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Prosecutors Team With Debt Collectors to Terrorize Consumers

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Unfortunately, the ATM withdrawal overdrew her account, racking up seven rejected checks and 21 overdraft fees totaling $560. "It had a snowball effect, leaving the account continually overdrawn, even though I made several deposits," Schwarm says in court documents. Her bank erased most of the fees.

But a few months later, Schwarm received a letter from the Mendocino County district attorney. She'd been accused of fraud and was ordered to repay the checks, along with penalties and a "diversion fee."

"I was in a panic," Schwarm said in court documents. "I had never been in trouble with the law before . . . I assumed that I must be in a lot of trouble if I was getting a letter from the district attorney that I could be arrested."

Schwarm called the number on the letter, assuming she was speaking with someone from the DA's Office. She promised to pay as soon as she could. But with her husband out of work and eight mouths to feed, she just kept falling further behind. A year later, she still hadn't paid her debts. The letters and phone calls kept coming.

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."

Meanwhile, 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.

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 exact 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.


Mike Wilhelms is president and CEO of Corrective Solutions. His LinkedIn profile boasts a photo of a fresh-faced surfer boy in charge of over 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 slide show gently fades in and out with statements about "holding offenders accountable for their actions." An interactive map shows its 140 contracts with DAs 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."

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Denise Grollmus
Contact: Denise Grollmus