On November 21, 2016, the U.S. Department of Justice (DOJ) and U.S. Postal Inspection Service announced that an individual defendant was sentenced for his participation in an allegedly fraudulent debt relief scheme. The defendant worked for two companies in Orange County, California that offered to settle credit card debts. According to the DOJ, those companies instead took debtors’ payments as undisclosed up-front fees. The defendant had previously pled guilty to conspiracy to commit mail and wire fraud.
The sentence was issued by U.S. District Court Judge Dale Fischer of the Central District of California in Los Angeles. The defendant, who admitted to selling fraudulent debt relief services to consumers, was sentenced to 27 months in prison and ordered to pay $1,208,086 in restitution.
According to the DOJ, the debt relief scheme ran from February 2010 through September 2012. At times, the companies portrayed themselves as law firms, and clients were purportedly told that the companies would negotiate settlements with their creditors. In turn, clients made monthly payments toward those settlements. The DOJ asserted that the companies took at least 15 percent of those payments as fees, with the first six months of payments going almost entirely to undisclosed fees.
The Federal Trade Commission (FTC) previously filed a civil suit against the CEO and his companies in September 2012. That suit was settled by consent decree in August 2013. Enforcement Watch covered the sentencings of four co-defendants in this case in this post.