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

  * * *

  One afternoon, I went out for beers at the hotel bar with Aaron, Brandon, and one of Brandon’s childhood friends from Boston, Ryan Vargus. Brandon still hadn’t found any paper to buy, but he didn’t seem overly concerned. I sat next to Ryan, a waifishly thin thirty-nine-year-old with a boyish face and a soft-spoken, easygoing manner. Ryan was quick to tell me that he had spent most of his adult life in prison. “I did fifteen years for weed,” he said, with a casual shrug. He was charged with possession of 6,000 pounds. When he finally got out of jail, he decided to follow Brandon’s lead and enter the collections industry, and Ryan and his wife now ran their own agency.

  Ryan had come to Las Vegas in hopes of finding a new source for paper—namely, anyone other than Brandon. Brandon had been supplying Ryan with virtually all of his paper. Most of it was paper that Ryan purchased from Brandon, including portfolios that Aaron’s fund had once owned. The rest of it was paper that Brandon either owned or controlled and that he allowed Ryan to collect on and earn a commission.

  Autonomy is what Ryan wanted, and he hoped to secure it here in Las Vegas, by finding a new supplier. Oddly enough, Ryan claimed to have enjoyed a fair amount of independence during his time in prison. He told me that, while incarcerated, he ran an elaborate betting enterprise, where inmates could wager on professional sports teams. He employed ten different runners, from the prison’s different blocks, who took the bets. On one occasion, Ryan recalled a gambler who tried to cheat him by placing a bet after a game had started. Ryan refused to honor his bet and eventually confronted him in the prison yard: “I stood my ground and went out there with a big old knife and said, ‘I’m not paying it—that ain’t how it works.’” According to Ryan, this kind of scenario was rare. Most of the time, inmates bet fairly and paid their debts. This was quite a contrast to the outside world, where collectors had to cajole debtors over the phone in the hopes that they might pay. All in all, prison provided Ryan with excellent training for running his own collections business: “You want to hit your goal, you want to cover your ass, and you don’t want to collect less than what you’re paying.”

  Aaron appeared enthralled by Ryan’s tales from prison, and, at one point, he couldn’t resist asking, “How long would I last in prison?”

  Ryan eyed Aaron appraisingly for a moment, as if assessing his prison-worthiness. “You’d be fine,” said Ryan finally. “The main thing is, you mind your business. You do your time. As long as you’re not sucking a dick, doing drugs that you can’t pay for, or gambling that you can’t pay for, you’re fine.”

  Ryan and Aaron both feared being too dependent on Brandon even as they worried about the risk of going elsewhere and buying bad paper from an unknown broker. The good side of dealing with Brandon, Ryan said, was that he never got “screwed.” His other sources hadn’t proved as reliable. He once purchased paper from another supplier and discovered that it was being worked, simultaneously, by seven other agencies. “What happened was, at some point down the line, the file had been outsourced to some scumbags,” explained Ryan. “[Then they] sold it to a bunch of people, instead of returning the file to their clients like they were supposed to do.” The takeaway from this story was clear: until he could find a more reliable supplier, Ryan was stuck with Brandon.

  Later on, when I asked Brandon about Ryan’s bid for independence, he replied, “I think once he gets around and checks prices, he’ll come back, because people always think the grass is greener somewhere else.” Ryan’s real problem, Brandon insisted, was the quality of the collectors that he had in his office. “I’m giving this kid great deals,” said Brandon. “He’s getting it cheaper than all my regular customers because he’s a friend of mine.”

  Aaron’s and Ryan’s relationships with Brandon were further complicated by their claims that Brandon owed them tens of thousands of dollars. To this end, Ryan said he was worried about Brandon’s gambling. Ryan recounted how, one time, Brandon was driving down to see him with some money in hand, but en route he stopped at a casino and gambled it away. Brandon confirmed this. At one point, I listened as Aaron and Ryan discussed their prospects of getting repaid. Aaron speculated that Ryan was in the better position, and he went on to enumerate Ryan’s advantages as a creditor, which included “geographic proximity,” “longtime friendship,” and the fact that “at the end of the day, when push comes to shove, [Ryan] is a little more intimidating.”

  “What’s your recourse?” Aaron asked Ryan. “Where does the rubber meet the road?”

  “I don’t know,” said Ryan, shaking his head. “I do not know.”

  The question of what Aaron, Brandon, and Ryan could—or couldn’t—expect from one another because of friendship seemed to be an ongoing source of speculation. Business aside, Ryan and Brandon had remained deeply loyal to each other. During the time that Brandon was in prison, Ryan paid the mortgage on Brandon’s mother’s house so she could keep the home. Years later, when Ryan was nearing the end of his time in prison, Brandon sent him money each month so he could stay out of trouble and refrain from other, riskier means of making money.

  One evening, I joined Aaron, Ryan, and Ryan’s wife, Kaleigh, for dinner at the Palm. At the end of dinner, Ryan asked us politely, “Do you guys mind if we chew and screw? We got a show to catch.” Aaron and I said that we didn’t mind at all.

  As he watched them leave, Aaron lamented that he didn’t know more shady characters like Ryan, adding that it was important to “cultivate” such friendships. “Everyone knows accountants,” he told me.

  Aaron went on to say that, no matter what crimes Ryan or Brandon had committed, they seemed to have a bond that endured in the way that many of his own friendships and business relationships never would. He recalled his sense of misery and isolation when he was going through the painful divorce from his first wife. “Brandon would call me up and ask me, ‘Aaron, how are you doing?’ He was really concerned. Some of my friends from Buffalo, they really weren’t there for me.” For a moment, Aaron’s eyes glazed over with tears. “Don’t get me wrong,” he said. “It’s not that Brandon wouldn’t mark up the price on a file—but that’s all fair game.”

  At times, it was clear that Aaron romanticized Brandon’s code of honor. Sensing that, Brandon seemed to ham it up, playing the role of the noble outlaw to his own advantage. But the romanticizing cut both ways. It often appeared that Brandon took pride in the idea that someone like Aaron, with such an aura of wealth and respectability, considered him such a close friend. Brandon was touched when Aaron once invited him to attend a political fund-raiser at Herb Siegel’s house. It was a big event and Bill Clinton was scheduled to attend. “I was very happy that I was even in a position to be invited to something like that, because, you know, coming from where I come from, that doesn’t happen much,” said Brandon. In the end, Brandon worried that his criminal past might somehow embarrass Aaron and Herb, so he opted not to go. Afterward, when Brandon explained why he hadn’t shown up, Aaron said that no one would have cared about Brandon’s past: they would have accepted checks from anybody.

  * * *

  Brandon finally found his paper—or a good lead on it, anyhow—the following morning in the hotel casino. We were headed toward a bank of slot machines when a heavyset, ruddy-faced man in a golf shirt approached us. The man, who was Brandon’s old acquaintance, pulled him aside and told him about a $600 million portfolio of credit-card paper that one of the big debt-buying companies was looking to unload. The debt was on the older side—it was unclear, at this point, just how old—but the acquaintance knew that Brandon liked to work older, beaten-up paper that no one else typically wanted. The banks had charged off and sold this paper before imposing any of the new preconditions, which meant it could be sold and resold indefinitely.

  Brandon’s immediate challenge was paying for this particular portfolio of debt. Brandon speculated that it could cost him as much as twenty basis points—or one fifth of a penny on the dollar—and this meant that Brandon n
eeded to line up as much as $1.2 million in capital right away. Normally, he would turn to Aaron in this situation; but at this point, Aaron didn’t have the cash on hand or the inclination to make such a big investment. Instead, Brandon he would ask an old friend and business associate, who asked to be identified by his middle name, George.

  George was a former collector, who had opened his own agency and done very well for himself. The secret to George’s success, Brandon explained, was that he always held on to his “postdates”—these were accounts connected to debtors who had agreed to set up extended payment plans, in which they paid $25 or $50 a month for several years. Brandon, by contrast, often sold his postdates at a discount to get a lump sum of cash as quickly as possible. He had done this, just several months earlier, in order to pay off the bulk of a debt that he owed to Aaron. The strategy, Brandon admitted, was effective but shortsighted: “I was always like, nah, I ain’t going to be here for those postdates—just give me the fifty [thousand] right now.”

  “I run out of cash once a month,” Brandon told me. “I run out of cash and I turn to him.” Brandon seemed certain that George would come through. “When my chips are down and I got no one to turn to, and I can’t go make fifty grand tomorrow to pay, I turn to him.”

  * * *

  George’s hotel room was a sprawling, multiroom penthouse with breathtaking views of the Las Vegas skyline and the desert landscape beyond. By the time I arrived, a party was well under way. The minifridge appeared to be plundered—small bottles of liquor were scattered everywhere—and a thick cloud of cigarette and marijuana smoke lingered in the air. A dozen or so people were there, including Brandon, Aaron, Ryan, and his wife.

  A friendly, heavyset fellow in shorts and a T-shirt—who turned out to be George—introduced himself and told me that he had come to Las Vegas to do a little business, gamble, and attend his best friend’s wedding. George helped foot the bill for his friend and his friend’s fiancée to make the trip. The friend appeared quite appreciative and referred to George as “the King.” Now the King was making plans to attend a concert while simultaneously listening to Brandon brief him on the deal that he had lined up. The paper was eight to fifteen years old, Brandon explained, with charge-off dates ranging from 1997 to 2005. “George, they got a massive inventory,” said Brandon. “It’s a publicly traded company, George. They only want to deal with me.”

  I asked George if he had any concerns about the deal. George told me that as long as the paper wasn’t “bogus”—meaning it hadn’t been double-sold and the chain of title was legitimate—he felt confident he would make money. Plus, George added, Brandon always took care of any problems that arose. The previous fall, for example, Brandon helped broker a deal for George involving a portfolio of payday loans. George quickly discovered that the accounts he had purchased were not legitimate, but merely the names and social security numbers of people who had applied for payday loans in the past. Brandon reimbursed George and then set out to solve the problem. He didn’t bother contacting the FTC, which would likely have done little good. Ultimately, he flew down to Miami in search of “the kid” who had sold him these files, but couldn’t find him. “The kid is in the wind,” Brandon told me. “I wish I knew where he was right now. I would take a taxicab over there and smash his face in so he can’t talk shit for six to eight weeks.” The bottom line for George, however, was that Brandon had protected his investment.

  “Here’s the deal,” Brandon said to George. “They only want to give it to one person—and they already chose me.”

  “Then just tell [him] I got all the money,” George said. “He don’t have to go anywhere else.”

  As the party continued in George’s penthouse, Brandon began trying to convince Aaron to invest with him. Ryan, who was sitting across the table from the two of them, listened but said nothing.

  “Aaron, all I need is one million dollars,” said Brandon, in his excited voice—a full-throated yell. “In six months I can get you a fifty-thousand-dollar remit for the rest of your life.”

  “It’s tough to get investors to put money in these days,” Aaron said.

  “Fuck the investors,” Brandon shouted. “What about you?”

  “I don’t have a million dollars.”

  Brandon shot him a dubious look.

  Someone across the room asked Brandon to talk more softly.

  “I’m rude, crude, and socially unattractive,” Brandon replied. “My balls dropped when I was eight.”

  Moments later, his cell phone rang.

  “Here we go,” he shouted. “Hotline—B.W. problem solver.” Brandon paused to listen, then asked out loud what the room number for the penthouse was.

  “Thirty-one thirty,” someone shouted.

  Brandon put the phone down and explained that another potential deal was materializing. The owner of a large collection agency would soon be paying them a visit. The owner, Steve, apparently had the ability to put Brandon in touch with some of his clients who had large volumes of paper to sell. Business appeared to be rolling. As soon as Steve arrived, Brandon rose to his feet and barked, “I want to talk to some of your clients!”

  “If you won’t yell at them, I’ll let you talk to them,” said Steve.

  Brandon appeared satisfied.

  Not long after this, a security guard arrived, explaining that someone had complained about the noise coming from this particular penthouse.

  “Want me to deal with this?” shouted Brandon. “I’m a problem solver!”

  Several people quickly intervened, assuring Brandon that this wasn’t necessary.

  As all of this transpired, I saw Ryan silently nodding his head. He had been sitting there so quietly that I had barely noticed him. He still hadn’t found a new source of paper. His expression was blank, and I couldn’t tell whether he was annoyed, amused, or ambivalent that Brandon had seemingly found good paper and was now bragging about it.

  Brandon looked at his old friend and smiled warmly. “I got an eleven-to-fourteen-year sentence when I was a young kid, right?” said Brandon thoughtfully. Brandon had a startling ability to downshift his energy levels rapidly, so that he could go from Viking-battle-cry mode to introspective-philosopher mode and then back in a matter of seconds. “My father died in 1994, and my mother had a small nervous breakdown when my father died. This kid, right here, paid my mother’s mortgage for like two years—even after he went to prison.”

  “I was in jail paying for it,” Ryan confirmed, his face still blank.

  “He was in jail sending my mother and my girl…” Brandon paused for a moment. Not everyone in the room was listening, and this seemed to irk him. “Hey!” shouted Brandon. Conversation dropped to a murmur. Then he resumed. “Sending my mother and girl fucking twelve hundred dollars a month. After he was already in prison. How many guys are going to do that?”

  Brandon pointed to George and said, “I had a couple problems, and George stepped up and said, ‘Brandon, if something happens to you, don’t worry, I’ll take care of your wife and kids.’”

  George nodded appreciatively.

  The room was fairly quiet now. Brandon was on a roll and no one was going to compete with him. It wasn’t that everyone deferred to him obsequiously, as if he were a rock star entitled to their respect and love solely by his sheer charisma. Rather, Brandon created the impression that he was a charging bull, a creature whose sheer force was so brutal and overpowering that you had to move the hell out of the way once he got going. Sure, he was hamming it up, inflating himself into the caricature of the brash armed robber who had done “ten years in the can,” but even this performance was part of the deal. This was his shtick, his talk-off, his chest-thumping war dance. And as loud, lewd, and unbearable as he could be, everyone seemed to believe that you needed a Brandon Wilson to scare off all the con men, hucksters, and charlatans in this industry. You needed a guy who had survived in the prison yard in order to help you succeed in a rude business. And if he was a little out of control,
a little erratic, a little dangerous, then all the better. Because he was the great Boston alpha male, here to make a buck and keep the wolves at bay. Brandon was no fool—quite the opposite. He was a quick study. On some level, he understood the role that was expected of him, and he played it to the hilt.

  “This is my guy, that’s my guy, this is my guy, that’s my guy over there,” Brandon said, as he looked around the room and pointed at people. “Right? You know what I’m saying? And I’m going to tell you right now, if any one of these guys called me and said, ‘I’m in trouble and I need you right now,’ I would fucking come—money or no money.”

  “Would you come with a shovel?” someone yelled out, goading him on.

  “You already know I’d come with a fucking shovel if that’s what we needed,” replied Brandon. “But I would be there. And you know what? I’m a man of my word, so that’s what it’s about. That’s what it’s about.”

  PART THREE

  THE LAST COLLECTORS

  8

  TAKING CONTROL OF ASSETS

  For all its roguish color, Las Vegas is the legitimate face of the debt-buying industry. It is the place where everyone—from the small operators to the big publicly traded debt buyers—comes to do business. Back on the streets of Buffalo, the rules are looser and the game is tougher. This is the other marketplace for consumer debt in America. It was here that the Package was stolen and here that paper of dubious origin is routinely bought and sold, no questions asked. For these reasons, it made sense to spend some more time in Buffalo. I still had a number of questions about the fate of the Package, and if I could answer them, I could understand what happened to debts—like Joanna’s and Theresa’s—when they dropped off the edge of the aboveground economy. I wanted to know just how far collectors would go to collect on the most “beaten-up” paper. In short, I wanted to know the inner workings of the financial underworld.

  My usher into this realm was a Buffalo-based debt broker named Larry. I met Larry for the first time in the summer of 2012, at a bar on Chippewa Street, which was once the epicenter of Buffalo’s theater district. Nowadays, Chippewa is where twenty-somethings, often from the suburbs, come to get drunk and gyrate to the pulse of the city’s nightclubs—places with names like Bottoms Up, Bada Bing Bar & Grill, and Pure Night Club. Larry emerged from the crowd of revelers—a man dressed entirely in black. He wore dark sunglasses, black pants, a matching shirt, and a black Yankees cap, which gave him the air of a chic grim reaper. Larry was a youthful-looking African-American man in his mid-forties. He sported a diamond earring and a beard trimmed so finely that, if you saw his picture, you’d swear it was airbrushed.