. Synergy Settlement Services Inc, No. 6:22-cv-00820, U.S. District Court for the Middle District of Florida.

For the SEC: Robert Levenson and Alice Sum

For the defendants: Not available

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com