Illegal Scheme Targeted Debt-ridden Customers

   NEW YORK - 5/10/2013 - Mission Settlement Agency, its owner Michael Levitis and three of its employees – Denis Kurlyand, Boris Shulman and Manuel Cruz – were charged recently with mail and wire fraud charges in connection with a multi-million dollar scheme that victimized more than 1,200 debt-ridden individuals across the country, announced U.S. Attorney for the Southern District of New York Preet Bharara and Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (USPIS) Philip R. Bartlett.

   As alleged, the defendants fraudulently tricked people into paying Mission for debt settlement services by lying to prospective customers about its fees and its purported affiliation with the federal government and one of the three leading credit bureaus in the U.S., as well as the results it supposedly achieved for its customers. 

   In connection with the scheme, Mission received over $6.6 million in fees. For over 1,200 of its customers, Mission took fees totaling nearly $2.2 million and has never paid a penny to the customers’ creditors. Each of the individual defendants was arrested this morning. They are expected to be arraigned in New York federal court before U.S. District Judge Paul G. Gardephe. Also unsealed were the guilty pleas of two former Mission employees, Felix Lemberskiy and Zakhir Shirinov, for their participation in the fraudulent scheme. 

   Shirinov pleaded guilty pursuant to an information before U.S. District Judge Denise Cote on April 26, 2013 and Lemberskiy pleaded guilty pursuant to an information before U.S. District Judge Ronnie Abrams on April 29, 2013. 

   In a separate action, the Consumer Financial Protection Bureau (CFPB) announced civil charges against Mission and Levitis, among others.

    “As alleged, Mission preyed upon the financial desperation of people around the country who – like so many ordinary Americans – were simply struggling to pay down their debts after the financial downturn. But the true mission of Mission turned out to be fraud and deceit, and for more than 1,200 consumers, the dream of debt relief turned into a nightmare of deeper debt trouble. Today’s case is a harbinger of an especially potent partnership between this Office and the CFPB that will benefit hardworking Americans everywhere,"   Bharara said.  

   According to the allegations in the indictment unsealed today and the forfeiture complaint filed in New York federal court: 

Background 

   Since its inception in 2009, Mission has offered “debt settlement” services to financially disadvantaged individuals who were struggling or unable to pay their credit card debts. Like other purported debt settlement providers, Mission held itself out as a company that could successfully negotiate to lower the overall debt its customers owed to credit card companies and banks. Levitis operated and controlled Mission which, at varying times, had offices in Brooklyn and/or Manhattan, N.Y. 

   The defendants targeted financially disadvantaged individuals known to be struggling to pay credit card debt and reached out to them through telemarketing and mail solicitations. Thereafter, Mission’s sales representatives typically spoke to the prospective customers on the phone, describing Mission’s work and its ability to renegotiate debt. Where an individual ultimately expressed an interest in engaging Mission, Mission then had the individual enter into a contract. 

Overview of the Fraud 

   From 2009 through May 2013, the defendants systematically exploited and defrauded over 1,200 financially disadvantaged individuals across the country who were struggling to pay their credit card debts. The individual defendants falsely and fraudulently tricked them into becoming Mission’s customers by making materially false and misleading statements about Mission’s ability to help settle their debts and about the fees Mission would charge in exchange for that help. 

   Specifically, the defendants commonly lied about and/or concealed Mission’s fees, falsely stating both verbally and in their written solicitations, that Mission would charge a mere $49 per month and/or that there would be no up-front fees. In fact, Mission took thousands of dollars in up-front fees from funds that its customers had set aside because they had been told the funds would be held in escrow and used to pay creditors. The defendants also deceived prospective customers by fraudulently promising that Mission could help slash their debts – typically by 45% – when, for the majority of customers, Mission actually did little or no work and failed to achieve any reduction in debt whatsoever. And the defendants deceptively created an air of legitimacy for Mission’s business by falsely suggesting that it had affiliations with the federal government and with one of the three leading credit bureaus in the U.S. 

   Overall, Mission had approximately 2,200 customers who paid a total of nearly $14 million in connection with its purported debt settlement services. Of these funds, Mission took over $6.6 million in fees, while paying only approximately $4.4 million to customers’ creditors. For over 1,200 of its customers, Mission took fees totaling nearly $2.2 million, but never paid a single penny to the customers’ creditors as payment for any negotiated debt. Levitis used the money that Mission took from its customers to pay for things including the operating expenses of a restaurant/nightclub he controlled, lease payments for two different luxury Mercedes cars and credit card bills for his mother. 

Lies About Mission’s Fees 

   In conversations with prospective customers, the defendants represented that customers would be asked to make affordable monthly payments for a set period of time, that these payments would be held in escrow by a third-party payment processor until Mission had negotiated down the customers’ debt obligations and that the money held in escrow would then be used to pay the creditors. The defendants further promised that Mission would only charge a nominal monthly fee of $49 in exchange for its efforts and they often explained that Mission would charge an additional fee only if it succeeded at obtaining a greater reduction in debt than what had been promised. They also claimed in both their written solicitations and in scripted phone calls that there were no up-front fees. 

   In reality, in addition to the $49 monthly fee, Mission also charged an up-front fee equal to as much as 18% of the debt the customer owed. Mission deducted these fees from the monies that customers paid to the third party payment processor, in accordance with a monthly payment plan it established and that customers understood would be held in their escrow accounts and used to pay their creditors. Instead, Mission regularly took as fees for itself all of the funds that its customers paid to the payment processor during the first three months of their contracts with Mission. This was done in order to insure that the company would receive up-front fees before any of the customers’ debt was even paid down. Lies About Mission’s Results The defendants typically promised prospective customers that Mission would negotiate a substantial reduction in their debt, promising prospective customers that they would have to pay only 55% of the amount owed to creditors. 

   When potential customers questioned that assertion because it sounded too good to be true, a written script directed sales representatives to tell them: “The creditors today are content to get the settled amount in light of all the bankruptcies, charge offs and bad debt out there today.” This assertion and the underlying promise were false. In reality, Mission did little or no meaningful work to negotiate reductions in debt for many of its customers and the sort of result Mission was promising prospective customers was substantially more favorable than the results Mission typically achieved for prior customers. The written script also instructed sales representatives to promise potential customers that if they worked with Mission, their credit scores would ultimately go up. 

   The script said, “Your credit score will go down in the short term while the accounts are put into position for settlement. Then your score will go up as the payments are made and ultimately your score will be significantly higher.” 

   This was also untrue. 

Lies About Mission’s Affiliations 

   The defendants also made material misrepresentations to prospective customers about Mission’s relationships and affiliations in a deceptive effort to make Mission seem more credible and trustworthy. For example, in an effort to attract business, Mission sent a solicitation letter to prospective customers that falsely suggested that it was acting on behalf of or in connection with a federal governmental program. The letter included an image of the Great Seal of the United States and indicated that it was coming from the “Reduction Plan Administrator” of the purported “Office of Disbursement.” However, the only phone number and address provided in the letter belonged to Mission and Mission did not have any relationship with any federal agency, nor was it operating in connection with any federal program. 

   Bharara also announced the filing of a civil forfeiture complaint seeking to forfeit the proceeds of the alleged fraud and the assets involved in money laundering related to the scheme. Those assets and proceeds include: the Rasputin nightclub, the title for which is in the name of Levitis’ mother, whom the government alleges is the real owner of the club; two pieces of real property; and 40 bank accounts.

   Levitis, 36, of Brooklyn, Kurlyand, 30, of Brooklyn, Shulman, 27, of Brooklyn, and Cruz, 30, of Brooklyn, are each charged with one count of conspiracy to commit mail and wire fraud, one count of wire fraud and one count of mail fraud. Each defendant faces a maximum sentence of 20 years in prison on each count. 

   Lemberskiy, 29, of Staten Island, New York and Shirinov, 29, of Brooklyn each pleaded guilty to one count of conspiracy to commit mail and wire fraud, one count of mail fraud and one count of wire fraud. They each face a statutory maximum sentence of 60 years in prison.

   Bharara praised the outstanding investigative work of the USPIS. He also thanked the CFPB for referring this case to this Office and acknowledged with appreciation, this extraordinary partnership. If you believe you were a victim of this crime, including a victim entitled to restitution and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the U.S. Attorney's Office for the Southern District of New York, at (866) 874-8900, or Wendy.Olsen@usdoj.gov. 

   For more information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html. For guidance on coping with debt or credit issues and information about dealing with debt settlement companies in particular, consider the following links to publications issued by the Federal Trade Commission and the Council of Better Business Bureaus: http://www.consumer.ftc.gov/articles/0150-coping-debt; and http://www.bbb.org/credit-management/overwhelming-obligations/advice-about-quick-easy-solutions/index.html. The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander and Edward Imperatore are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case. The charges contained in the indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

   Source: Financial Fraud Enforcement Task Force

Mid-Market CFOs See Expansion Opportunities

   NORWALK, Conn. - (BUSINESS WIRE) - 9/27/2012 - U.S. chief financial officers (CFOs) of middle-market companies surveyed this summer remain generally positive about the state of their own industries and continue to see measured growth over the next three years, according to the latest GE Capital Mid-Market CFO Survey.
  CFOs’ sentiment on the state of the U.S. economy and their respective industries declined slightly since the first quarter survey but remained above the levels of a year ago. Their view on the current health of the world economy continued to deteriorate.
  A majority of CFOs expect to grow their revenues in 2012, and nearly two-thirds of CFOs still plan to hire in the next 12 months, although both figures fell from six months ago.
   The survey, which was conducted during the third quarter of 2012, included responses from 500 CFOs of companies with average revenues of $124 million operating across seven distinct industries including: food, beverage and agribusiness; general manufacturing; healthcare; metals, mining and metals fabrication; retail; technology and business services; and transportation.
   “Middle-market CFOs still see expansion opportunities over the next three years, but remain cautious as concerns about the business environment and uncertainties in areas such as tax and healthcare policy persist,” said Dan Henson, president and CEO of GE Capital, Americas. “From our perspective as a provider of capital, we see positive year over year growth in both lending and leasing. Economic sentiment, while still positive, is slightly more guarded than we saw in the last survey. In the meantime, the credit markets are very healthy, providing extremely attractive terms for borrowers as credit facilities come up for renewal and as acquisition or other investment opportunities develop.”

2012 Growth and Profit Expectations

   CFOs’ expectations for their industries shifted from an expansion phase to a more stable outlook. Moving forward, CFOs continue to project moderate growth for their companies, even amid a more measured sentiment for the U.S. economy.
   Eighty-five percent expect the U.S. economy to grow or be stable in the next 12 months, down 11 percentage points since the first quarter, but higher than a year ago.
Eighty-eight percent expect their industry to grow or be stable during the same time period.
   Revenue expectations for 2012 remain positive but have diminished, with 54 percent projecting increases, down 13 percentage points since the last survey.
   Seventy percent expect profits to remain the same or increase this year compared to last, down 11 percentage points.
   Healthcare and raw materials costs continue to be cited as the top threats to business performance in the next 12 months.
   “This data reinforces what we have heard from our clients. Over the last several years, middle-market companies have focused on right-sizing to manage through a lower growth environment and have maintained disciplined approaches to growth — and they now have cash on hand that they are looking to use wisely, including purchasing new equipment and making strategic hires,” said Henson.

   Confidence Indicators: Hiring, Cost Structure and Capital Expenditures

   Forty-six percent of CFOs plan on increasing their cost structure in 2012. Eighteen percent expect to decrease their cost structure in 2012, up from 15 percentage points since the last survey.
Sixty-two percent of CFOs plan to hire in the next 12 months, down 12 percentage points from the last survey. Transportation companies are the most bullish in their hiring plans, with 79 percent expecting to hire.
   Layoffs continue to decline, down to 24 percent from 27 percent a year ago.
   Expectations for greater capital expenditure spending increased slightly to 28 percent. Retail companies are the most likely to increase their cap-ex spending.

Other Top Findings

   Top threats to health of the economy – Domestic unemployment numbers and global fiscal concerns continued to weigh heaviest on CFOs.
   Pricing outlook – For the first time since the third quarter of 2010, less than half (44 percent) of CFOs expect to raise prices on their company’s products or services this year, down from 51 percent in the first quarter of 2012.
   Credit availability/cost – Sixty-five percent of CFOs state that credit availability from their current lender has stayed the same, an increase of eight points from a year ago. Seventy-two percent believe the cost of capital will remain the same in the next 12 months, with only 18 percent predicting an increase.
Internal challenges – Reducing employee benefit costs and implementing service process improvements were cited as the most common internal challenges faced by middle market CFOs today.
   For an executive summary including industry highlights, visit www.gecapital.com/cfosurvey

Coalition Questions Cost of Bank 'Swipe' Fees

   WASHINGTON- (BUSINESS WIRE) - 5/12/2012 - In a May 11 news article, USA Today exposed some of the myths banks propagate about hidden, exorbitant “swipe” fees the banks charge retailers when customers buy with credit or debit cards, said the Merchants Payments Coalition.
   The article also makes a strong case for reforming the way Visa and MasterCard and their bank members fix the fees that consumers pay when they “swipe” their cards.
   American merchants pay the highest swipe fees in the industrialized world, which pushes up prices at their stores. Because MasterCard and Visa fix fees for their banks, which refuse to compete on price, the fees have become retailers’ second-highest operating cost, after labor, and a real obstacle for small merchants in particular.
   Here is what the newspaper found:
   First, consumers are saving from debit reform. Public reports for America’s largest retailers show that operating margins fell in the fourth quarter of 2011, when the Durbin Amendment to the Dodd-Frank financial reform law reduced debit card fees. That means those retailers were passing along any savings they might have, and then some. And some companies are giving discounts specifically for using debit cards, including, among others, Ikea, Nice N Easy Grocery Shoppes and some Exxon and Arco stations.
   Second, free checking has not disappeared under the Durbin Amendment, as the banks claimed it would. In fact, more banks offered free checking after reform than before and overall prices on bank accounts dropped.
   In the second half of 2011, 39 percnet of banks offered checking accounts with no monthly maintenance fee, up from 35 percent for the first part of the year, according to a survey of the 50 largest banks and 50 midsize and small banks by MoneyRates.com.
   Even at the big banks that charged a fee for checking accounts, the average cost fell to $11.28 from $11.75, the survey found. The average minimum balance required to avoid a monthly fee also fell, to $391.41 from $412.53 in mid-2011.
  Third, small banks have benefitted from the reforms. The rates those banks charge on debit cards has not been driven down at all by Durbin, which does not apply to them.
   "So far, it has turned out to be not nearly as bad as we were concerned it might have been," says Bill Hampel, chief economist for the Credit Union National Association, the trade association for credit unions.
   Debit cards are still offering rewards, though some programs have changed strategies. “Instead of cash back or miles, some banks have switched to rewards programs that give debit-card holders points that can be used to get discounts on specific purchases," said Alex Matjanec, co-founder of MyBankTracker.com.
   For example, a consumer who buys a lot of coffee might receive points that can be used to get a discount at Starbucks.
   Finally, savings for consumers would have been bigger, but the Federal Reserve’s mistakes in setting its rules let banks charge more for small purchases.
   Retailers who previously paid as little as 4 cents on a small debit card transaction found themselves hit with a 21-cent fee.
   "A customer buying a can of soda on a debit card is costing me more today than it did before the legislation," said Ari Haseotes, president of Cumberland Farms, which operates almost 600 gas and convenience stores in 11 states across the Northeast and in Florida.
   Meanwhile Visa and MasterCard announced big jumps in profit for their latest quarter, and Visa said it was under a federal antitrust investigation into the way it handles debit card fees.
   “Were the Fed to reform its rules,” said Doug Kantor, counsel to the Merchants Payments Coaliton, a group of retailers that fights exorbitant swipe fees, “consumers would be saving even more. “And that’s not even counting credit cards; reforming that broken market should be the next step toward fairness.”