A tipster (send in your tips here) sent in information with an update to the lawsuit resulting from the Allegro Law bankruptcy filing. For those who might not know, Allegro Law was an attorney model debt settlement company where the lawyers was disbarred and the firm filed a Chapter 7 bankruptcy petition.
This suit was filed by the Chapter 7 Trustee against AmeriCorp, Seton, and Tim McCallan personally. The original complaint was filed back in February, 2011 but this case is still active and has a lot of action to it. See 11-03007 Hamm et al v. AmeriCorp, Inc. et al.
Here are the allegations from the original complaint.
Defendants AmeriCorp and Seton, through their principal Defendant Timothy McCallan, have a long history of masterminding, orchestrating, and facilitating debt settlement schemes across the United States. As described by one State Attorney General, debt settlement is, at best, an “aggressive” form of debt management in which consumers stop paying all of their unsecured debts in an attempt to have their creditors agree to a reduced settlement. See Plaintiff’s Complaint, State of Texas v. CSA-Credit Solutions Services of America, Inc., No. 09-00417, at p. 2 (Dist. Ct. Travis County, Tex. Mar. 26, 2009), attached hereto as Exhibit A.
The myriad risks inherent in a debt settlement program “can have catastrophic effects on the consumer,” including the following: (a) an increase in the amount owed by the consumer due to the addition of interest, late fees and penalties on any accounts that are not being paid; (b) a creditor’s decision not to accept, let alone entertain, any settlement offers; (c) an increase in collection calls; (d) a drop in the consumer’s credit score; and (e) an increase in tax liability because any debt forgiveness that may occur as part of the settlement is taxable income. Id.
Defendants AmeriCorp, Seton and McCaIlan purport to provide a laundry list of services to debt settlement companies (including to Debtors Allegro Law and Allegro Financial Services). However, they fail to deliver all of the promised services, make false claims about the results that they can achieve for consumers, exaggerate the effectiveness of what few services they do provide, and charge exorbitant fees for so doing.
Prior to 2008, Hess-Kennedy Chartered, LLC, and its principals and affiliates (collectively, “Hess-Kennedy”) were involved in a debt elimination scheme in Florida.
Under the guise of providing “legal services,” “debt elimination services,” and/or “debt management services” for which various clients were charged substantial fees, Hess-Kennedy advised, encouraged, and enabled its clients to initiate, allegedly under the Fair Credit Billing Act (“FCBA”), 15 U.S.C. § 1666 et seq., “billing error disputes” against various credit card companies. Hess-Kennedy induced its clients to retain Hess-Kennedy and to stop making any payments to their creditors. Hess-Kennedy also promised consumers that it would make settlement arrangements with their creditors and that payments would commence immediately. However, the Florida Attorney General determined that Hess-Kennedy failed to inform its clients that money sent to Hess-Kennedy by clients would be used to pay Hess-Kennedy’s substantial fees first and “that only after legal fees are paid does the consumer start paying money towards settlement of the debt owed to creditors.” Office of the Attorney General v. Laura Hess, Esquire, et al., No. 08-007686-08, at pp. 2-3 (Cir. Ct. Broward County, Fla. Jul. 17, 2008) (memorandum of law in support of Plaintiff’s emergency motion), attached as Exhibit B.
The entire Hess-Kennedy scheme was made possible only by the participation of Defendants AmeriCorp, Seton, and McCallan. AmeriCorp, Seton, and McCallan provided back office services, call center services, and processed payments as part of the Hess-Kennedy program. AmeriCorp, Seton, and, by extension, McCallan, received substantial sums of money in fees for the services they purportedly provided to Hess Kennedy and its related entities.
Timothy McCaIIan has a history of being associated with debt relief operations that end up in trouble with government regulators. Before working with Hess-Kennedy, McCallan participated in another debt relief operation that involved two companies owned and/or operated by Andris Pukke – AmeriDebt, Inc. and DebtWorks, Inc. See Federal Trade Commission v. AmeriDebt, Inc. et al., No. 03-3317 (D. Md. Nov. 19, 2003) (plaintiffs complaint for injunctive relief), attached hereto as Exhibit C. McCalIan partnered with Andris Pukke to supply leads to AmeriDebt. AmeriDebt and DebtWorks were taken over by a receiver due to their fraudulent and deceptive conduct with consumers. See FTC v. AmeriDebt, Inc., et al., No. 03-3317 (D. Md. Apr. 20, 2005) (order granting preliminary inunction and appointing receiver), attached hereto as Exhibit D). The companies and Andris Pukke were successfully prosecuted by the Federal Trade Commission. See FTC v. AmeriDebt, Inc., et al., No. 03-3317 (D. Md. May 17, 2006) (order granting stipulated final judgment and permanent injunction), attached hereto as Exhibit E. For his role in the operation, McCallan agreed to release his claim to more than $1.9 million in favor of the Florida Receiver for the benefit of the defrauded consumers. See FTC v. AmeriDebt, Inc., et al., No. 03-3317, at pp. 4-5 (D. Md. March 2008) (receiver’s emergency motion for order approving settlements), attached hereto as Exhibit F.
A lawsuit filed by Florida’s Attorney General under Florida’s Deceptive and Unfair Trade Practices Act resulted in the appointment of a receiver (the “Florida Receiver”) who took over Hess-Kennedy’s operations on July 18, 2008. See Office of the Attorney General v. Laura Hess, Esquire, eta!., No. 08-007686-08 (Cir. Ct. Broward County, Fla. Jul. 17, 2008) (order appointing receiver), attached as Exhibit G. As a result, the Defendants needed somewhere to move their operations.
At the end of 2007, approximately 6 months before Hess-Kennedy was placed into receivership, Keith A. Neims was introduced to Timothy McCallan, owner and operator of AmeriCorp and Seton. When Hess-Kennedy came under serious scrutiny from governmental investigators, McCalIan became especially interested in establishing a relationship with Keith Nelms.
Keith Neims began operating a debt settlement and negotiation business in the spring of 2008. The business operated under the name “Allegro Law, LLC.” It signed its first contract with Seton, one of Timothy McCallan’s data processing and account administration companies, on March 31, 2008.
Defendant Seton was to provide a variety of services associated with data processing and account administration related to various consumers that would sign up for Allegro Law’s debt elimination programs. These services included, but were not limited to:
(a) Producing a standard set of business and operating statements that report transaction activity, client detail list, aged client receivables, checks paid, creditor billings, creditor cancellations and/or decline summaries, productivity and management reports for origination;
(b) Scheduling and producing creditor proposals;
(c) Scheduling and producing disbursements;
(d) Scanning, archiving and processing client documents;
(e) Mailing proposals, disbursement checks, fair share invoices, client statements, and routine customer correspondence;
(f) Overseeing and maintaining a creditor database;
(g) Calculating and collecting outstanding balances and applying funds received;
(h) Recording manual and electronic payments, reversals and returns and reconciling such;
(i) Administering banking functions;
(j) Providing general cash management and reconciliation assistance to Allegro;
(k) Establishing an account for each client;
(I) Making certain portions of each client’s file accessible via the Internet
(m) Maintaining a call center;
(n) Maintaining an administrative staff to receive and record documentation received from consumers and their creditors;
(o) Maintaining a staff to handle client complaints and the escalation of those complaints;
(p) Communicating on Allegro’s behalf with consumers’ creditors and collectors;
(q) Communicating with consumers about the status of their claims;
(r) Negotiating with each consumer’s creditors and attempting to reach a mutually agreeable settlement approved by each client;
(s) Providing notice of any pattern of client complaints;
(t) Providing training to Allegro’s staff; and
(u) Providing Allegro with access to reports and queries through the Quality Contact System.
Defendant AmeriCorp was also supposed to provide a variety of services associated with data processing and account administration related to various consumers who signed up for Allegro Law’s debt elimination programs. These services included, but were not limited to:
(a) Collecting and scanning consumers’ documents;
(b) Sending debt settlement proposals to consumers’ creditors and negotiating with them;
(c) Contacting consumers regarding any additional requirements that their creditors may impose;
(d) Processing consumers’ initial payments, recurring payments, and all fees charged;
(e) Depositing consumers’ payments into bank accounts;
(f) Providing daily deposit reports;
(g) Disbursing consumers’ funds to creditors;
(h) Handling refunded or returned checks from creditors as well as reconciling discrepancies;
(i) Operating a fully staffed call center for consumers;
(j) Recording all calls and all call center activity and evaluating the customer service representatives on a monthly basis;
(k) Reminding consumers about missed payments;
(I) Operating a call center for creditors;
(m) Providing regular reports and financial statements that record all of Allegro Law’s revenues and expenses; and
(n) Establishing bank accounts on behalf of Allegro Law and reconciling them each month.
Once Hess-Kennedy’s operations were halted by the Attorney General in Florida, many of Hess-Kennedy’s former customers were transferred to Allegro Law. Defendants AmeriCorp, Seton, and McCallan both created and seized the opportunity to continue raking in money from unsuspecting consumers by, among other things:
(a) Falsely representing to the Debtors that they were performing certain debt elimination services on behalf of consumers in the Debtors’ debt elimination program when in fact those services were either not performed or were inadequately performed;
(b) Falsely stating the extent to which the Defendants could successfully negotiate a reduction in debt on behalf of consumers;
(c) Concealing the fact that many creditors refused to negotiate with Defendants;
(d) Concealing the fact that any settlement negotiated with a consumer’s creditors would not necessarily result in a discharge of the remainder of the debt owed;
(e) Concealing the fact that the Defendants had been involved in various other debt elimination schemes that had been found to be fraudulent and had been put into receivership;
(f) Concealing the extent of the fees charged by the Defendants;
(g) Concealing the fact that many of the fees collected by Defendants in conjunction with the Allegro Law debt elimination program were diverted for personal, family, or other improper uses; and
(h) Concealing the fact that both AmeriCorp and Seton were charging fees for the same services.
Defendants AmeriCorp, Seton, and McCallan continued to use and abuse Debtors until Allegro Law, like other programs before it, was also put into receivership. – Source
As an interesting twist I did notice that Julian Spirer is representing AmeriCorp, Seton, and Tim McCallan. What makes that remarkable is that Spirer, from Maryland, was also an attorney previously representing Ameridebt.
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