Bad Paper: Chasing Debt From Wall Street to the Underworld Read online

  On one occasion, I overheard one of Brandon’s collectors tell a debtor to pay up or risk facing a “summons”—a not-so-subtle hint. Making a threat like this was a calculated risk. It could help you collect, or it could get you sued. Brandon once paid $16,000 in damages, for example, to a debtor after one of his collectors threatened to sue. After that, Brandon strongly discouraged this talk-off or any like it.

  Another consumer also filed a complaint with the Better Business Bureau, saying that Brandon’s agency was trying to collect a debt that was beyond the statute of limitations in the consumer’s home state of Pennsylvania. Of course, Brandon prided himself on his skill at collecting on older paper—“out-of-stat” debt—that debtors could no longer be sued over. Brandon favored taking a direct approach, reminding debtors that they were still “morally” obligated to pay. Interestingly, once a debtor makes a payment on an out-of-stat debt—no matter how small—this transaction often resets the statute of limitations. It effectively revives the debt, bringing it back to life. And so some collectors do whatever they can to exhort, cajole, browbeat, or even deceive consumers into reviving a debt. The FTC has recommended that states require collectors to warn debtors about this trick. But this is ultimately a matter that has been left to the states, and the vast majority of them have not yet acted on this suggestion. In any case, Brandon’s agency responded to the complaint from Pennsylvania by stating, “We understand that it may be frustrating to receive a call on an older account, but there are no laws that prevent [us from] attempting to collect on an account past the statute of limitation, ONLY in litigating or implying further civil action.” And, as far as the law is concerned, this was completely right.

  * * *

  Brandon transitioned from collecting on debt to buying and selling it with well-practiced ease. At one point, I was chatting with Brandon when we were interrupted by Jeremy Mountain, who told us that there was an important call that he needed to take. The guy on the phone wanted to sell him a portfolio of credit-card debt, most of which had been charged off in 2002 and was out-of-stat.

  “You want to see me make fifty thousand dollars?” asked Brandon.

  I nodded.

  “This is a piece of paper I am going to buy for one hundred thousand and flip for one hundred fifty thousand tomorrow,” he said. The face value of the file—the total amount of dollars owed on all the accounts—was $100 million, meaning that Brandon would be buying this file for one tenth of a penny per dollar. Brandon grabbed the phone. “I will give you one hundred,” he said into the receiver. “It is pretty beat up. You got a couple of huge balances on top. I don’t know what I can get for it. There is twenty million on top that I don’t even want. If you pulled it out, I would still take it. Let’s get something done. Get back to me.”

  As it turns out, Brandon already had the buyer lined up. “The buyer thinks he’s getting a deal,” explained Brandon. “He thinks it’s worth three hundred thousand because he put it through his computerized scoring model, and based on the dates, states where the creditors live, and agencies that worked it previously, he thinks he knows exactly how much he can liquidate.”

  “Is he right?

  Brandon gave me a look, as if to say, Maybe.

  “They got their sophisticated scoring models, I got my eyeball,” Brandon said.

  “Will the seller give you this file for one hundred thousand?” I asked.

  Brandon nodded and explained that the broker, who was helping the seller arrange the deal, was a friend of Brandon’s and had told him that he could push the seller down to $100,000. Brandon lived on tips like this. “Insider trading is alive and well in the debt business,” he told me.

  Brandon got back on the phone and called the prospective buyer. The buyer understood, implicitly, that Brandon was acting as a middleman and that Brandon had not yet even purchased this piece of debt. The buyer also knew, however, that Brandon was vetting this file for him and giving him his word that the file was legitimate. “If there is any problem, if anyone tries to burn us, it is not on you, it is on me,” Brandon told the buyer. “If that happens, I am in the car going to his place and I smash the guy’s fucking head in. You know that.” The buyer was appeased and, shortly after this, the deal went through.

  * * *

  Brandon was always on the prowl for would-be partners with deep pockets—or even not-so-deep pockets—who could help fund deals that he lined up. One night I went out for a drink with Brandon, and we ended up bumping into one such partner, a handsome young man in his mid-twenties from Thailand named Ahm Kongsuriya. Ahm had a slim, athletic build and wore jeans, a white T-shirt, and a black baseball cap emblazoned with red sequins. Ahm owned a sushi restaurant in Bangor, and sometimes when he had cash to spare, he invested his money with Brandon. “He usually gets me a fifty-percent return over the course of six months,” said Ahm, who seemed very pleased. “I don’t need any contract with him.”

  “That’s right,” said Brandon, as he put his arm around Ahm. “My word is my bond.”

  As the night went on, many of the people who entered the bar—mainly twenty-somethings dressed like Brooklyn hipsters—seemed to recognize Brandon. At one point, Brandon peeled out a thick wad of hundreds, which he had won at the casino the night before, and bought everyone a round of drinks. Soon after that, a guy in his early twenties, with an immaculately trimmed beard, approached us and introduced himself. He said his name was Kristopher Snyder and that he was studying to be a nurse practitioner. Then he turned to Brandon: “You’re the guy who beat up the Nazi, aren’t you?”

  Brandon nodded.

  Kristopher recounted a story from a night not long before, when a very large man with a swastika tattooed on his throat had showed up at this bar and started heckling people—one of them being Quincy, Brandon’s chauffeur, who was African-American. As Kristopher told it, Brandon, despite being much older and smaller than the Nazi, dragged the Nazi out of the bar and beat him savagely. “The Nazi was way out of line—every step of the way that evening,” Kristopher said. “He had it coming.”

  “I took it to that Nazi,” confirmed Brandon proudly. “I am a perfect gentleman. But that Nazi was going to get banged out for that tattoo and that Nazi nonsense. I was just waiting for him to disrespect anyone.”

  “I think he sensed that,” Kristopher said.

  “I warned him twice.”

  “You went animalistic on him.”

  Brandon nodded and returned to the bar for another drink. Kristopher eyed him as he walked away. “He is the kind of guy who knows what he wants, and if he can’t get it psychologically, he will get it physically,” he said. “He is like a pit bull, dude.”

  Late that evening, after Brandon and I both had had more to drink than we should have, we sat together on a street bench under the canopy of an old tree. It was a temperate night, and cool air rustled through the branches overhead. “I thought that once I had enough money, happiness would follow,” Brandon told me with uncharacteristic somberness. “It’s not true. I am a worse person with money. The more money I have, the more I am like Thurston Howell, and the less I have, the more I am like Robin Hood.”

  “So why do you do it?” I asked.

  Brandon shrugged. He then told me the story about the day, back in late 2008, when he had brokered Aaron’s $9 million purchase of Bank of America paper—the “senior citizen” debt, as Aaron put it. “I made a four-hundred-ninety-seven-thousand-dollar commission for brokering that deal with Aaron,” he told me. “I made the deal at eleven a.m., and at one a.m. that night I was still in the office working. I called my friend and said, ‘Bring me some cigarettes; I am still at the office.’ He got there and said, ‘You made half a million dollars this morning. What the fuck are you still doing at the office?’ I thought it was all about money until I had it—and then I realized it was just about outdoing the next guy.”

  That day in 2008 seemed to be the high mark of Brandon’s career. There had never been another deal like it. In the
years since then, profit margins had been leaner. There were, occasionally, quick deals or flips—like the one that I had witnessed—where he could make a tidy profit; but these, too, were becoming rarer. When I visited him, in early 2013, Brandon’s situation seemed especially precarious. At the end of one workday, Brandon announced that the agency had earned just $900 and that he was going to the casino to replenish the company’s coffers. Brandon also alluded to the fact that he owed money—not just to Aaron, but to some other business associate and the IRS as well. “Right now it just so happens that I’m in a bad spot,” he told me. “But I made a lot of people a lot of money, in a lot of different ways. So I’m not as concerned about tomorrow, and I don’t think [the people I owe] are, either. Obviously, they’d like to have it today. You know what I’m sayin’?”

  Brandon did own a fair amount of property in Maine—including five houses and a farm—but he didn’t own them outright. In fact, one afternoon when I was having lunch with him at a roadside stand, we met a middle-aged woman named Carol Harvey who was his real estate agent, mortgage broker, and banker all rolled into one. According to Brandon, his credit scores were so low that it would have been difficult for him to finance a traditional mortgage, so he went through Carol instead. She held the deed to the numerous properties that he owned, and he paid her each month instead of the bank. “We met him and fell in love with him—the good, bad, and the ugly,” she told me.

  “She has a little pet name for me,” said Brandon. “It’s Cocksucker.”

  “No, we don’t say that,” said Carol, laughing.

  I was a little surprised that Carol and Brandon were on such good terms given what he had told me about his finances. Eventually, I asked Carol whether Brandon had missed any payments. Brandon did “get in trouble” occasionally, she said, and he had been late on some payments. “But he’s honest with us. And then we say, ‘Okay, let’s work on this.’” While Carol spoke, it seemed as if she were echoing Aaron Siegel’s very words, professing her faith in Brandon despite all of his missteps. She was also echoing Brandon’s former boss, Jeff Schreiber, who hailed him as a bad boy turned good—a real-life Horatio Alger. Despite all the warning bells that he set off—or should have, rather—the way that he lived his life and spun his own tale made people want to believe in him.

  The only person at Brandon’s agency who seemed especially worried about finances was his bookkeeper. Her name was Shana Maloney, and she was also Brandon’s stepdaughter. One afternoon, I wandered into an office tucked away in a corner of the agency and struck up a conversation with her. She was a pretty woman, in her mid-twenties, with shoulder-length blond hair. The walls of Shana’s office were essentially barren except for a few letters tacked to the wall. They were utility bills for the office. I asked Shana what they were doing on the wall, and she said that they were unpaid because she didn’t have the funds, and she was hoping that Brandon would notice them and appreciate the gravity of their situation. She tacked them to the wall on a whim, she explained. “I’m like, I wonder if I just put these up and he sees them, will he feel the anxiety that I feel—and the stress?”

  Another problem, Shana explained, was that Brandon didn’t collect a regular paycheck and sometimes simply used the debit card linked to the company’s business account to cover his personal expenses. “He promised me the other day he’s going to stop doing this,” she told me. “He gave me the debit card, but he’s done this before.” Shana was used to Brandon’s erratic behavior; after all, she had lived under the same roof as he had for years. “Once he gets an idea in his head, he just does it,” she said. “He would get home at one a.m. and tell my mother, ‘Wake up the kids. We’re going camping.’ And we would go.” Shana stared up at the bills and shook her head. She seemed close to tears. “I’m the one seeing the bills that aren’t being paid,” she told me quietly. “It’s like I almost have the fucking world on my shoulders and everybody else is oblivious.”

  Brandon may have exuded nonchalance, but he wasn’t oblivious. Not at all. He understood, above all else, that he had to keep finding deals on paper. This was the key to turning a profit. He needed to do this as a debt broker; and he had to do this as the owner of a collection agency, because his collectors always needed new accounts to work. This need was complicated by the fact that there was simply less debt on the market. By early 2013, I got the sense that if he didn’t acquire some paper soon—either to sell or to give to his own collectors—he might not be in business much longer. What he really needed to do was to find a great deal on a large quantity of debt. And quickly. The timing was crucial because tax refund season was rapidly approaching. This was the one time of year when even poor and working-class people had a little extra cash lying around. It was the equivalent of the holiday season for collectors when yearly net profits were either made or lost.

  Fortunately, each and every February there was a place that Brandon visited to solve his problems—a happy hunting ground for paper—and that place was Las Vegas.

  7

  SCORING IN VEGAS

  Once every February, more than a thousand debt buyers travel to Las Vegas to attend an annual conference sponsored by DBA International—which bills itself as a “nonprofit trade association” and “the voice of the debt buying industry.” Aaron compared the scene with the bar in the movie Star Wars, where Luke Skywalker and Obi-Wan Kenobi met Han Solo. “You get all walks of life,” he explained. For those serious about buying or selling paper, billions of dollars’ worth at a time, for the lowest possible price—a nickel on the dollar, or a penny, or even one tenth of a penny—this is where you come. Much of the consumer debt that is bought and sold in the United States each year changes hands because of what happens here.

  In 2013, the mood was subdued. Buyers from all over the country worried about a tightening market in which every opportunity had to be pursued. In particular, a great many were angling to purchase a large parcel of debt that everyone was calling the “Rincon paper.” The FTC had recently shut down a large collection company known as Rincon Debt Management. According to the FTC, Rincon employees had harassed debtors, threatened them with arrest, and sometimes even coerced them into paying debts that they didn’t actually owe. The FTC had seized Rincon’s paper and was preparing to auction it off through a court-appointed receiver. Brandon had heard rumors, however, that the Rincon paper was tainted. He wanted to learn more. And the key to doing this, it turns out, was to hang out in bars, casinos, and hotel lobbies.

  The convention, which was held at the Aria Resort & Casino, had an official schedule, with lectures and workshops on new developments in the industry. But that’s not really why Brandon came. Most debt buyers were in Las Vegas for the ten-minute meetings, which they attended in rapid succession. Theoretically, all of these interactions could have occurred over the phone, but in an industry with so little trust—where sellers worry about getting paid and buyers worry about what, exactly, they’re buying—people still liked to meet in person.

  On the first day of the convention, I arrived at the Aria to meet up with Brandon and accompany him to a number of meetings that he had scheduled. His first meeting was at 11:00 a.m., but as the time neared, Brandon was nowhere to be seen. In his stead was Jeremy Mountain, the young man who headed sales and compliance for the agency. On this particular morning, Jeremy and I waited patiently for Brandon to show up, until it became apparent that he wasn’t coming.

  “Where is he?” I asked finally.

  Jeremy shrugged his shoulders and speculated: “Probably on a rampage yelling, ‘Where is my weed?’” Jeremy went on to tell me that he typically did all the “bitch work” at conventions—waking up early, filling out the paperwork, and making sure that the company was properly accredited. He also often met prospective clients before Brandon did. “I’m like the professional façade of this corporation, and then I just pretty much loosen them up so they get a full grasp of what Brandon’s going to be like,” he told me.

  “What do you t
ell them?”

  “I say, ‘Listen, he’s a little bit unorthodox, but he’s a good guy and you can go make money with him. You just got to get past the fact that he’s probably highly intoxicated and swears like a sailor.’”

  “Do you actually tell them this?”

  “Yeah, kind of,” he said with a laugh. Except he usually made his pep talk more professional, he added. Jeremy’s goal, apparently, was simply to help Brandon consummate the deal. Aaron referred to Jeremy as “Brandon’s fluffer”—a reference to the stagehand in pornographic movies who helps the male actor get aroused. Yet, in a way, Aaron often played a similar role, serving as an intermediary between Brandon and the sorts of people who might otherwise clutch their wallets tightly when passing Brandon in the hall.

  Brandon never showed up for the 11:00 a.m. meeting, so Jeremy stood in for him and met with the debt buyers, two somber-faced men dressed in business attire, who seemed slightly irritated. “Where is Brandon?” one asked.

  “He partied pretty hard last night,” explained Jeremy apologetically.

  “You’re saying he hasn’t emerged yet?” asked the buyer, glancing at his watch. “That’s what you mean?”

  “Yes.”

  “I see.”

  The meeting went on without Brandon.

  Not long after this, I joined Jeremy for another meeting—this one with a short, soft-spoken man, who asked that I identify him by his nickname, “Elie.” Elie was an Orthodox Jew who sported a thick beard, spectacles, and a yarmulke. Elie explained that he needed to hire an agency to help him work his paper, which was mainly payday loans. These loans are taken out by people in desperate need of cash and the interest rates are steep—annual rates typically are 391 percent. Payday loans are considered “scummy” paper, as one agency owner told me, because the balances are small and the debtors often don’t pay or can’t be found. Jeremy started giving his pitch, explaining what sort of man his boss was, when Brandon showed up.