By Abigail Caplovitz Field | March 13, 2012
Update: Potential whistleblowers, please understand; what you can do is crucially important for our nation. However, if you do it badly, you help no one and can hurt yourself. And to get whistleblower bounties, you need to do things right. So do your homework; make sure you have evidence to support your claims. Talk to a lawyer who specializes in this area. For example (but there’s others out there) this one. Do the right thing, the right way.
Everyday brings more proof the Bailed-Out Bankers (those B.O.Bs) are running our country to their liking. Exhibit A: the Obama Administration, the B.O.Bs and the rest of state and federal law enforcement agree to violate contracts so taxpayers, pension funds, 401ks and other investors can pay for the B.O.B.s misdeeds. So what’s an American to do to reclaim her country?
Well, if you work for the B.O.Bs and are in a position to witness banker wrongdoing, tell law enforcers. You know, like the anti-terrorism ads say: If you see something, say something.
Perhaps you know your B.O.B bosses are ripping people off by lying about the bank’s borrowing costs; perhaps you know your B.O.B. bosses are systematically ripping off our government via the HAMP program, via inflated appraisals for FHFA insured mortgages; or perhaps, like whistleblower Linda Almonte, your B.O.B. bosses demanded that you participate in their fraud.
Almonte first made headlines over a year ago. Now she’s breaking her silence, backed up by first rate reporting by American Banker, to deafeningly blow the whistle on JPMorgan Chase’s abuse of its credit card users.
According to American Banker’s several sources, JPMorgan Chase can’t be bothered to do a competent job of integrating its databases, so when a credit card account goes delinquent, it goes into a kind of data no man’s land. As a result, ensuring that Chase pursues only people who actually owe Chase money, and ‘chase’ them for only the amount they actually owe, involves a lot of hands on work.
Until about 2008, Chase generally did that work. But then Jamie Dimon got greedier and, American Banker reports, changed the management of the credit card division. The new folk cared only about chasing people and garnishing their wages; they didn’t care about accuracy. And things got so bad Chase started selling debts so poorly documented that Chase employees called the debts “toxic waste.”
Selling Bad Debts for Collection Is Nothing New
Don’t imagine that 2008 is a bright line between Chase doing debt collection well and doing it poorly, however. This dynamite BusinessWeek story from 2007–note the link is hosted by the Federal Trade Commission, so regulators know what’s going on even if they do nothing–includes this anecdote (bold mine):
During a preliminary hearing in New York in March, U.S. Bankruptcy Judge Robert Drain asked a lawyer for JPMorgan Chase how the bank had managed to sell consumer credit-card debts that had been discharged [in bankruptcy]. “I don’t know who would buy a discharged account,” the perplexed judge said.
“Happens all the time, your honor,” the Chase lawyer, Thomas E. Stagg, responded.
Drain’s confusion is understandable. Traditionally, discharged debt was seen as not worth the paper it’s written on. Once a judge excuses some of a debtor’s obligations—part of the bankruptcy system’s goal of granting a financial fresh start—that person has no legal duty to pay them. In fact, bankruptcy law prohibits efforts to collect discharged debt.”
See, in 2007 Chase’s lawyer tells a judge that Chase sold debt discharged in bankruptcy all the time. And Chase isn’t the only company selling uncollectable debt. In 2009 District Council 37, a local of public employee union AFSCME, documenedt how nearly everyone they helped challenge a debt collector didn’t owe the money for one reason or another. From the union report’s executive summary (bold mine):
“Of the 238 cases in which our office sought substantiation of the debt:
• The debt buyer responded only 5.5% of the time. In 94.5% of the cases, the plaintiff failed to substantiate the debt.
• Even when the debt buyer did respond, rather than showing that the debt was owed, its own documentation often proved the opposite.
• The cases in the study bear a common thread: in many instances debt buyers sued consumers when they clearly had no legitimate claims. Debt buyers sued in cases of identity theft and mistaken identity, when their records did not reflect payments by the defendant, and when the debt was beyond the statute of limitations.
Get that? So many companies like Chase are selling uncollectable debts to third parties that the union lawyer-challenged debt is almost never legitimate. Those workers were so lucky to have the lawyers representing them; because of practices like sewer service, many had no idea they were being ‘chased’ for debts until after the debt collectors started stealing money from their paychecks:
• In 65 of the 238 cases (27%), our clients had only learned of the lawsuit after their salary was garnished or bank account restrained. These clients were typically deprived of the use of funds for 10 days to three weeks until we could lift the garnishment or restraint – on an alleged debt that the debt buyer could not substantiate.”
Now, the AFSCME study only involved 238 cases. University of Maryland law professor Peter Holland took a more comprehensive look at the document fraud, lack of legitimacy and other problems plaguing people being ‘chased’ in court over such debts. Holland’s article focuses on debt buyers’ use of small claims courts to pursue cases they could never bring in courts that have more procedural safeguards.
Sadly, the AFSCME report, Holland study and the BusinessWeek article that even the FTC noticed, were insufficient to make meaningful change. Only one effort was enough to shut down a good chunk of fraudulent debt collection; only one effort may drive systemic change: Linda Almonte’s courageous truth telling to the huge power that is Jamie Dimon and his massive, bailed-out bank. As a direct result of her willingness to do the right thing Chase has halted collecting on much of this debt, and the Office of the Comptroller of the Currency (OCC), Chase’s main regulator, has gotten involved. Now, I don’t trust the OCC, but hey, Almonte couldn’t be ignored and perhaps good will come of the OCC’s involvement.
Whistleblowing Can Pay Off
Potential whistleblowers, I know it’s daunting to confront the naked emperors, especially when they can fire you, especially in this economy. But if you’re a witness to defrauding our government, there could be a big payday under the False Claims Act. Or, if you can give the Securities and Exchange Commission good information, you may get a bounty that way.
Ultimately, though, the big motivation has to be doing the right thing, and thereby helping to save our country. We, the People, won’t regain control of our country until the all the fraud and theft systematically committed by some of our biggest businesses is exposed and ended. As Michael Olenick of Seeing Through the Data and Find the Fraud put it in a post about fraud fighter Lynn Syzmoniak, who just received a $18 million whistleblower payout:
“Real business people can’t compete with fraudsters because it’s impossible to beat Madoff’s returns. They should use this settlement as an excuse to step out of the woodwork and start to scream as loud or louder than Lynn has been over these past years.”
So you, real business person, witnessing your top bosses organize lying, cheating and stealing for massive profit, wealth that those executives mostly capture in salary and bonuses, stand up, be counted, and hey, maybe get paid like your bosses for doing the right thing. (Instead of what they do.)