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From Banking and Finance Law Daily, May 8, 2013

Manhattan U.S. Attorney, CFPB File Charges in Illegal Debt-Relief Scheme

By Katalina M. Bianco, J.D.

The United States Attorney for the Southern District of New York, Preet Bharara, and the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, Phillip R. Bartlett, announced the unsealing of an indictment charging Mission Settlement Agency with mail and wire fraud charges in connection with a scheme that allegedly charged consumers illegal advance fees for debt-settlement services. The indictment also names Mission owner Michael Levitis and three of its employees—Denis Kurlyand, Boris Shulman, and Manuel Cruz.

Also unsealed were the guilty pleas of two former Mission employees—Felix Lemberskiy and Zakhir Shirinov—for their participation in the fraud.

In his release, Bharara noted that these are the first criminal charges brought as a result of a referral from the Consumer Financial Protection Bureau. The CFPB has filed a civil action against Mission, Levitis, and others in connection with the debt collection scam.

Criminal charges. The defendants allegedly tricked people into paying Mission for debt settlement services by lying to prospective customers about its fees, its purported affiliation with the federal government and one of the three leading credit bureaus in the United States, and the results it supposedly achieved for its customers, according to the Manhattan U.S. Attorney. In connection with the scheme, Mission received more than $6.6 million in fees. For over 1,200 of its customers, Mission allegedly took fees totaling nearly $2.2 million and never paid the customers’ creditors. The defendants were arrested on May 7, 2013, and are expected to be arraigned in Manhattan federal court before U.S. District Judge Paul G. Gardephe.

"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," Bharara said.

"Today’s case is a harbinger of an especially potent partnership between this Office and the CFPB that will benefit hardworking Americans everywhere," he said.

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, he said.

CFPB. The CFPB filed a complaint in a federal district court in New York against Mission and a second debt-relief provider, Premier Consultant Group LLC. The bureau is seeking to halt the operations and to obtain both penalties and relief for victims.

"Consumers deserve better and we are proud of this coordinated effort with the Department of Justice and U.S. Attorney Preet Bharara to crack down on harmful behavior," CFPB Director Richard Cordray said in a May 7 release.

The CFPB is alleging that the defendants violated the Federal Trade Commission’s Telemarketing Sales Rule (TSR). In addition, the bureau is alleging that Mission and Levitis engaged in deceptive and unfair practices in violation of the Dodd-Frank Action Act. In total, the defendants allegedly charged fees to over a thousand consumers in multiple states in violation of the TSR’s advance fee ban, totaling over $1.3 million.

"These wolves in sheep’s clothing take money from consumers who are already struggling to pay their bills, falsely promising them help while really making their problems worse," Cordray said in remarks at the SDNY Enforcement Press Conference on May 7.

The CFPB initiated the investigation in July 2012, and later referred evidence of criminal conduct to Bharara. The CFPB is required by the Dodd-Frank Act to refer evidence of criminal activity to the Department of Justice.

Companies. Mission Settlement Agency, Premier Consultant Group LLC

MainStory: TopStory CFPB CrimesOffenses DoddFrankAct DebtCollection EnforcementActions

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