Telemarketing Fraud Recovery
Private Organizations Which Seek Restitution for Fraud Victims
One company has established itself to profit from assisting victims recover a portion of their losses when they can.
The Interclaim group of companies (Interclaim) with parent company Interclaim Bermuda Ltd. (IBL) is a private company incorporated and resident in Bermuda. Interclaim Holdings Limited (IHL) is a wholly owned subsidiary of IBL incorporated and resident in the Republic of Ireland. Interclaim Recovery Limited (IRL), incorporated and resident in Ireland is also a subsidiary of IBL.
They identify claims, judgments or debts which have been abandoned by their owners, or which have not been enforced because their owners lack the financial or human capital necessary to conduct effective enforcement proceedings in multiple jurisdictions at the same time. Interclaim takes on the financial risks of claim enforcement by either purchasing such claims or establishing joint ventures with the financial institutions, sovereign governments and individuals.
In the case of multiple, unrelated and/or undercapitalized victims it is impractical for Interclaim to enter into agreements with each claimholder. In such circumstances it uses a legal process such as bankruptcy proceedings to acquire its interest which it usually obtains through a contingency fee agreement with a representative such as an interim receiver.
In the early 1980s, Blair Down established a small group of British Columbia based mail order businesses in an attempt to exploit the popularity of Canada’s then new lottery business. By 1990 onwards he was operating a large mass-marketing business through a network of some seventy-seven associated corporations and business aliases. The business purportedly carried out the sale of foreign-issued government lottery tickets by mail solicitation and telemarketing.
They particularly preyed on elderly Americans, many of whom were apparently so swayed by the promises of congenial telemarketers and convincing mailings that they paid thousands of dollars, sometimes their life savings, to the lottery organization.
Using hundreds of telemarketers they continued to market the scheme and solicit monies despite being contacted by law enforcement agencies and being advised that the activity was illegal.
After six years of investigation, with the US Postal Service, the United States Attorney’s Office and the Federal Government proceeding against them, they entered into a Plea Agreement by which he agreed to make partial restitution of $12 million and serve a period of time in jail.
Down established certain Cayman Island trusts to hold and invest funds obtained through the illegal activity which Interclaim believes exceeds $200 million. When he pled guilty he knew he would leave prison a very wealthy man following his 6-month period of incarceration.
Seeking agreement of the victims to support the legal proceedings as co-petitioner, Interclaim offered to advance a cash sum of between $2,500 and 5,000 to each in exchange for both an interest in the claim and support for Interclaim's recovery scheme.
The agreements provided that each victim would keep their restitution from the U.S. fund and that Interclaim would receive a return of its advance. For this advance, Interclaim acquired a 50% stake in the net proceeds of any recovery as compensation for its services.
Interclaim then acquired trade debts to provide it with a basis to file the bankruptcy petition. Bankruptcy proceedings also allowed for an application for the appointment of an interim receiver and court approval of the International Claims Enforcement Agreement (ICEA). By providing that Interclaim will receive 50% of the net recoveries from the debtors, the ICEA is the means by which Interclaim can ensure that it will be compensated.
In this case Interclaim carried out an investigation to assess the viability of recovering assets of the debtors said to be concealed in other jurisdictions and concluded that there was a reasonable opportunity to recover from $25 million to over $50 million.
They claimed that the debtors committed numerous acts said to be acts of bankruptcy under the BIA including participating in an enterprise formed for an illegal purpose, making a fraudulent conveyance or property transfer, permitting execution in respect of the property seized in accordance with the plea agreement, attempting to or actually assigning, secreting, removing or disposing of assets with intent to defeat creditors, and generally ceasing to meet liabilities as they become due.
However, a Canadian court ruled that current law does not allow a stranger or a commercial interest to traffic in litigation for a share of the profits so they couldn’t proceed. The higher courts may well wish to consider whether it is appropriate to create a new "no pre-existing interest" exception to the common law rules against champerty and maintenance.
At one time lawyers could not take cases for a contingency fee on that basis but now such arrangements are sanctioned. In addition to legal services, Interclaim is trying to provide financial and other inter-jurisdictional expertise to allow victims to seek redress by using the provisions of the BIA which does contain some safeguards not found in conventional litigation such as court approval for settlements.
The victims could proceed with a class action or a representative action but it is highly unlikely that any of them have either the financial resources or incentive or the necessary will to avail themselves of these alternatives.
Update Editorial - Madison Record - 01/05
Presiding last week over a notorious case in a notorious place, Madison County Judge Phillip J. Kardis took time to praise one lawyer for his “tremendous efforts”while assailing another for talking with the media.
The lawyer earning plaudits was Robert Forbes, Kardis’ former law partner whose wife works now as the judge’s court reporter.
The demerits went to Forbes’ opponent, New York lawyer Jody Pope. He was in Edwardsville to object to a settlement that would, among other things, enrich Forbes and his partners with hefty fees.
It’s another day, another outrage in the case of millionaire “Canadian con man”James Blair Down.
The Down saga is John Grisham material, a tale of five years, a $120 million telemarketing fraud, 400,000 “sick”senior citizens, a hefty South Carolina law firm, media-sensitive judges, and an Irish collection agency.
Mix them all up and it makes quite the metaphor for how Madison County got that national reputation.
It all started in 1998, when Down pled guilty to conspiring to mail gambling materials. He was sentenced to pay $12 million to his victims plus serve six months in an Oregon prison.
That Down remained a rich man-- allegedly worth $50 million-attracted an Irish collection agency and later the lawyers of South Carolina plaintiff’s firm Ness Motley. They saw a class action opportunity and smelled an easy settlement.
So in 2000, the South Carolinans moved ahead, filing a class action lawsuit against Down on behalf of 400,000 “elderly.. in declining mental or physical health.”
And they filed it in the best courthouse they could find-- ours.
According to sworn testimony, Ness Motley lawyer Blair Hahn said he chose Madison County because he thought he could “manipulate the court.”Hahn said here “his wishes would be granted.”And they were.
Ness Motley hired local class action impresarios Korein Tillery to file the lawsuit. And like clockwork, Judge Nicholas Byron froze Down’s assets, and settlement talks got underway.
The settlement Judge Byron approved guaranteed $2 million for Ness Motley, with rebates for Down’s victims-if they could meet a complicated proof of payment requirement, including finding decade-old receipts and getting their signatures notarized.
Only 450 victims were found, costing Down a mere $85,000.
$2 million for lawyers and $85,000 for victims grabbed press attention, leading a New York law professor to dub this “the most abusive class action settlement of the decade, if not the century.”
The national media piled on and Judge Byron relented, agreeing to revisit the matter for the “victims.”Which leads us to today.
Judge Kardis-assigned last year to replace Byron on the case-- has approved an eerily similar “new”settlement that could guarantee $1.5 million for his former partner Forbes and his co-counsel, Stephen “Phillip Morris”Tillery,
Victims will get repaid-if they can find them.
Here’s a better idea. Base the lawyers’ fees on how many class members actually see cash. The more victims collect, the more Forbes and Tillery can reap.
Let the lawyers wait just like the victims.
And let the media know how the “class hunt”is going so we can all gauge just how much "justice" is being served.
The lesson of James Blair Down is that "tremendous efforts" only result in larger fees for attorneys.
But brighter media lights--- they can prevent such travesties from ever occurring in the first place.
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