DETROIT (AP) – Six former Michigan prison inmates who are due $3.5 million in an abuse lawsuit against the state could end up losing much of the money to private financiers who advanced them cash but haven’t been paid a dime.
U.S. Magistrate Judge Paul Komives said there’s nothing illegal about the roughly 4 percent monthly compounded interest rate charged by MFL CaseFunding, which sued the women over the lack of payments.
In a 28-page decision signed Monday, Komives recommended the financiers win the lawsuit. U.S. District Judge Mark Goldsmith now will review the case.
The women’s attorney, Ralph Sirlin, said the six were “desperate” for cash when the deals were made.
“They were getting all these calls. When you’re facing what they were facing, it was hard to turn it down. They signed on the dotted line,” Sirlin said in an interview.
The six women were part of a lawsuit alleging widespread abuse in Michigan prisons by male guards who were accused of raping, groping and peeking at inmates. A Washtenaw County jury in 2008 awarded them a total of $5.5 million, including $2.4 million to one woman.
But with appeals by the state of Michigan, there was no guarantee that the women would ever see the money. MFL CaseFunding contacted them and paid $635,000 in exchange for a partial stake in future payments from the lawsuit, with interest. The financiers were betting that the verdict would hold up on appeal.
In 2009, there was a dramatic shift: The state agreed to pay $100 million to settle all claims with hundreds of inmates. The deal also covered the six women who won the first trial. Instead of getting $5.5 million, they would receive $3.5 million spread over six years, and any appeals by the Michigan attorney general’s office would end.
MFL CaseFunding, based in New York, said it was never informed of the settlement and has not received a payment from the women. It filed a lawsuit in 2010 and is seeking a judgment against the six for more than $2 million.
“CaseFunding did not take advantage of the defendants,” attorney David Plunkett said in a court filing. “Instead, it is defendants who are now trying to take advantage of CaseFunding by arguing that CaseFunding is not entitled to the agreed-upon return on its investment.”
Sirlin said he tried to settle the case but was not successful. He said he will file objections to the magistrate judge’s recommendation to Goldsmith.
“They’re charging usurious interest,” Sirlin said.
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