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Buffalo becomes 'ground zero' for abusive debt collectors

By now, the horror stories are well-documented. Tales of vulnerable victims, thousands of them, many of them elderly, coerced or deceived into paying big money for the promise of an even bigger pot of gold down the road.

It was the early 1990s and Buffalo, unbeknownst to most people, had become a hotbed of unscrupulous telemarketers.

Fifteen years later, the stories of threats, harassment and deception are back. But this time, it's a new cottage industry - debt collectors. And they are giving Buffalo a reputation any Chamber of Commerce would like to ignore.

"Buffalo is ground zero for debt collection companies that routinely violate state and federal debt collection laws," Assistant Attorney General James M. Morrissey said.

At last count,  the region was home to 4,700 debt collection workers, according to the Federal Trade Commission. The businesses range from small Mom and Pop shops with two or three people to large companies with 200 to 300 people.

The juicers and the spoofers of debt collection

"Why are they here?" asked James P. Kennedy Jr., the acting U.S. Attorney. "That's the interesting question."

The debt collection industry has a long history here and Morrissey  suspects the bad eggs learned the trade from legitimate collectors before going out on their own.

The business is also relatively easy and inexpensive to get into. Uncollected debts can be bought for pennies on the dollar, according to Morrissey, and here in Buffalo there is the added benefit of cheap office space and a surplus of people looking for work.

Strong-arm tactics

Kennedy is one of those who sees strong similarities between the telemarketers who called Buffalo home in the 1990s and the debt collectors here now.

The similarities, aside from the proliferation of both industries, range from the strong-arm tactics used by companies to the victims they prey upon. Those tactics - 'juicing," "spoofing" and "re-dos" - include inflating debts, making up debts or collecting the same debt multiple times.

Early on, most of the federal cases against local debt collectors were handled in civil lawsuits but, over the past two years, the government has taken on more and more criminal prosecutions.

"These are bottom feeders and they deserve to be dredged up and brought to the surface," said Kennedy. "These are people who are preying on the most vulnerable."

One of the first prosecutions to establish Buffalo as a hub for illegal debt collectors came out of New York City and the office of former U.S. Attorney Preet Bharara.

In what was described then as the largest criminal debt collection scheme ever charged, prosecutors accused Travell Thomas of Orchard Park of masterminding a $31 million scam that fraudulently inflated people's debts.

Thomas, who also made a living playing professional poker, was accused of using deceptive tactics, including threatening people with arrest or posing as a law enforcement official.

"They are en route now," one of his collectors reportedly told a victim, as if authorities were on their way. "Within 46 minutes, they will be there to serve you."

Thomas, 38, pleaded guilty last year and was sentenced to 8 1/3 years in prison. He also was ordered to repay $31 million to the victims and the government, a figure his lawyer suggested is grossly overblown.

More criminal cases

Michael Benson, Thomas' Springville attorney, thinks the increase in criminal investigations is due in part to the fact that debt collection cases are politically popular among prosecutors.

In the Thomas case, the abusive and coercive conduct was committed by "rogue" employees trying to reach a sales goal and earn a bonus, and yet Thomas is the one going to prison, Benson said.

"I don't think there was a need for a criminal prosecution," he said of his client. "He's going to jail longer than someone who got drunk and ran over someone, and longer than someone who sold a pound of cocaine."

In May, just a month after Thomas learned his fate, another local debt collector was sentenced to prison.

Alan Ceccarelli, a 31-year old Buffalo man, admitted his lead role in a scheme that targeted people in debt and, sometimes, people without real debt.

Like Thomas, Ceccarelli was accused of posing as a law enforcement official and using "spoofing," a collections technique that makes it appear to victims that the collector's telephone call originated from a police department or government office.

"You're seeing a more robust approach by the government," said Joseph G. Makowski, a Buffalo attorney with more than eight years of experience defending debt collection companies. "In terms of evolution, you're seeing more government resources put into these cases."

Makowski said the government used to pursue debt collectors through civil actions that resulted in fines, a change in business practices or, at worst, the company shutting down.

Now, people are going to prison.

Wrong people charged

"The Thomas case did catch the attention of the industry," Makowski said. "People are watching."

The government's increased scrutiny of the debt collection industry is evident in its 2015 civil case against Vantage Point Services of Amherst and a criminal prosecution two years later against one of the individuals named in the Vantage Point suit.

That dubious distinction belongs to Joseph Ciffa, one of a handful of local debt collectors who have been named in civil suits, often times together, filed by the state attorney general, Federal Trade Commission and Consumer Financial Protection Bureau.

It's no secret the government sees links between the individuals and companies they believe have run afoul of the law. Among them are three Buffalo debt collectors - Mark Gray and twin brothers Douglas and Gregory MacKinnon.

In a 2015 lawsuit against Douglas MacKinnon and Gray, the government accused the two men of ordering their callers to pose as law enforcement or threaten people with prosecution. This suit is still pending.

“You need to be aware of multiple fraud charges being filed against you," one caller told a victim, according to court papers. "It is imperative I speak with you to debrief you on your case and retain a statement in your defense. Failure to respond will result in you forfeiting your right to settle this case on a voluntary basis and it will be forwarded out for prosecution.”

In the Vantage Point lawsuit, the government laid out its contention that the companies and individuals named in the suit are a single large, intertwined business.

Morrissey said the template for some debt collectors is to create several companies - some to buy the debt, others to collect it - with the ultimate goal of trying to disassociate themselves from any wrong doing down the road.

"The model is for debt buyers to purchase debt for pennies on the dollar and place it with debt collection shops they help set up to distance themselves from the conduct by the debt collectors," he said.

The government laid out its allegations of a large, interconnected enterprise as part of a recent motion seeking a $22.5 million judgement against Vantage Point. The company countered by claiming it is a debt buyer, not a debt collector.

In rejecting the government's motion, U.S. District Judge William M. Skretny said he found "overwhelming evidence of wrongdoing," but little proof linking that conduct to Vantage Point or the other corporate and individual defendants in the case.

The judge, in fact, said the majority of the wrongdoing appears to have been done by people not charged in the civil case.

"That was the government's best shot," Dennis C. Vacco, the former state attorney general representing Vantage Point, said of the government's failed motion.

Vacco said the government seized control of the company more than two years ago as part of a court injunction and, despite unfettered access to its records, lost its request for a $22.5 million judgement against Vantage Point.

"They shut the business down, put people out of work and now, two and a half years later, the judge in the suit is saying the government hasn't made its case," Vacco said.

Unlike the criminal prosecutions of Thomas and Ceccarelli, which are over, the civil actions against most of the region's other debt collectors remain unresolved.






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