As the number of exonerations slowly rises across the country, so do the wrongful conviction claims against states.
The falsely convicted and imprisoned face the daunting prospect of trying to rebuild their lives while simultaneously fighting legal battles to receive their rightful compensation for being wrongfully incarcerated.
Such claims can take years to settle, said Corey Kilgannon of the New York Times, leaving the exoneree without cash or credit to help them pay their bills. Thus, many exonerees turn to firms that offer loans for pending court settlements, including exonerations.
These firms typically advance funds based on anticipated future payouts from court settlements such as for slip-and-fall, car accidents, and medical malpractice cases. The Times article explained that exonerations have turned into a niche sector, but that these loans come with high-interest rates.
The cash advances also come with uncertainty — if exonerees fail to collect from the court, lenders often must forgive the advances. If the court payouts do materialize, then lenders receive a hefty percentage as a reward for taking the risk of a failed settlement.
For many exonerees, the bargain is worth the price in order to have funds to begin rebuilding their lives. “I needed a service and they provided it,” said one exoneree quoted in the article. “Most people aren’t willing to take a chance on any of us.”
While appealing to some, this business model concerns some prisoner advocates.
“These are among the most unjustifiably victimized people in our society, plucked out of their lives and thrown behind bars. To then monetize them seems a little harsh,” said civil rights lawyer Ron Kuby.
The article cited some of the rates charged by these firms. For example, New York residents Huwe Burton took an advance of $500,000 and paid 28%; Sundhe Moses took an advance of $489,413 at a rate of 33%; and Fernando Bermudez took an advance of $290,000 and ended up paying back roughly twice as much. Such rates far exceed the state’s 25% limit on usury interest rates.
Jonathan Moore, a lawyer who works on exoneration compensation cases, said that he tries to counsel his clients against these high-interest loans, but he admitted that such firms provide a lifeline. The Times also said that this niche sector has grown more competitive as lenders follow exoneration cases closely.
Firms defend their high-interest business model by stressing that they risk losing the entire advanced amount if the exoneree’s wrongful conviction compensation claim against the state fails, the article said. The legal claim is the sole collateral for an exoneration loan.
Abraham Arouesty, the vice-president of a firm that lends to exonerees, said the loans are viewed as a gamble by lenders and that the rates they charge are calculated to reflect the risk of losing the entire advance.
However, the article quotes Donna Lee Jones, the president of another firm that provides exoneration loans. Jones said that advancing funds for future wrongful conviction lawsuits make exceptionally good bets because they have often gone through years of appellate court scrutiny and vetting by lawyers handling the claims.
The Times article quoted Jeffrey Gutman, a law professor at George Washington University, who cited a total of $2.65 billion in court payouts from 716 exonerees. These payouts averaged $3.7 million per exoneree, the equivalent of $318,000 per year in prison. The business model is expected to continue to grow given that the National Registry of Exonerations added 367 cases in 2022 alone.