Collecting debt is a dirty business which is why The Federal Government turns it over to the private sector. Meet one of the biggest players in the industry, law firm Linebarger Goggan Blair & Sampson. It has worked for small-town school districts, the city of New York and at one point, the largest tax collector in the country: the Internal Revenue Service. As CNN reports, based in Texas, Linebarger works for 2,300 clients nationwide and collects $1 billion for its clients each year. But the collection system is far from perfect, leading to some nightmare scenarios. Despite decades of scandals over the way the firm gets business (and even jail time for one of its top executives) Linebarger still lands lucrative government contracts...
As CNN Money reports, Government agencies across the country are hiring private debt collectors to go after millions of Americans over unpaid taxes, ancient parking tickets and even $1 tolls...
It’s a good deal for cash-strapped states, cities and other local governments. By outsourcing this dirty work and letting private companies charge debtors sky-high fees, government agencies can get these collection services free of charge.
And it's a great deal for debt collectors. In an industry already known for bad behavior, debt collectors that work for government agencies usually don’t have to work within the confines of consumer protection laws – opening the door for higher fees and even more aggressive tactics.
Their government bosses can give them the power to threaten debtors with the suspension of their driver’s license, garnishment of their wages, foreclosure and arrest to get them to pay up.
State lawmakers have even passed laws allowing private collectors to charge debtors steep fees. In Florida, for example, fees can be as high as 40% on top of the total bill, which includes not only what they already owe, but interest and government penalties as well. In Texas, they can reach 30%. And in cases of unpaid toll violations, flat fees can effectively amount to more than 100%. As a result, small unpaid tolls can easily balloon into hundreds of dollars, once government penalties and collection fees are tacked on.
"They keep figuring out ways to stack these fees up,” said Tai Vokins, a Kansas-based attorney and former assistant attorney general. “They’re preying on the absolute poorest people."
And this is all legal.
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One of the biggest players in this industry is law firm Linebarger Goggan Blair & Sampson. Based in Texas, Linebarger works for 2,300 clients nationwide and collects $1 billion for its clients each year.
Despite decades of scandals and bad press surrounding the firm and its partners, Linebarger continues to wield widespread political influence and rake in new million-dollar contracts.
The scandals date back to its early days, when firm partners became infamous for using political connections to win contracts and change laws. Past controversies ranged from allegations of illegal loans to public officials to inappropriately influencing lawmakers, including a controversial Mexican getaway with a Texas Speaker of the House that reportedly involved a topless dancer.
Some critics thought the firm could even face extinction in 2002 after a major partner, Juan Pena, was indicted on charges that he bribed two city councilmen with more than $10,000.
Pena eventually pleaded guilty to bribery charges, lost his law license and was sentenced to 30 months behind bars. He did not respond to requests for comment.
Yet the scandals have continued. Take Chicago, for example, where Linebarger's contract was terminated in 2008 because the firm had paid for the trip of a top city official. The bad blood didn’t last long though, with the city hiring it again in the same year.
"The incident ... was embarrassing to say the least, but we worked very hard to earn another chance to represent the City," said Vallandingham.
Meanwhile in Memphis, attorneys in a class-action lawsuit challenging the firm’s fees questioned Linebarger’s payment of millions of dollars to a local attorney who helped it win the city contract to collect taxes. After the lawsuit was filed, Memphis ended its relationship with the firm.
And in Texas, a partner was indicted in 2012 for covering up donations to a local elected official and his case remains ongoing. More recently, two Linebarger consultants have been at the center of alleged bribery schemes -- one of which is heading to trial and another that is still under investigation.
Linebarger says the firm itself has never been charged with committing a crime and the actions of a few individuals aren't representative of its overall business practices. But one former Linebarger partner, who asked to remain anonymous, said some of the firm's tactics for getting contracts made him uncomfortable and didn't always "pass the smell test."
So how does Linebarger keep getting new business?
The firm touts its longstanding work in the field saying: "we are hired and rehired because we are good at what we do."
But others say it's all about the money.
Linebarger spends millions on campaigns and lobbying efforts across the country. And it pays big bucks to influential current Texas public officials by putting them on its payroll -- a surprising but legal practice.
"They’ve discovered a niche that they can monopolize through political manipulation," said Byron Schlomach, a former fellow at the Texas Public Policy Foundation. "And they’ve become very good at it."
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Linebarger's reach is growing...
Linebarger says it undertakes all of its political activities with "strict adherence to the law." ... "The way you get access is you contribute to political campaigns, you go to fundraisers ... You make friends with these people," he said.
But even if all of the politicians and government agencies end their love affair with Linebarger, there are other private collectors that would be happy to take its place. What is really needed, consumer advocates say, is an end to the special treatment given to government debt collectors.
Until then, millions of Americans are left facing ominous threats and steep fees each year.
"They're bottom feeders; that's what they are," said Tom, the Oklahoma tax attorney. "The problem is they're bottom feeders with the power of the government behind them."
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