Sign Here to Lose Everything Part 2

The $1.7 Million Man

Meet New York City’s highest-earning official. He’s a debt collector for predatory lenders.

In the 1960s, New York’s loan sharks would send thugs with nicknames like “Jimmy Dimps” to beat up borrowers who fell behind on their payments.

Now predatory lenders have a quieter way of collecting debts: an obscure city official named Vadim Barbarovich. Armed with a badge and a stack of court papers, he empties peoples’ bank accounts nationwide and keeps a cut for himself. He earned $1.7 million last year, giving him the most lucrative job in New York City government.

Barbarovich is a city marshal. In an archaic system dating to colonial New Amsterdam, he’s one of 35 mayoral appointees who compete for fees recovering debts. Marshals mostly evict tenants and tow cars, but Barbarovich and a few others have become cogs in a debt-collection machine that has crushed thousands of small businesses. They use their legal authority on behalf of lenders who charge more than some mafia loan sharks once did.

Image of Marshal Vadim Barbarovich.
Marshal Vadim Barbarovich.
SOURCE: NEW YORK CITY DEPARTMENT OF INVESTIGATION

In theory, Barbarovich’s reach ends at the city limits. In practice, it spans the nation. From a third-floor office near Coney Island in Brooklyn, he has grabbed cash from a physician in California, a roofer in Florida and a cattle auctioneer in Illinois. Borrowers say he and other marshals routinely push the limits of their authority.

“How could they pull all that money? I’ve never even been to New York,” says Jose Soliz, a masonry contractor near Amarillo, Texas, who had more than $56,000 taken from his bank account by Barbarovich last year. “It’s a con.”

Barbarovich, who declined to be interviewed, said in an email that he follows the rules for issuing legal demands. Michael Woloz, a spokesman for the New York City Marshals Association, said his members aren’t responsible for their clients’ business practices. “Marshals simply enforce court judgments,” he said.

The companies making Barbarovich rich advance money at rates that can top 400 percent annualized. To get around state laws designed to stamp out loan sharking, they say they aren’t making loans but buying the money that businesses will likely make in the future at a discounted price. Courts have generally recognized this distinction, and the industry, known as merchant cash advance, has grown to an estimated $15 billion a year.

A City Marshal’s Fortunes Rise

The dramatic growth in Barbarovich’s income coincided with increasing use of New York State court judgments by the cash-advance industry

Barbarovich

net income

Cash collected

by Barbarovich

for clients

Estimated value

of New York

State judgments by confession

$2.0M

$18.0M

$500M

1.5

375

13.5

1.0

9.0

250

0.5

4.5

125

0

0.0

0.0

2014

2017

2014

2017

2014

2017

Barbarovich

net income

Cash collected by

Barbarovich for clients

Estimated value of

New York State

judgments by confession

$2.0M

$18.0M

$500M

13.5

1.5

375

1.0

9.0

250

0.5

4.5

125

0.0

0.0

0

2014

2017

2014

2017

2014

2017

Barbarovich

net income

Cash collected by

Barbarovich for clients

Estimated value of New York State judgments by confession

$2.0M

$18.0M

$500M

1.5

13.5

375

1.0

9.0

250

0.5

4.5

125

0.0

0.0

0

2014

2017

2014

2017

2014

2017

Notes: Barbarovich net income as a marshal includes earnings from all sources. Cash collected by Barbarovich reflects funds kept in trust account for clients after deduction of fees and poundage. Value of judgments by confession applies only to judgments obtained by merchant cash-advance companies. It is a Bloomberg News estimate from analysis of a representative sample of judgments.
Sources: New York City Department of Investigation; New York State Unified Court System documents

When lenders claim borrowers have fallen behind, they often call in the marshals. Their job is to force banks to hand over whatever cash is left. They do it not with their fists, but with a court order rubber-stamped by a clerk and obtained without going before a judge. Most banks comply quickly, without checking if the marshal has a right to grab the funds. The borrower often doesn’t know what’s happening until the money is gone.

Before Barbarovich, 47, became a marshal, he worked in property control at Brooklyn’s SUNY Downstate Medical Center, where he never made more than $70,000 a year and sometimes volunteered as a Russian translator. When he started as a marshal in 2013, he pursued a traditional mix of work, targeting deadbeat tenants and parking scofflaws, earning $90,191 in his first full year, city records show. His income skyrocketed when cash-advance companies discovered his power. Lawyers and debt advisers say Barbarovich is the industry’s go-to legal enforcer. By last year, his earnings had increased almost 20-fold, even after he put his daughter and father on his payroll.

Barbarovich’s financial disclosures don’t break down how much he makes from each activity. But they show his work enforcing state Supreme Court property judgments grew dramatically during 2016 and 2017, as did the amount of cash he recovered from debtors. His parking and eviction activity slowed, the records show.

Making More Money Than the Mayor

Barbarovich earned more in 2017 than any other New York City official. Here are a few who made less

Vadim Barbarovich

NYC Marshal

$1,723,308

Carmen Fariña*

Schools Chancellor

$233,430

Scott Evans*

NYC Retirement Systems

Chief Investment Officer

$362,416

Melissa Mark-Viverito*

City Council

Speaker

$170,336

Bill de Blasio

Mayor

$232,982

Joseph Ponte*

Dpt. of Correction

Commissioner

$232,934

Scott Stringer

Comptroller

$216,466

James O’Neill

NYPD

Commissioner

$232,352

Scott Evans*

NYC Retirement Systems

Chief Investment Officer

$362,416

Carmen Fariña*

Schools Chancellor

$233,430

Bill de Blasio

Mayor

$232,982

Vadim Barbarovich

NYC Marshal

$1,723,308

Joseph Ponte*

Dept. of Correction

Commissioner

$232,934

James O’Neill

NYPD Commissioner

$232,352

Scott Stringer

Comptroller

$216,466

Melissa Mark-Viverito*

City Council Speaker

$170,336

Scott Evans*

NYC Retirement Systems

Chief Investment Officer

$362,416

Carmen Fariña*

Schools Chancellor

$233,430

Bill de Blasio

Mayor

$232,982

Vadim Barbarovich

NYC Marshal

$1,723,308

Joseph Ponte*

Dept. of Correction

Commissioner

$232,934

James O’Neill

NYPD Commissioner

$232,352

Scott Stringer

Comptroller

$216,466

Melissa Mark-Viverito*

City Council Speaker

$170,336

* Indicates city officials who no longer hold office
Notes: Total gross paid in fiscal year ended June 30, 2017, for city officials by their respective agencies, and in calendar year 2017 for Barbarovich; NYPD Commissioner didn't serve the full fiscal year
Source: City of New York

The unusual compensation scheme for city marshals—they draw no salary, earn fees from customers and compete with each other—encourages them to be aggressive, critics say. City officials have done little to rein them in, they add.

“He goes about it in any which way he can,” says Avery Steinberg, a lawyer in White Plains, New York, with several clients whose accounts were seized by Barbarovich. “He has a reputation of being a bully.”

Soliz, 55, whose family-owned company builds concrete-block walls for schools and big-box stores in the Texas Panhandle, has a typical story. He needed money to expand and couldn’t get bank loans, so he started borrowing from cash-advance companies about two years ago and quickly got trapped in a cycle of debt.

By August 2017, Soliz was in hock to several lenders when he applied for a cash advance from Queen Funding LLC in Miami Beach, Florida. Court documents show he got about $23,000 after brokerage and origination fees and agreed to pay back $44,970 within nine weeks—akin to 800 percent annualized interest. A lawyer for Queen declined to comment.

Soliz says the fees were more than he expected, so he stopped payment. A few days later, on payday for his roughly 50 workers, Soliz checked his Wells Fargo & Co. bank account on his phone and noticed it was frozen. The paychecks bounced. He scrambled over the next few days to gather cash from completed jobs to make up the wages.

Many cash-advance companies, like the ones Soliz used, require borrowers to sign a document called a confession of judgment as part of their application. By signing, borrowers agree in advance that if there’s a legal dispute, they will automatically lose, short-circuiting any judicial review. Signers often don’t realize the power they’re handing over. A lender can accuse a borrower of not paying, without presenting proof, and have a court judgment signed by a clerk the same day.

Queen obtained such a judgment against Soliz in a court in Buffalo, New York, and sent in Barbarovich. Even though Soliz opened his account at a Wells Fargo branch in Texas and the judgment was valid only in New York State, the bank turned over $56,764 to the marshal within six days, including attorneys’ fees and the marshal’s cut of $2,784.

Marshals can seek out-of-state funds as long as they serve demands by hand at a bank location in New York City, according to the city’s Department of Investigation, which oversees their operations. It is “currently proper, according to the rules,” Diane Struzzi, the agency’s spokeswoman, said in an email.

But it’s not clear whether banks have to comply with these orders. Struzzi would say only that it’s up to those institutions to decide if they’ll hand over out-of-state money. Some reject such demands, but most have a policy of following any legal order they receive, avoiding the hassle of reviewing each one.

Wells Fargo declined to comment on Soliz’s case or say how Barbarovich served the demand. The bank, which has numerous offices in New York, said in a statement that “we carefully review each legal order to ensure it’s valid and properly handled.” Barbarovich also declined to comment on Soliz’s case. He said in his email that he serves all such papers by hand.

That’s not true, according to Soliz’s lawyer, Shane Heskin of Philadelphia, who points to two other cases he handled where Barbarovich went after companies with no connection to New York. One was First Commons Bank in Massachusetts, in 2016, and another was EBCO General Contractor Ltd., a Texas construction firm that employed an electrician hit by a judgment last year.

Barbarovich said in his email that he served registered agents of both companies in Manhattan. He declined to identify them or provide documentation of the visits. New York’s Department of State has no record of any registered agents for either company.

Image of the office of the Marshal Vadim Barbarovich.
Barbarovich’s office in the Sheepshead Bay section of Brooklyn.
PHOTOGRAPHER: MISHA FRIEDMAN FOR BLOOMBERG

Karen Schwartzman, a spokeswoman for the bank that later bought First Commons, said she wasn’t aware of any legal address in New York. EBCO President John Egger said the company has no registered agent in New York and that Barbarovich just sent the order by mail. In January, after Heskin challenged the EBCO action in New York, a judge ordered Barbarovich to stop issuing out-of-state levies.

The Department of Investigation “has and continues to review” Barbarovich’s work, Struzzi said, declining to give specifics. She said the agency is conducting multiple investigations into the enforcement of judgments, focusing on whether marshals are serving orders by hand in New York.

When the Dutch imported the marshal’s post to their fledgling colony in the 17th century, jobs requiring a boat trip across the Hudson River earned the biggest fees. Under current law, marshals keep 5 percent of cash collections, a perk known as poundage.

The city has a sheriff’s office that does similar work, but employees there draw salaries. Several mayors have called for an end to the marshal system. Ed Koch described it as “anachronistic” in 1978, but he failed to get the state legislature to act.

The next two mayors didn’t appoint any new marshals, and their numbers dwindled. Michael Bloomberg, the majority owner of Bloomberg News parent Bloomberg LP, replenished the ranks when he held the office, adding Barbarovich and 19 others. A committee he appointed that screened applicants emphasized diversity and language skills. The cash-advance industry wouldn’t become a big moneymaker for marshals until a few years later.

Barbarovich isn’t the only marshal working for cash-advance companies. Stephen Biegel, a retired police lieutenant appointed in 2007, earned $786,418 last year and has also been known to push the limits of his jurisdiction.

Image of Marshal Stephen Biegel.
Marshal Stephen Biegel.
SOURCE: NEW YORK CITY DEPARTMENT OF INVESTIGATION

In June, Biegel faxed an order demanding money to a bank in Elmira, New York, 173 miles northwest of the city. He claimed that a state court had entered a judgment against a plumber named Orion Megivern. That wasn’t the case. The lender had tried to enter a confession of judgment at a clerk’s office in Staten Island, but the clerk there hadn’t yet acted on the application. The Elmira bank had no locations in New York City, where Biegel’s authority ended.

Still, the bank froze Megivern’s account, causing “cataclysmic” consequences for his business, he later said in a sworn affidavit. Desperate to unfreeze the account, Megivern released $13,453 to the marshal—not a bad haul considering Megivern had borrowed $6,837 less than a month earlier and had, according to his affidavit, already repaid $2,990.

Biegel, who declined to comment, was the subject of one of the few known penalties brought against a city marshal for improper service. In June, the Department of Investigation found that he’d improperly demanded $150,522 from a Florida-based bank and ordered him to return any money collected, Struzzi said. She declined to give details.

Steinberg, the lawyer who represents debtors, compared marshals’ actions on behalf of lenders to a delivery driver who routinely double-parks, knowing that any potential penalties are worth it. “Once in a while they get parking tickets,” he says. “It’s a cost of doing business.”

This is the second in a series of articles about the merchant cash-advance industry. Read more about how local, state and federal officials are trying to crack down on it as a result of the Bloomberg News investigation.