Money Management International Accused in Kick-Backs in Class Action Settlement

Now here is something you don’t get to witness often, if at all. Apparently there is a bit of disturbed blood milling about in the credit counseling world right now.

In just doing some routine checking on activity I came across a very, very odd letter from the Association of Independent Consumer Credit Counseling Agencies (AICCCA) to the U.S. District Court about Money Management International.

In a class action case back in 2007, a group of consumers went up against Chase Bank and that sucked in Money Management International as well. – Source

After seven years you’d expect that case to be long gone. But in the debt relief world almost anything is possible.

But here is where it gets very interesting. In a letter from AICCCA entered into the public record on July 11, 2014 the credit counseling group says part of the money Money Management International paid out in order to settle the class action case involving Chase Bank and Money Management International was recovered by MMI in an alleged kick-back.

The letter from AICCCA gives the impression that whoever was controlling or in charge of AICCA at some point in the past, intentionally gave the settlement funds back to MMI. Now I’m not a lawyer but it certainly seems that when funds are paid out to settle a consumer class action suit they should not return to the entity paying them out. Isn’t that just money laundering?

A letter from the AICCCA lawyers to the Court painted a quirky story.

“On or about October 1, 2010, a Joint Stipulation of Partial Class Action Settlement and Release (hereinafter “Joint Stipulation”) was filed in the above-referenced case. Contained in section III of the Joint Stipulation was a provision relating to cy press funds (Joint Stipulation III(E)(1-2)). The Joint Stipulation specifically identified certain 501(c)(3) charities to be recipients cy pres funds resulting from the Joint Stipulation (Joint Stipulation III(E)(2)). AICCCA was one of those 501(c)(3) charities identified by the parties, subject to Court approval. Subsequent to the entry of the Joint Stipulation, AICCCA received approximately $64,000 in cy pres funds.

It has now come to the attention of AICCCA’s Board of Directors that an employee of AICCCA entered into what they believe to be an unauthorized agreement with a representative of Defendants Money Management by Mail, Inc. and Money Management International, Inc. (hereinafter collectively “MMI Defendants”). Pursuant to the aforementioned agreement between the unauthorized representative of AICCCA and the representative of the MMI Defendants, the MMI Defendants agreed to submit AICCCA as a proposed recipient of cy pres funds in exchange for a share of the cy pres funds awarded AICCCA. To date, AICCCA believes that it has delivered to and the MMI Defendants have accepted $35,000 of said cy pres funds. The agreement between AICCCA and MMI Defendants was entered into and acted upon without authorization of the Board of Directors of AICCCA.”

Then the lawyer who originally represented the Plaintiffs went on to say:

“The July 7, 2014 letter is the first notice class counsel has received of the AICCCA giving a kick-back to MMI. We respectfully request that the court make further inquiry and order MMI and its counsel to file declarations or present testimony from the appropriate person(s) detailing all the facts and circumstances surrounding these serious allegations.” – Source

Money Management International responded to the allegations and brought in A-Team lawyers from Venable. A nice bunch of people.

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The Venable letter added more smoke to the smoking gun and seemed to toss former AICCA officers David Jones and Joel Greenburg squarely under the bus. In fact I think they drove over and backed the bus up several times.

According to Venable the MMI kick-back story goes like this:

“Our review consisted of interviewing current and former MMI employees in-person at MMI’s offices in Sugarland, Texas or via telephone. We also conducted telephonic interviews with David Jones, former AICCCA President and Joel Greenberg, former AICCCA Chairman.

Finally, we have had several telephonic discussions with Scott Brennan, AICCCA’s counsel and one telephonic discussion with Anne Marie Murphy, Plaintiffs’ counsel. We also reviewed certain documents provided to us by MMI and documents that were already in our possession as counsel for MMI in this matter.

In summary, our review confirmed that MMI received a $35,000 grant from AICCCA in connection with the $64,295.36 cy pres distribution paid to AICCCA. The grant was to be used for MMI to provide in-person financial counseling sessions and was approved, after a written submission by MMI, by the then current President and CEO of AICCCA and the then current Chairman of the Board of AICCCA. The grant was made at approximately the same time MMI made the cy pres distribution to AICCCA. The grant’s stated purpose was to provide in-person credit counseling.

Employees of MMI and former employees of AICCCA deny that there was any quid pro quo in 2010 when AICCCA was designated by MMI in the Joint Stipulation as a cy pres recipient. Counsel for AICCCA, however believes that there was a quid pro quo agreement in 2010 between AICCCA and MMI based upon oral statements made by MMI’s CEO and AICCCA’s former President when questioned by AICCCA’s board in a telephone interview with the AICCCA board. MMI’s CEO and AICCCA’s former President deny making such admissions in their interviews with AICCCA’s board. Whether there was an agreement reached prior to naming the cy pres recipients in the Joint Stipulation to return a portion of the cy pres funds to MMI in the form of a grant, or otherwise, is a disputed issue, although MMI’s CEO and AICCCA’s former President both deny the allegation. Unquestionably, there was a grant approved and grant payment made in 2014 by AICCCA to MMI following the disposition of the cy pres funds to AICCCA.

Further, although not raised in the July 7 letter to Judge Carney, our investigation also examined RMCA, the second entity designated by MMI to receive cy pres funds. We learned that RMCA made a payment to MMI consisting of its entire operating account, which included the $64,295.36 cy pres funds, approximately 30 days after RMCA received the cy pres funds. This amount was intended to pay down an outstanding account receivable owed to MMI. Information suggests that MMI kept RMCA in operation despite financial hardships in order to allow RMCA to receive the cy pres distribution and then repay monies owed to MMI. RMCA has since been liquidated and dissolved at the direction of its Board of Directors, which included MMI’s CEO and two AICCCA officers.

Moreover, the Joint Stipulation incorrectly identifies RMCA as a tax-exempt 501(c)(3) organization, when it is, in fact, a taxable nonprofit corporation, not an entity exempt from federal income taxation under the Internal Revenue Code.

MMI acknowledges that the return of the cy pres distribution by RMCA to MMI, in reduction of RMCA’s account payable owed to MMI is inconsistent with the original intent of the Joint Stipulation. Further, the timing of the MMI grant application approval for $35,000 by AICCCA, concurrently with its receipt of the cy pres distribution, has the appearance of impropriety.

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MMI’s special committee authorized Venable to make a proposal to AICCCA that in connection with advising the Court of these events, MMI return the $35,000 grant to AICCCA. AICCCA’s counsel Scott Brennan was not willing to enter into such an agreement with MMI, and informed us that the proper resolution of this matter was for the Court to decide. Similarly, Venable contacted Plaintiffs’ counsel Anne Marie Murphy to propose that in connection with advising the court of these events, MMI return the $35,000 grant to AICCCA and return the RMCA cy pres distribution that had been applied to the account receivable to the cy pres organizations identified by Plaintiffs in the Joint Stipulation. While stating that Plaintiffs’ counsel appreciated the candor in which these issues were disclosed, Ms. Murphy and her co-counsel concluded that Plaintiffs would look to the Court to resolve the issue. – Source

So what we appear to be left with here is AICCCA saying they discovered money sent to MMI after the settlement funds were received was a kick-back. MMI layers say it wasn’t but that money was sent to MMI right after the settlement funds arrived at AICCCA. A wild coincidence for sure. But is it really a coincidence?

And then the letter from Venable opens up a whole new can of worms when it appears to say it uncovered a separate kick-back issue with settlement funds between MMI and the Reverse Mortgage Counseling Association (RMCA). No only was RMCA not a non-profit as specified in the settlement agreement with Chase Bank and Money Management International but the settlement funds magically returned to MMI in a transaction that was “inconsistent with the original intent of the Joint Stipulation.”

Probably the point of this story is more unbelievable is why would MMI get themselves in this mess over what must certainly be pocket change for them? If all the allegations prove to be true then why would they do something so deceptive and stupid to erase any supposition that commonsense was involved?

Obviously the Court is going to get a chance to sort this all out.

Damon Day - Pro Debt Coach

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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.
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