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Debt Relief USA Owners to Personally Pay Millions in Court Award

I don’t think the former corporate directors of Debt Relief USA will soon forget July 15, 2011. On that day a State of Washington court awarded a class action award of $1.5 million against the directors of a now defunct and bankrupt debt settlement company.

James Wojcik, Kelly Reilly, and Alvin Bell will have to personally pony up this big damage award. The Court also tacked on litigation costs and punitive damages as well. – Source

In an alleged attempt to shake the liability of the Debt Relief USA business the then owners bankrupted the company to attempt to control damages. In June of 2009 Debt Relief USA filed a Chapter 11 bankruptcy which was soon converted to a Chapter 7. The bankruptcy proceeding is ongoing.

A Special Meeting of the Board of Directors of Debt Relief USA, Inc. (the “Corporation”), was held at 16200 Addison Road, Suite 105, Addison, Texas 75001, on June 1, 2009.

The following directors were present: Kelly E. Reilly, James F. Wojcik, and Alvin B. Bell.

Kelly E. Reilly, President of the Corporation, called the meeting to order and stated that the meeting had been called in accordance with the Bylaws of the Corporation. James F. Wojcik acted as Secretary of the meeting.

The Chairman then announced that meeting was called to consider the following: the liquidation and shut down of the Corporation’s operations and the filing of a bankruptcy petition to wind up the Corporation’s affairs. After discussion and motion duly made, seconded and carried, it was:

RESOLVED, that the Corporation file a petition under Chapter 11 of the Bankruptcy Code, that the officers of the Corporation are directed and empowered to take all reasonable and necessary actions to retain counsel, pay retainers, sign bankruptcy petitions and related schedules and documents, prepare a plan of liquidation, and otherwise wind up the affairs of the Corporation.

There being no further business to come before the Board of Directors, on motion duly made, seconded and carried, the meeting was adjourned.

At the time of the bankruptcy the court documents show the company owned interest in XO Communications and co-owned a Mercedes S550 with Alvin Bell. Ironically they also owed $25,000 to American Express and $15,000 to Bank of America on credit cards. – Source

The case was originally filed in August 2009 by The Scott law Group in the State of Washington on behalf of 345 consumers.

This is not the only such case The Scott Law Group is pursuing and a number of other debt settlement companies are now facing the same fate. Owners of advanced fee debt settlement companies that offered debt settlement services in the State of Washington should expect to see this develop further if they charged fees in excess of the Washington debt adjusting act.

B. Mack Mayo, attorney at The Scott Law Group, P.S., said, “Debt settlement companies often operate on a business model specifically tailored to exact as much money as possible from already financially vulnerable individuals. This judgment sends a strong message to individual corporate officers whose companies violate Washington consumer protection laws, including the protections afforded by our debt adjusting act.”

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.NewEraDebtSolutions.com Alex Viecco

    Steve,
     Needless to say that this is something that will shake up this industry in a big way.  As you have attorneys get these cases together on behalf of clients who were offered ADVANCE FEE models and that received little or no benefits.
    This might be the final way to send the message to the companies praying on consumers that they need to look out.  If ever transparency is needed, it is now more than ever.  Consumers and even these law firms I am sure will be looking for all the companies that have taken funds from consumers by the millions and have done the consumers no service.
    Some operators would actually think that now that they have collected their payday and possibly even moved on or transferred to an :”Attorney Model” are free from harm, they should read this post very carefully.
    Bottom Line is to ALWAYS do right by the consumer and in that manner you can substantiate your claims!
    Alex Viecco

    • http://GetOutOfDebt.org Steve Rhode

      The irony is that for all that time we were saying to pay attention to the fundementals of running a debt relief company, we were the ones called crazy.

      There is no getting away from the underlying issue that debt relief consumers will always be viewed as a disadvantaged class of consumers where regulators and courts will defend them first whenever possible. Shortcuts in compliance lead to bigger issues and in this case, large personal fines against the operators.

      It seems like the State of Washington laws were ignored or overlooked in this case. It was an easy situation to avoid.

  • Brad

    Hey Steve!  I just read this and found it VERY interesting!! Is this a pattern on the rise for those dreaded debt consolidation companies? I have been using your info on the United Financial Systems (of Florida) demise since last fall.  I am still awaiting the full refund, and have been in touch with Att Gen of FL and WI (where I reside).  I’m wondering if the state of WI Justice Dept can go after and file their own suit, as state of Washington did?  One of the Att Gen of WI spokespersons told me they have 30-60 days to comply or else that very well could happen.  Any insight?  And BIG THANKS to everything you’ve done to help me & 1000s of others when we were at our wits end!! :)
    -brad k

    • http://GetOutOfDebt.org Steve Rhode

      Wisconsin seems to be taking this seriously at the moment so you might want to just wait to see if they take action. Otherwise your quickest route and chance to get a larger refund would be to sue the company yourself in your local small claims court.

      Class action suits take forever and often return little to participants.

      Keep me posted on what you decide to do.

      Thank you for the kind words.

      • Brad

        Steve, I FINALLY received my email from UFS last week notifying me they were  out of available funds, etc etc.  I wrote to the person I had been speaking with here in Madison, WI,,,will attach her email response to me

        Mr. Kett: We are sorry that you have not been provided the refund you were expecting.  However, I can assure you that the Financial Crimes Unit of the Florida Attorney General’s office will be taking whatever action they can to secure the required refunds for the consumers.  I contacted the FL AG office this morning for any update they could provide me with and was told the following: UFS has advised the AG office that their assets have run out and no more refunds can be provided.  While such a notification is very distressing to all regulators, it does not mean that no further action can or will be taken.There may be physical assets that can be obtained and sold or any number of other things found through the investigation. This office has issued an Order against UFS and has provided the State of FL with that Order.  The FL AG is the enforcing office in this matter. Because you contracted with an out of state and unlicensed company, the regulatory authority of this office is very limited.  We will continue to follow up with the FL AG, however you will probably be notified of any significant changes before we are. We are sorry that we cannot bring this matter to resolution on your behalf. Sincerely, Maggie Schmelzer, ExaminerLicensed Financial ServicesWI Department of Financial InstitutionsPO Box 7876Madison, WI  53707-7876Phone: 608-261-2310Fax: 608-267-6889Now the thing that caught my attention here was when she called UFS an “unlicensed company”.  They WERE licensed at the time I began using them, back in September 2006. I was under the impression they lost their license last year and THAT is why they self-imploded.  Correct me if I am wrong on that. Hell, they even bragged on their website (when it was still up) how the program was “100% RISK FREE”.Now my last question(s) for you is if I would look into a small claims suit, how do I go about doing that.  I have little money, and am not familiar with the law system so I do not know where to begin in this matter, if I get a consult meeting with an attourney for free, etc. I also do not know if I should go to a local attourney at law, or a specialist of sorts.  Any advice would be greatly appreciated. Thanks!! :)Brad

      • DOUBLE DEBT

         CONTACT UFS ATTORNEYS

        ERICA FRANQUI
        United Financial Systems, Inc
        1117 Banks Rd
        Margate, Florida 33063
        Office: 954-990-1695
        Fax: 888-491-1120
        efranqui@unitedfinancial.org

        Robby H. Birnbaum, Esq.

        Trade Centre South100 West Cypress Creek RoadSuite 700 Fort Lauderdale, FL 33309954-343-6959 Email: robby.birnbaum@gmlaw.com
        954-343-6959 Email: robby.birnbaum@gmlaw.com

      • Brad

        Hello again, well after more no-news since the August 31, 2011 deadline came and went, I received an email from one Mark Briesemeister at the Economic Crimes Division, Office of Att Gen of FL, with an attached Affidavit to fill out against UFS!  I guess that is a very good step towards a refund almost 12 months in the making. I filled it out (a no brainer) and requested my due refund ($1100) plus the interest that was added on to my accounts during all this time.  (i was supposed to be finished with payments over a year and a half ago!!). Whether that is granted remains to be seen, but I stated my anger with the companies lack of concern for client, no answers, no apology, etc & that taking money from someone in another state & not applying it as contracted to is a felony & that their CEO deserves the harshest penalty…but we can’t hold our breath for anything more than a slap on the wrist, right!? :) 
        Is this affidavit a move in the right direction?

      • http://GetOutOfDebt.org Steve Rhode

        Progress in these issues moves slowly.

        Chris Boulahanis is also affiliated with Global Tax Relief LLC, Global Credit Management Inc, United Financial Credit Counseling Inc, Capital Debt Relief LLC, and Jenson Group Inc. These are all Florida companies.

        From the looks of it he is a serial owner of debt relief companies.

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