N.Y. Mission debt settlement firm charged with fraud

Kevin McCoy, USA TODAY | USATODAY

NEW YORK — More than 1,200 people across the nation were swindled out of millions of dollars by a company they turned to for help paying off credit card debts, federal prosecutors charged Tuesday.

New York City-based Mission Settlement Agency, owner Michael Levitis, 36, and three employees were arrested and charged with conspiracy, mail fraud and wire fraud in what prosecutors described as a four-year criminal scheme in which customers' fees were used to pay expenses of a popular nightclub, luxury car leases and credit card bills.

The case represents the first criminal charges stemming from a referral by the Consumer Financial Protection Bureau, the federal watchdog agency created in response to the 2007 national financial crisis. The agency filed a parallel civil case against the defendants.

"As alleged, Mission preyed upon the financial desperation of people around the country who — like so many ordinary Americans — were simply struggling to pay down their debts after the financial downturn," said Manhattan U.S. Attorney Preet Bharara.

Levitis and his employees allegedly tricked potential customers by falsely telling them Mission had affiliations with the federal government and a major credit-rating agency, according to a three-count criminal indictment. They also gave the victims phony accounts of debt-settlement results they claimed to achieve for other customers.

Victims allegedly were told Mission would negotiate credit card settlements in which they would have to pay only 55% of the amount owed. In exchange, the victims were told to make affordable monthly payments that would be held in escrow by a third-party payment processor until the firm had negotiated final settlements. Clients were told Mission would take only a $49 monthly fee for its efforts, the indictment says.

When some potential customers said the promises seemed too good to be true, a written script allegedly instructed Mission employees to reply "the creditors today are content to get the settled amount in light of all the bankruptcies, charge-offs and bad debt out there today."

From mid-2009 through March 2013, about 2,200 customers paid nearly $14 million to Mission. The company took $6.6 million in fees from those customers and paid approximately $4.4 million to creditors. For more than 1,200 customers, the company allegedly took nearly $2.2 million in fees and "never paid a single penny to the customers' creditors," the indictment says.

"Most of Mission's customers failed to achieve the reduction in debt that the defendants had promised them, and some of them suffered further declines in their credit ratings, were sued by their creditors and/or fell into bankruptcy," the indictment alleges.

Levitis allegedly used fees from the victims to pay expenses for Rasputin, a popular Russian-theme nightclub he controlled in Brooklyn's Brighton Beach neighborhood, home of many immigrants from the former Soviet Union. He also diverted money to pay for leases on two luxury Mercedes autos and pay credit card bills for his mother, who is listed in records as the nightclub's owner.

Prosecutors are seeking civil forfeiture of nearly $2.2 million, the nightclub, two other pieces of real estate and 40 bank accounts allegedly used to launder money generated by the scheme.

Levitis and employees Denis Kurlyand, Boris Shulman and Manuel Cruz were scheduled to be arraigned in Manhattan federal court later Tuesday.

Prosecutors also unsealed guilty pleas by two former Mission employees, Felix Lemberskiy and Zakhir Shirinov.