Here is the latest Get Out of Debt show podcast.
Do You Have a Question You Want to Ask?
If you have a credit or debt question you’d like to ask call 919-321-2378. Leave your first name and question and I’m happy to help you totally for free.
I had an opportunity to speak with Daniel Stermer, Esq., the court appointed receiver for the Hess Kennedy law firm in Florida that was shut down. I thought it would be important for Hess Kennedy clients and people involved in the Allegro Law debt settlement firm that was shut down in Alabama to hear what it is like from the court appointed receiver seat.
Listen to the Answer
Subscribe to Debt Interviews
You can subscribe to my series of debt interviews through iTunes by clicking here.
Interviewer: Today I had an opportunity to call and speak with Daniel Stermer. He is the court-appointed receiver for the Hess Kennedy law firm in Florida that was closed down. I thought it was important to talk to him to find out what he learned from that experience.
Daniel Stermer: Steve, I appreciate the opportunity and welcome it. And yeah, there have been a lot of lessons learned, and be more than happy to share them with you and your listeners. You know having been appointed by the court here in Florida last July, so in our year’s experience we’ve had many experiences, and have come to know an awful lot about the industry.
Interviewer: Mr. Stermer, when people first find themselves in this situation, generally it’s a surprise. The court has stepped in; all of a sudden things are frozen. From a receiver’s point of view, a court-appointed receiver’s point of view, how important do you think that it is for the receiver to maintain open communication and try to disseminate as much information as possible to keep people in the loop?
Daniel Stermer: We believe it’s very important, which was why we have initially and continued to send out written correspondence to claimants, whether they’re consumers involved or trade creditors or other interested parties, as well as we created a website which is updated almost in real-time with not only court pleadings, so everyone can see what’s happening in the court, but also with narratives which explain what is happening. In our case, in the Hess Kennedy matter we walked into a situation where there were over 90,000 consumers involved across the country.
And while we’ve answered every phone call and every email, and responded to every letter we’ve received, that’s only from a small segment of the potential consumers involved. So we believe it’s very important to disseminate information, and one of the ways to do that is not only by regular mail – and depending on the size of the case, that can be very expensive – or via the internet. And we’ve been using our web page that we created as one of our methods of communication.
Interviewer: Can you help educate us about how a court-appointed receiver is compensated in a situation like this? Is it from the funds that have been seized, or exactly how does a court-appointed receiver get paid?
Daniel Stermer: Yeah, I understood, and I welcome that question because people do have that question. I am a neutral third party that is appointed by the court. We make application to the court with regard to my fees and those of my professionals. The initial order that appointed me contained in it provisions with regard to the payment for the professionals I engage, but my fees and costs need to be applied for and approved by the court separately.
And every time – which we only do periodically – where we seek payment of my fees, we do it with a filing with the court wherein we attach all of my invoices as backup and get a court order authorizing it. We get paid – and I apologize. In response to the rest of your question, yes, we get paid of the funds available in the estate.
Interviewer: So in the Hess Kennedy situation people actually had funds in escrow to settle their accounts.
Daniel Stermer: Well, let me parse apart your question before you get to the rest of it. In theory that was correct, and potentially in what was discussed with consumers that would be their impression. But there was never an attorney’s escrow account. And Hess Kennedy presented itself as a law firm, which then would mean pursuant to the Florida Bar Regulations they would need to create an iota account, which is an escrow account, which was never set up.
So all of the funds here at Hess Kennedy, whether consumer funds, business-generated revenue – all funds here were actually comingled in one or a couple accounts, but there were no consumer escrow accounts.
Interviewer: In the Hess Kennedy situation – and probably with Allegro Law – there were a number of affiliates who were getting paid for referring business to both of these companies. In the Hess Kennedy situation, when the court seized the company and you took over, were affiliates immediately stopped from being paid?
Daniel Stermer: We got a court order directing us to stop making those payments, and we in turn by mid-September – having been appointed on July 18th of last year, a year and a month ago – within 90 days we sued and started recovery actions against 13 of those advertiser/marketing firms for the illegal payment to them of attorney’s fees, which is illegal pursuant to Florida law.
Interviewer: What have you learned about the debt settlement industry after having immersed yourself so quickly in it?
Daniel Stermer: It is a industry that when done properly can be beneficial to consumers. Consumers need to understand that they can on their own negotiate their current credit card debt with their credit card holder. It is not an easy process, but it takes some patience and tenacity. But consumers can do this on their own. We’ve learned there are entities in the industry that may not be doing some things right, many things right, or everything right. So it’s a heavily – at the moment – regulated industry that is under many regulators’ microscopes.
Some companies don’t pay attention for one reason or another to the various state regulations as it relates to fee caps or up-front fees, and a company needs to be careful where it’s doing business and how it’s doing business, or they very well may come under the ire of one or more regulators.
Interviewer: What happened with the funds that were on deposit with Hess Kennedy and people who later went on to file bankruptcy before settlements had actually occurred?
Daniel Stermer: We are working with those bankruptcy trustees, who many of the consumers filed claims in our claims process and then alerted us to their pending bankruptcies. So we’ve been coordinating where necessary and as necessary with their bankruptcy trustees as it relates to either amounts that they paid to Hess Kennedy or as part of the global resolution that we were lucky enough to negotiate with three of the major credit card companies as it related to tens of thousands of consumers. Wherein we got resolved and forgiven over $150 million in consumer debt, as well as getting those consumer trade line deletions. I say that now only because in some of the instances some of the folks in bankruptcy had some of these credit card issues there, so we’ve been coordinating with bankruptcy trustees across the nation related to those specific consumers.
Interviewer: I was really impressed that you were able to get some very major settlement offers from a few of the major creditors. What was the secret to that success?
Daniel Stermer: We believe it was our tenacity in trying to get it done. Capital One was the first major creditor to enter into an agreement with us, and then HSBC fell in suit, and more recently, Chase, we resolved the litigation that was out there, as well as with the Capital One case there was pending litigation. So we basically for pennies on the dollar resolved like I said over $150 million, and more importantly those trade line deletions are important to consumers because what would’ve been negative trade line because of the late payments or no payments is now removed from their credit report.
So for them that’s a positive that in any resolution credit card companies don’t normally agree to trade line deletions. Every regulator we’ve spoken to has said, “How did you do that?” And we said, “That was one of our conditions of settlement.”
Interviewer: It’s so unusual that a trade line would actually be completed eliminated from a credit report so any negative history is gone.
Daniel Stermer: Correct. We took the position – and I believe rightly so – that a consumer who was in trouble reached out to a company – Hess Kennedy – to assist them with their problem. The consumer made a bad choice in coming to Hess Kennedy, but don’t fault the consumer for things that the company did on the consumer’s behalf. The consumer, in our view, tried to reach out to a company to assist it with its debt situation, and we held fast to that statement with the credit card companies. And I think they were understanding of it, and they understood our desire to have it happen and agreed to it.
Do You Have a Question You'd Like Steve to Answer? Click Here.
Interviewer: Were there any other major creditors that you approached that just didn’t want any part of the settlement deals?
Daniel Stermer: We approached the largest – at least the ten largest creditors involved in the Hess Kennedy matter. And part of the issue – and it became difficult with some – was just the time constraint we were under, because we had to get things done for all intents and purposes by the third or fourth week in October. And with some creditors it was just difficult to get all of our arms around the information that they had and we had and get it tied up.
Interviewer: Is there anything that you can say about Americorp after you took over Hess Kennedy? Are they still servicing accounts for you?
Daniel Stermer: They continue to process our debt management accounts, as well as there’s another provider out there that’s doing it for us as well, and they’re continuing through today to process our debt management accounts.
Interviewer: Mr. Stermer, thank you so much for taking the time to answer these questions and to help people better understand what it’s like from your side, the court-appointed receiver point of view, when you take over a firm like this. If there are any more questions, do you mind if I contact you further?
Daniel Stermer: Steve, you’re more than welcome to. And let me also suggest for you and your listeners, if they go to www.LBFMiami.com, click on the button that says “Active Cases,” click on the button that then says “Receiverships”, and click on the link to “Laura Hess and Associates” they can find all the information we have posted with regard to this matter. Which includes not only the documents I told you about earlier – the narratives and the court filings – but consumers can actually look up the status of their claim online.