NEW YORK (Reuters) - Federal authorities announced fraud charges against a debt settlement company on Tuesday, in the first criminal case based on work by the new Consumer Financial Protection Bureau.
A newly unsealed indictment filed in District Court in Manhattan charged Mission Settlement Agency and four individuals with mail and wire fraud over a scheme that prosecutors said victimized more than 1,200 people across the United States.
Manhattan Attorney Preet Bharara suggested the case would not be the only one arising out of ongoing investigations related to the debt settlement industry. Based on the results so far, “our concern is that predatory practices pervade the industry,” he said.
Prosecutors called the case the first criminal referral from the CFPB, an agency established after passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
Richard Cordray, the agency’s director, said at a news conference in New York that there are other instances of the CFPB referring cases to federal prosecutors “and there will be more.”
“There is nothing to get the attention of people who are dedicating their lives to committing fraud like knowing that they could end up in prison,” he said.
According to the indictment, Mission, whose website lists a Brooklyn address, had touted its ability to help people reduce their debts to credit card companies and banks.
But the company instead “systematically exploited and defrauded” customers by failing to reduce their debts and charging excessive fees, the indictment said. Some customers had their credit scores cut, were hit by creditor lawsuits or were pushed into bankruptcy, the court papers said.
In the case of 1,200 of its customers, the indictment said, Mission took $2.2 million in fees and “never paid a single penny” to creditors.
The indictment named four defendants, including Michael Levitis, who authorities said operated and controlled the company. His lawyer, Jeffrey Lichtman, said “rogue employees were responsible for much if not all of the fraud charged here.”
“He strongly denies the allegations,” he said.
Levitis, a suspended lawyer, had been previously sentenced in August 2011 to three years probation and fined $15,000 for lying during an investigation into New York State Sen. Carl Kruger, who pleaded guilty to corruption charges in 2011.
Other defendants include Denis Kurlyand, Mission’s vice president of sales; Boris Shulman, a sales representative; and Manuel Cruz, an employee who assisted with customer solicitation.
A lawyer for Kurlyand did not respond to a request for comment. The other defendants could not be located for comment, and their lawyers could not immediately be identified.
Two other former Mission Settlement employees, Felix Lemberskiy and Zakhir Shirinov, have pleaded guilty and were charged in separate indictments unsealed Tuesday.
The CFPB separately filed a civil lawsuit against Mission Settlement, Levitis and New Jersey-based Premier Consultant Group LLC. The lawsuit seeks an injunction against future violations along with restitution and disgorgement.
U.S. prosecutors also filed one forfeiture complaint and two restraining orders targeting 40 bank accounts and two properties in an effort to preserve funds for Mission’s alleged victims.
Cordray signaled his agency was also giving a closer look at debt settlement agencies and the payment facilitators that help them operate.
Reporting by Nate Raymond in New York; Editing by Alden Bentley, Gary Hill