Then she was pulled over in a traffic stop with her six kids in the car. Schwarm was sure it had to do with the letters. "I was terrified. I thought...my children were going to see me get handcuffed and taken away. I was giving my children instructions on calling their father to come pick them up when I found out that I was just being warned for not coming to a complete stop at an intersection."

By that point she was so deep in debt that she filed for bankruptcy. Only after she consulted an attorney did she discover that it wasn't the DA sending her all those letters. It was an Arkansas company called District Attorney Technical Services. "The real district attorney had not investigated me or considered filing charges against me."

And still the letters kept coming, threatening her with arrest. She eventually became part of a class-action lawsuit filed by Arons against the company's owner, Henry Craighead.

Carole Hirth of Chicago ran foul of Corrective Solutions when PNC Bank held deposits to generate overdraft fees.
Will Rice
Carole Hirth of Chicago ran foul of Corrective Solutions when PNC Bank held deposits to generate overdraft fees.

The suit claimed that District Attorney Technical Services illegally disguised itself as a government entity in order to extort penalties and fees. In 2011, a federal court awarded 36,000 victims nearly $750,000 in damages.

But it was too late. That same year, Craighead declared bankruptcy himself and only paid $160,000. He's now retired and living comfortably in Oregon, says Arons.

"That's what they do," Arons says. "Whenever we win one of these cases, they declare bankruptcy in order to avoid paying out damages. It's absolutely maddening."

The same thing had happened a year earlier, when Arons won a similar suit against American Corrective Counseling Services. A federal court ruled that, despite the company's claims of immunity, it had misrepresented itself, made false threats of prosecution and charged exorbitant penalties.

Once again, Arons' clients were unable to collect on their victory. American Corrective also declared bankruptcy, saying it couldn't repay investors — despite having herded $47 million in fees over the previous four years.

A few months later it was back in business, re-formed as Corrective Solutions and "free and clear" of all liability, according to court records.

Today it's the biggest bad-check collector of them all.

A Payday for Prosecutors
Mike Wilhelms is president and CEO of Corrective Solutions. His LinkedIn profile boasts a photo of a fresh-faced surfer boy in charge of more than 200 employees. The California counties of Los Angeles, San Bernardino, Riverside and Orange are his biggest customers, all within driving distance of his palm-tree-lined headquarters in San Clemente, where it's clear that business is booming.

Consumer-rights lawyers estimate the company sends out around 2 million letters annually. (The company did not respond to repeated interview requests.)

The Corrective Solutions website does its best to imply that it's an arm of law enforcement. A slideshow gently fades in and out with statements about "holding offenders accountable for their actions." An interactive map (removed from the site in recent weeks) showed its 140 contracts with prosecutors nationwide.

Nowhere does it say that most of these "offenders" have never been investigated or formally charged with a crime.

The site boasts dozens of quotes from pleased prosecutors, who sing praises of reduced caseloads and crime rates. Yet Contra Costa District Attorney Robert Kochly offers the most telling endorsement, noting he's grateful for "more revenue to my office."

District attorneys don't pay a cent for Corrective Solutions' services. Instead, the company pays them to run their bad-check programs. All a prosecutor must do is hand over official letterhead, along with a list of bad-check writers and a bit of "case criteria."

Between 2005 and 2008, Los Angeles County raked in more than $1 million. Miami-Dade made more than $375,000.

When asked whether Miami-Dade's program was little more than a moneymaking scheme, Toussaint balks.

"Diverting such cases out of the criminal justice system gives an individual with no prior record an opportunity to avoid having a criminal record," she says. "It makes the victim receiver of the worthless check whole, and it is done with no cost to the taxpaying citizens of our community. Pretrial diversion programs also allow the courts to focus on other types of criminal activity."

But while prosecutors claim they use collection agencies to decrease caseloads, some companies actually promise to expand them – for the sole purpose of generating more money.

Take Missouri's own BounceBack. It owns Check Connection and makes no bones that generating fees is mission one.

"Is your program suffering from diminishing checks?" asks the company's website. "Visit Check Connection to learn how you can substantially increase the number of checks in your bad-check program."

The site offers examples from places such as Palm Beach County, Florida, which switched to BounceBack in 2006 after "merchants and other victims were complaining that they felt intimidated by the people administering the program. Check writers complained of strong-arm collection tactics."

Since then, Palm Beach has "passed the $1.5 million mark."

And while one might think that there's plenty of money to go around within the industry, competition between the key players can be nasty. In 2010, Corrective Solutions sued the Kansas City-based company for "trade libel." The case was dismissed. In March 2011 BounceBack turned around and sued Corrective Solutions in federal court in Missouri alleging the company violated RICO laws by operating a "fraudulent debt-collection scheme" and conspiring to "fraudulently acquire" BounceBack's business interests. BounceBack dismissed the lawsuit a couple months after filing it.

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5 comments
suetoo
suetoo

There's so much fraud in the U.S. these days it just nothing but sad.  

On a lighter note, Mike Wilhelm closed his LinkedIn account.  I guess people who read this were writing and bugging him.  What goes around comes around.  Creep.

a42natson
a42natson

Easy fix: Keep a couple hundred bucks extra in your account to cover your errors.  Don't have a couple hundred extra dollars?  Pay with money orders and cashier's checks until you reach maturity.

mimivonlichenstein
mimivonlichenstein

@a42natson what a terribly judgemental thing to say!   Keep a couple hundred bucks extra in your account??....until you reach maturity??...wow!   Not everyone has EXTRA money. 

j__M__M
j__M__M

@a42natson Easy fix: Just be a trust fund baby and tell the lawyers to keep at least a hundred g's or so in checking at all times.  Problem solved.

Everything is so easy... 


 
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