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Collecting on fake debt results in lawsuit against two WNY companies

There are counterfeit sneakers, counterfeit watches and counterfeit cosmetics.

There is even counterfeit Viagra.

And now, in a world where everything real seems to have a fake counterpart, there's a new twist: Counterfeit debt.

A new federal lawsuit accuses two local companies, one in Amherst, the other in Hamburg, of distributing and collecting on "phantom debts" that consumers do not owe.

The suit, filed by the Federal Trade Commission and the New York State Attorney General's Office, claims the companies knew the debts were fake, and that one of them went so far as to threaten and harass consumers in order to collect on the counterfeit obligations.

“It’s unconscionable to collect on fake debts that consumers don’t actually owe in order to make a quick buck,” Attorney General Barbara D. Underwood said in a statement Wednesday.

The suit seeks a temporary restraining order against Hylan Asset Management of Amherst and its owner Andrew Shaevel, and Worldwide Processing Group of Hamburg and its owner Frank Ungaro Jr.

In court papers, the FTC and attorney general accuse Hylan and Shaevel of obtaining the phantom debts from two known peddlers of fake debts and, even though they knew they were fake, placing those debts with collection companies.

A lawyer for Hylan called the lawsuit a "standard ploy" filled with "all kinds of exotic claims" and suggested the evidence will show the FTC gave a thumbs up to the use of debt portfolios filled with legitimate and illegitimate debts.

The suit also names Worldwide Processing and Ungaro as defendants and says the company, operating under the name “Forward Movement Recovery,” collected on counterfeit debts it received from Hylan.

Worldwide and Ungaro knew the debts were fake, according to the suit, and nevertheless harassed and threatened consumers in an effort to collect.

Dennis Vacco, a lawyer for Hylan and Shaevel, dismissed the lawsuit as a government ploy, a document filled with only one side of the story. He also suspects the FTC and attorney general left key evidence out of the suit.

He referred specifically to an April 2016 email from an FTC lawyer to Hylan and said the message refers to the same debt portfolios at the center of the suit. He said the FTC lawyer noted that debt portfolios can contain both legitimate and illegitimate debts and to, "proceed with extreme caution."

"This is not an FTC asking them to cease and desist," Vacco said Wednesday. "The FTC said proceed with caution and that's exactly what Hylan did."

A lawyer for Worldwide and Ungaro also referred to the FTC's history of dealing with these type of debts.

"The government's allegations are shocking considering the government's previous involvement with these accounts," said David Peltan, a lawyer for the company.

Lawyers for the two companies are expected to appear before U.S. District Judge Lawrence J. Vilardo on Thursday as part of the government's request for a temporary restraining order.

The state and feds claim the companies violated the state’s fair debt collection law and the Federal Trade Commission Act, which outlaws unfair methods of competition. They are seeking an unspecified amount of restitution for victims.

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