A South Carolina woman pleaded guilty to conspiracy for her role in a nationwide structured cash flow scheme that exploited military veterans in desperate financial straits and targeted elderly investors seeking a safe retirement investment.

Candy Kern, 55, of Anderson, South Carolina, was the managing partner of a small South Carolina-based law firm. From approximately 2012 through 2021, she used her law firm to facilitate a fraudulent scheme involving the illegal assignment of veterans’ benefits.

The scheme worked as follows: Numerous individuals and small corporate entities, referred to as Structured Cash Flow (SCF) entities, offered veterans – many of whom were in acute financial distress – an up-front lump sum payment in exchange for the assignment of the veterans’ monthly pension and/or disability payments for a period of time. Working through a network of investment advisors and insurance agents, the SCF entities would then solicit retirees to invest in these contracts – providing the up-front lump sums under the false pretense that the flow of repayments by veterans over time would translate into a return for the retiree-investors.

For more than eight years, Kern, through her law firm, served as the banker, legal counsel, and debt collector for the SCF operation. Among other services, Kern’s law firm (1) managed, controlled, and maintained the bank accounts through which payments to and from investors and veterans flowed; and (2) filed suits against veterans who defaulted. Throughout the duration of the scheme, and unbeknownst to the veterans or the retirees, the pension assignment contracts were in fact void, as it is illegal to assign a pension under federal law – a fact Kern knew but never disclosed during the execution of any contract.

Over time, the scheme collapsed, as many veterans (who tended to be in dire financial straits) either were unable to repay their “obligations” under the contract or opted not to do so upon learning that federal law prohibited pension assignments. Over the course of this scheme, approximately $14 million in illegally assigned veterans’ benefits flowed through the accounts controlled by Kern’s law firm. Notwithstanding the invalidity of the contracts, Kern pursued enforcement actions against veterans who defaulted, securing numerous default judgments against veterans in absentia. As a result, Kern’s law firm received approximately $1,446,336, while retiree-investors – who were misled and fraudulently induced to purchase the SCF product without being informed of all material information about the contracts – lost approximately $31,352,897.26.

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“This elaborate scheme preyed upon and exploited some of our most vulnerable populations, and when it collapsed, it left thousands of veterans in financial ruin and scores of retiree-investors without adequate resources to retire,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division. “The Department is committed to protecting servicemembers, veterans, and older adults from fraud. And we are dedicated to ensuring that those involved in this scheme are held accountable.”

“The District of South Carolina has been at the forefront of prosecuting fraud related to veterans’ pensions and associated investment scams,” said U.S. Attorney Adair F. Boroughs for the District of South Carolina. “It is reprehensible that a former member of the South Carolina state bar would participate in such a scheme and use her standing as a lawyer to give victims a false confidence. My office will continue its efforts to protect our veterans and to bring perpetrators to justice.”

“This guilty plea is a true testament to the FBI’s steadfast mission to uphold justice and protect the most vulnerable members of our society from financial exploitation and fraud,” said Special Agent in Charge Steve Jensen of the FBI Columbia Field Office. “The FBI recognizes the sacrifice and dedication of our veterans and values the contributions of our seniors to our communities. The guilty plea represents our commitment to holding accountable those who seek to take advantage of our nation’s heroes and seniors.”

Assistant U.S. Attorney William Watkins for the District of South Carolina and Trial Attorneys Ehren Reynolds and Yolanda McCray Jones of the Civil Division’s Consumer Protection Branch prosecuted the case.

The matter was investigated by the FBI. The Veterans Benefits Administration’s Benefits Protection and Remediation Division and the Defense Finance Accounting Service also assisted. Resources from the Department of Justice’s Servicemembers and Veterans Initiative and the Transnational Elder Fraud Strike Force aided in the investigation and prosecution.