Feds: Debt Collector Cheated 6,000 Consumers in Scheme

BNP Paribas Charged In Sanctions Violation Probe in New York
Andrew Harrer/Bloomberg via Getty Images Preet Bharara, U.S. attorney for the Southern District of New York.

By Emily Flitter and Nate Raymond

NEW YORK -- U.S. authorities arrested seven people Tuesday for what they said was a multimillion-dollar scam by a debt collection company that victimized more than 6,000 people, and a prosecutor said a wider crackdown was underway.

Williams Scott & Associates wrongly threatened people with arrest, used aliases such as "Investigator Ace Rogers" and tried other tricks to collect at least $4.1 million from consumers whose debt it bought for pennies on the dollar, prosecutors said.

The company was owned by John Williams of Norcross, Georgia, who authorities said went on to operate a new debt collection business using the same tactics after the FBI conducted a search of its office in May.

A criminal complaint filed in Manhattan federal court charged Williams, 48, the company and six employees with conspiracy to commit wire fraud in connection with the scheme, which had run since 2009.

Manhattan U.S. Attorney Preet Bharara said the case was an example of "an absolute epidemic of abusive debt collection practices."

%VIRTUAL-pullquote-We are far from finished looking at the seedy side of debt collection.%Bharara said he reached out to the Consumer Financial Protection Bureau and Federal Trade Commission about bringing more cases as part of a broad crackdown and was also looking into creditors who assign debts to abusive collectors.

"We are far from finished looking at the seedy side of debt collection," he said.

Others arrested included employees Benita Cannedy, Rudy James, Arthur Cook, Christopher Lenyszyn, Clark Smith and Titus McDowell.

Lenyszyn's lawyer said he couldn't immediately comment, while attorneys for the other defendants couldn't be immediately identified.

The criminal case followed an earlier civil action by the FTC in which the company agreed to an order stopping it from collecting allegedly fake payday loan debts.

The criminal complaint said WSA employees using aliases such as "Mr. Cline" and "Investigator Ace Rogers" told victims that the "national check fraud center" had filed complaints against them and that they faced jail time.

To sound convincing, the employees read from a script containing phrases that sounded like official legal language, the complaint said.

"Failure to respond will lead to criminal charges being pursued," one line in the script read.

"It's a Class A felony pending against you for theft of property," another read.

The Williams Scott & Associates employees also told victims that WSA stood for "Warrant Services Association."

The case is U.S. v. Williams Scott & Associates LLC, U.S. District Court, Southern District of New York, 14-mj-2546.