Debt-Repair Firm Charged in First CFPB Criminal ReferralPatricia Hurtado and David McLaughlin
A debt-settlement company was charged with a multimillion-dollar scheme that defrauded more than 1,200 customers struggling to pay credit card debt in the first criminal case to come from a referral by the Consumer Financial Protection Bureau.
Manhattan U.S. Attorney Preet Bharara’s office today announced the unsealing of a felony indictment against Mission Settlement Agency, Michael Levitis, 36, of Brooklyn, who operated and controlled the company, and five employees.
The defendants “systematically exploited and defrauded” victims from across the country in a four-year scheme, Bharara said in a statement. Richard Cordray, director of the Consumer Financial Protection Bureau, said his office filed a separate civil action against Mission and Levitis in Manhattan federal court.
“Mission preyed upon the financial desperation of people all around the country, who like so many ordinary Americans were simply struggling to pay down their debts after the financial downturn,” Bharara said.
“Mission promised to slash debts nearly in half for just $49 a month in fees, but as alleged in the indictment, Mission’s promises were too good to be true,” Bharara said. “The true mission of Mission turned out to be fraud and deceit.”
The U.S. said the defendants hooked at least 2,200 customers by claiming to be affiliated with the federal government and leading credit bureaus, then tricked them into paying Mission as much as $6.6 million in fees to settle their debts. The company collected at least $2.2 million in fees from at least 1,200 customers without paying a single penny to their creditors, Bharara said.
Levitis used the money he collected from his victims to cover operating expenses for a restaurant and nightclub in Brooklyn called the “Rasputin,” lease two Mercedes Benz vehicles and pay off his mother’s credit card bills, the U.S. alleged.
Jeffrey Lichtman, a lawyer for Levitis, said he and his client have known about the investigation for months and attempted to meet with Bharara’s office and present evidence about “rogue” employees at Mission who Lichtman said were behind the alleged fraud.
“We intend to fight the charges and strongly deny the allegations,” Lichtman said in a telephone interview. “We’ve attempted numerous times to meet with the prosecutors and present evidence of rogue employees involved in fraud within the Mission business. Those rogue employees have gone off and started their own debt-settlement business and we’ve attempted to present this fraud to prosecutors and show them it wasn’t Michael’s responsibility for it. They obviously haven’t taken up our offer.”
Levitis, Denis Kurlyand, Manuel Cruz and Boris Shulman were all charged and entered not guilty pleas through their lawyers. U.S. Magistrate Judge Gabriel Gorenstein ordered the men released on bail. Two other employees pleaded guilty.
Levitis posted $1 million bond secured by his father’s Brooklyn apartment in which he has $350,000 of equity. Kurlyand, Cruz and Shulman were each ordered released on $100,000 bond.
Two former Mission employees, Felix Lemberskiy and Zahir Shirnov, pleaded guilty last month to mail fraud and wire fraud for their role in the scheme, Bharara said today.
Federal prosecutors also filed a civil forfeiture complaint seeking the proceeds of the alleged fraud and assets involved in money-laundering allegations related to the scheme. The assets sought by the U.S. include the Rasputin nightclub, two pieces of property and 40 bank accounts.
Levitis, who is a lawyer, pleaded guilty in 2011 to unrelated charges that he lied to agents with the Federal Bureau of Investigation about a pay-to-play bribe scheme tied to former New York State Senator Carl Kruger, according to court records.
Levitis was sentenced to three years’ probation and a fine of $15,000, said Robert Nardoza, a spokesman for Brooklyn U.S. Attorney Loretta Lynch. Kruger was ordered last year to serve seven years in prison for taking payoffs.
“Preying upon the financial desperation of individuals struggling to pay their credit card debts, the defendants falsely and fraudulently tricked over a thousand such individuals into becoming Mission’s customer with significant -- but false -- assurances about Mission’s ability to help,” the U.S. said in today’s indictment.
Levitis was charged with a count of conspiracy to commit mail and wire fraud and separate counts of mail and wire fraud. Each count carries a term of as long as 20 years in prison, the U.S. said.
The company claimed to negotiate a substantial reduction in customers’ debt, promising them they would only have to pay 55 percent of the amount owed to creditors, according to the indictment. For the majority of customers, Mission did little or no work and failed to reduce debt, prosecutors said.
A woman who answered the phone at the number listed on Mission’s website declined to comment on the charges. The company operated out of offices in Manhattan and Brooklyn, according to the indictment.
The cases are: U.S. v. Mission Settlement Agency; U.S. v. All Right Title and Interest in the Business Known as Rasputin Restaurant/Nightclub, 13-cv-3069, Consumer Financial Protection Bureau v. Mission Settlement Agency, 13-cv-3064, U.S. District Court, Southern District of New York (Manhattan).