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Litigation finance pioneer bet big and then lost

Perry Walton’s innovative idea to invest in lawsuits was borne out of a conversation with his housekeeper in the late 1990s.

"She told me she wanted to buy her son a coat for Christmas, but she didn’t have the money," Walton said. "That would’ve been a shame, so I gave her the money. She had been in an auto accident and told me she’d pay me back once she got her settlement (in the lawsuit)."

It was then that the Las Vegan’s entrepreneurial instincts kicked in.

"I realized there must be a million other people in the situation my housekeeper was in," said Walton, once the subject of a lengthy profile in The Wall Street Journal, in his first interview in nearly a decade.

Walton soon became a pioneer of the litigation finance industry, in which companies offer plaintiffs in lawsuits cash advances in return for repayment with interest if a case settles.

Nevada is seeking to regulate the controversial practice.

Involvement in the industry led to a professional rebirth for Walton, a North Carolina native and former mobile-home park developer.

A couple of years earlier, Walton pleaded guilty in Clark County to a felony charge of extortionate collection of debt, stemming from his ownership of Wild West Funding, a money-lending business he ran out of his Las Vegas Valley home. Authorities said Walton threatened people who didn’t repay loans on time. Authorities alleged he told an undercover detective that he worked for people who could make delinquent borrowers "end up dead in the desert."

Walton, who denies ever having ties to organized crime, was sentenced to 18 months of probation in that case.

After the conviction, Walton quickly got back on his feet by launching Future Settlement Funding Corp., the company inspired by the woman who cleaned his house.

Within a short time, Walton was conducting training sessions in Las Vegas for people interested in opening similar businesses. His teaching manual consisted of thousands of pages of legal and financial documents that helped students analyze jury verdicts and settlement awards. He charged $12,500 a class and taught about 600 students.

His goal, Walton said, was to make money but also to make sure plaintiffs in personal injury lawsuits had a fighting chance against insurance companies.

"I didn’t think people should be put in a corner and forced to settle for less than their case was really worth," Walton said.

Rather than asking borrowers for repayment with interest, Walton typically would buy a share of a lawsuit. If his share were one-third of the total recovery in a case, he would receive $10,000 from a $30,000 settlement.

"It was a voluntary, participatory agreement, not predatory in any way," he said.

In addition to operating his own local business, Walton sold franchise rights to a related company. Soon, an industry that didn’t exist before Walton developed it had a foothold in several states.

As Walton invested in cases around the country, the new industry got the attention of state regulators. One of Walton’s contracts in Ohio led the state to ban litigation financing for a period of time.

But business remained good for Walton, who started putting his money in bigger cases.

Then he bet big and lost on a lawsuit in North Carolina. The lawsuit was brought against George Shinn, owner of the NBA’s Charlotte Hornets, by a woman who alleged Shinn had sexually assaulted her. Walton advanced Leslie Price, the plaintiff, several hundred thousand dollars.

Not only did Price lose her lawsuit in 1999, but after the verdict, her attorney alleged that the terms of her contract with Walton’s company caused her to turn down a lucrative settlement in favor of going to trial. The lawyer sued Future Settlement for wrongful interference with an attorney-client contract, and he won in what Walton calls "one of the biggest miscarriages of justice I’ve ever seen."

That case cost Walton about $1.6 million, bankrupted him, and exhausted him to the point where he ended his brief but eventful relationship with litigation finance.

Today, the 58-year-old Walton operates Pop’s, a cheesesteak stand on Decatur Boulevard.

"I’m glad I had an opportunity to pioneer the (litigation finance) industry," he said. "I have no regrets about going into the business. The bottom line is I just got burned out."

Contact reporter Alan Maimon at amaimon@reviewjournal.com or 702-383-0404.

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