Recently attorney Michael Livitis, the CEO of Mission Settlement Agency, was sentenced to nine years in jail. His co-defendants, Denis Kuryland, Boris Schulman, and Manuel Cruz pled guilty as well.
This case wasn’t an unusual outlier. From all outward appearances it was your run of the mill attorney model debt settlement agency that made promises, would not give refunds, and wound up with unhappy customers.
In the past this approach has been fairly typical. So much so that it could even be described as the norm.
The settlement guys were sued by the United States of America after the Consumer Financial Protection Bureau (CFPB) pushed the case forward. The government alleged Mission was like other debt settlement companies that held itself out as a company that could settle debt.
Specifically the government says Mission and the Defendants:
- Lied or concealed fees.
- Made debt reduction promises people did not achieve.
- Falsely suggested they had some relationship with an Obama plan or government plan.
The government claims the enterprise specifically targeted disadvantages consumers with debt by telemarketing and mail solicitations. And they even used this sales pitch which sounds very common to what consumers have reported hearing from a wide number of debt settlement companies.
Mission said funds would be held in escrow to settle but instead they took fees out of those funds for their own use. The fee, 18% of the enrolled debt. – Source
As part of the sentencing the defense prepared and supplied a document which basically says the enterprise did what was the industry standard. The document they provided contains a substantial amount of information from the American Fair Credit Council (AFCC).
“First, the Government points to conduct by Mr. Levitis that was in no way criminal. In doing this, the Government fails to distinguish between the criminal conduct for which Mr. Levitis has accepted responsibility and the standard, noncriminal practices of the debt settlement industry. Mr. Levitis should be punished for his criminal conduct alone, and not for the noncriminal failings of a debt reduction model.” – Source
As you can expect the government sentencing report paints a different picture.
Under the subject of refusing refunds, the government took that as a very consumer unfriendly action.
“Victim-1’s daughter, more fluent in English than her mother, contacted Mission on her mother’s behalf and demanded a refund for her mother. In a series of phone calls, a different Mission employee refused to return any of the money, which totaled over $1600. Ultimately, this employee said that Mission would return approximately just $200 of Victim-1’s money, but Mission never did return any of that money. Nor did Mission ever settle any of Victim-1’s credit card debts.”
“Levitis remained utterly undeterred by his customers’ pleas. He agreed to refund customers’ money only in the most limited circumstances, particularly when state Attorney General offices asked for responses to particular customer complaints, and he continued to direct employees to recruit new customers with the same lies about Mission’s fees, results, and affiliations.”
“Furthermore, at the same time that he was ignoring victims’ pleas to refund their money, Levitis flaunted his wealth and privilege on a short-lived reality television show in which he starred.”
The government took no notice that actions by Mission were fairly standard across the debt settlement industry. Instead it took notice of the false results claimed and lack of remorse for charging fees for debt it never settled.
“At Levitis’s direction, Mission employees deceived prospective customers by fraudulently promising that Mission could help reduce their debts – typically by 45% – when, for many customers, Mission actually did little or no work, and failed to achieve any reduction in debt whatsoever.”
“Contrary to the picture he paints of himself as an otherwise upstanding member of his community, Levitis brazenly preyed on financially struggling people in that community and across the country to commit this fraud.”
“Levitis abused his status as a lawyer to reap additional benefits from the fraud, conduct that demonstrated particular contempt for the law in light of the fact that Levitis was also on probation in the Eastern District of New York while he committed these crimes. And while Levitis suggests, in his sentencing submission, that he deserves a below-Guidelines sentence because he experienced challenging personal circumstances as an immigrant, there can be no serious dispute that he knowingly victimized many people in the same circumstances in the course of his fraud. Finally, while he suggests that he was raised feeling pressure to succeed, there is just a single, straightforward reason why Levitis committed this crime: greed.”
“Levitis committed a brazen and callous fraud, victimizing financially vulnerable people across the country in order to commit the crime. In doing so, Levitis, a lawyer, showed particular contempt for the law, using his ability to provide legal services in furtherance in the scheme, and engaging in the fraud at the same time he pleaded guilty to a felony and was serving a federal probationary sentence for lying to FBI agents investigating a prior, unrelated crime.”
“Mission and Levitis perpetrated a wide-ranging fraud against financially disadvantaged
people in New York and around the country. Some of these people were in serious financial distress; all of them wanted to settle their debts fairly, and were looking to Mission for help. Levitis, in particular, preyed on their desperation. On a daily basis, Levitis supervised nearly a dozen employees who, at his direction, lured in customers by lying about quick, affordable, and guaranteed solutions to their serious financial problems. After further tricking customers into believing that their up-front payments to Mission would be held in “escrow,” at Levitis’s direction, the employees provided additional false comfort that these payments were affordable by advising customers to stop paying their credit card bills during the months they were dealing with Mission. As a result, customers lost significant amounts of money they could not afford to lose, and additionally – and contrary to Levitis’s claim that the harm to customers was limited to the amount of money Mission took from them – customers frequently incurred substantial interest and penalties. Ultimately, some fell into bankruptcy, and many others have experienced long-lasting effects on their credit that persist to this day.”
“Levitis suggests that he did not intend, at the outset, to perpetrate a fraud. Whether he did or did not is of no consequence, because there is no question that Mission lied to customers, at his direction, essentially from its inception. Mission’s small offices were inundated with written complaints, many dozens of which were recovered by the Government during the execution of search warrants in this case. In addition to these written complaints, customers complained regularly by phone, by email, and in person at Mission’s offices. Customers also complained to various state Attorney General offices, each of which forwarded all complaints to Mission and requested responses from the company. Levitis remained utterly undeterred by his customers’ pleas.” – Source
The mistake the debt relief industry could make is to read about this mess and be in denial that the typical business of debt settlement does not have potential jail consequences.
In the past debt relief criminals came out ahead, taking in say $10 million and paying out $2 million to settle complaints. Then the company would be closed down and be reborn again.
At least in this case, debt relief officers and employees are headed for jail.
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