At Joseph A. Ciffa’s offices in Niagara Falls and Kenmore, debt collectors intimidated their victims with illegal threats of arrests and lawsuits.
According to federal prosecutors, an elderly cancer patient in Texas was so rattled by the threats that she borrowed $500 from her sister to help pay off a debt of $1,285.
That payment helped keep the profits rolling in for Ciffa and his company.
“We did 370 grand the month of March,” Ciffa told one of his supervisors in a phone call that Ciffa recorded and federal agents later obtained. “We’re on a $300,000-a-month pace right now.”
Welcome to the world of illegal debt collections.
Here are snapshots of some cases against debt collectors that the State Attorney General’s Office, Federal Trade Commission and other law enforcement agencies have pursued in the past decade.
And welcome to Western New York, a region that has become a veritable Silicon Valley for a dirty industry that turned some locals into millionaires, and where prosecutors say organized crime has gained a foothold in the industry.
The National Consumer Law Center calls Buffalo “an epicenter” of fraudulent debt collection activity. Authorities say thousands of people from all over America are scammed each year by collectors working in Erie or Niagara counties.
There are 156 debt collection companies – some of them legitimate, some not – in those two counties, employing more than 3,400 people, according to the state Labor Department.
In recent years, authorities have either fined, seized or issued judgments totaling $120.4 million against debt collectors in Western New York. They have prosecuted at least 39 local debt collectors since 2010.
But that hasn’t stopped the abuses.
Unlawful debt collectors take advantage of struggling, unsophisticated victims who are terrified by fake threats of police arrests, lawsuits and other drastic actions, authorities say. Some of the victims are harassed again and again for debts they never owed or paid off years ago.
Joseph Bella, a Buffalo man who federal law enforcement authorities said defrauded customers while selling Covid-19 test kits during the pandemic. Authorities raided his business in April, seized $114,063 from its bank account, and charged Bella with possessing drugs, a gun and ammunition.
Links to organized crime
At least two of the defendants targeted in a wide-ranging probe into alleged organized crime in the Buffalo area have run debt collection companies.
Assistant U.S. Attorney Joseph M. Tripi outlined ties between mobsters and debt collection during a court hearing last year for Joseph C. Bella III, a former debt collector with alleged mob associates who was charged with drug trafficking and weapons-related offenses.
Tripi told a judge that investigators believe people in the “upper tier” of Buffalo’s Mafia family are involved with debt collection businesses.
Read the full story from News Staff Reporters Lou Michel and Dan Herbeck
Quoting a federal agent’s grand jury testimony, Tripi said, “I would say, associates or members of the Italian Mafia will typically appoint someone to operate these organizations on their behalf, but they are still manipulating, making decisions and they are drawing money from illicit – from that activity.”
The prosecutor explained that the ongoing federal probe into organized crime found that debt collection was one of the mob’s methods of making money.
Tripi said Bella was an associate of Buffalo Mafia members and, in particular, cited his connection to Frank J. “Butch” BiFulco, who died in October and was known to many as “Butchie BiFocals.”
The state attorney general in 2013 entered into an agreement with Bella requiring him to pay $165,000 in restitution and penalties for illegal debt collection practices. Two years later, the state and Federal Trade Commission fined him $112,000 after he was accused of using lies and threats to unlawfully collect $8.7 million. Bella was also permanently banned from the debt collection industry.
Attorney Thomas J. Eoannou, who represents Bella on the federal drug and weapons charges, has said his client is not involved in organized crime. Eoannou said he also disagrees with Tripi’s claim that organized crime is involved with some of the region’s debt collection firms.
Tripi and U.S. Attorney James P. Kennedy declined to comment on the probe into organized crime and the Buffalo Mafia’s suspected links to debt collectors.
The New York State Attorney General’s Office, which has pursued numerous civil actions against debt collectors in Buffalo, said it too has suspected links between some collection outfits and organized crime.
“We have seen debt collection used to launder money for drug and gun-running operations and other businesses with suspected links to organized crime,” a staff member from the Attorney General’s Office told The Buffalo News.
Hub for illegal debt collecting
How did Buffalo become such fertile ground for the debt collection industry?
Debt collection provided thousands of job opportunities in a region where unemployment is traditionally high.
“Debt collectors continue to open in Buffalo because of the cheap office space and no statewide licensing requirement for debt collectors in New York,” according to the staffer in the Attorney General’s Office, who spoke on the condition of anonymity.
James C. Morrissey is a retired assistant attorney general who spent decades suing corrupt debt collectors. He said he believes many unsavory people got into the business because they were impressed by the huge profits made by some legitimate Buffalo debt collection firms in the 1970s, 1980s and 1990s.
Started in Buffalo in the early 1970s, the Great Lakes Collection Bureau grew into one of the nation’s largest collection firms, with nearly 2,000 employees. In 1997, the owners – Joel Castle and the late Joseph Mosey – sold the business for a reported $40 million.
“People became aware of all the money that could be made in a legitimate debt collection business, with a fairly small capital investment,” Morrissey said.
A legitimate debt collection firm gets hired by credit card companies, department stores, health care companies and other businesses to collect debts that are actually owed by consumers, Morrissey explained.
But dishonest people also learned that big money could be made by running illegal debt collection companies, Morrissey said.
“People found out that you can buy ‘old debt’ for a few pennies on the dollar,” Morrissey said.
He said “old debt,” also known in the industry as “bad paper,” is a list of people who are believed to owe money. Some of these debts are legitimate, but are many years old.
Some of these debts are fictitious, and never were owed. Some of the debts have been discharged in bankruptcy cases. Others were paid off years ago.
“Some companies buy old debt, collect what they can on it, and then – instead of canceling the debt, which they are supposed to do – they just sell the list of debtors to another company,” Morrissey said. “Some of this old debt gets sold and collected on two or three times.”
“Extorting New Yorkers with lies and deceit to steal their money is inexcusable,” State Attorney General Letitia James told The Buffalo News. “Over the years, Buffalo has unfortunately become a hub for this method of debt collection.”
Kennedy has likened the proliferation of unlawful debt collection companies to the illegal telemarketing operations that once boomed in Buffalo.
In the 1990s, Buffalo was a focal point of a national effort by the Justice Department to rein in illegal telemarketers, sometimes known as telesharks. There were hundreds of arrests and convictions across the country, including dozens in Buffalo.
Ronald C. Serio is another debt collector whose name has been associated with the feds’ investigation into organized crime.
Ronald C. Serio is awaiting sentencing on felony drug and weapons charges stemming from a 2017 raid at his former Lebrun Road mansion in Amherst. The case against Serio is part of a federal investigation into organized crime in Buffalo. Serio pleaded guilty to the charges.
Serio has pleaded guilty to felony drug and weapons charges stemming from a 2017 raid at his former Lebrun Road mansion in Amherst, and is awaiting sentencing.
Serio and a business partner have run into additional legal problems involving debt collection activities in New Mexico. The New Mexico Attorney General’s Office in September alleged in a civil case that Central Mediation Services and its operators, Serio and Jason “Jay” Camacho of Buffalo, attempted to collect on debts that did not exist, lacked authority to collect debts in that state, and were abusing and threatening consumers. The threats allegedly included claims they would be arrested on fraud charges, see their vehicle registrations canceled and have their wages garnished.
Matt Baca, a spokesman for the New Mexico attorney general, said the office has been receiving complaints against Serio and Camacho’s company for at least three years. Baca said it is his understanding that Central Mediation Services is no longer operating.
Attorney Christopher J. Tebo, who represents Serio in the debt collection case, declined to comment.
Civil penalties vs. criminal charges
Local debt collectors who cross the line by threatening and harassing consumers rarely find themselves facing the possibility of time behind bars. In most cases, experts say, they face civil lawsuits or forfeiture actions.
The civil penalties imposed appear substantial. But like many debtors, debt collection kingpins have been elusive when it comes to paying what they owe.
According to court records, there have been at least $120.4 million in fines, penalties, cash seizures and judgments against local debt collectors over the past several years, but only a fraction of that amount has been paid.
In 2019, federal and state prosecutors obtained a $60 million civil judgment against Clarence resident Douglas MacKinnon and his companies, Northern Resolution Group and Enhanced Acquisitions.
To date, MacKinnon has not paid a penny.
The U.S. Consumer Financial Protection Bureau and the state attorney general recently filed a lawsuit to seize the MacKinnon family’s $1.6 million home.
MacKinnon transferred his interest in the home to his wife and daughter prior to the judgment after learning his debt collection businesses were under investigation, according to the lawsuit.
“Our position is that he was free to make that transfer,” said MacKinnon’s attorney, Joseph G. Makowski.
Collecting on judgments against debt collectors and restitution to consumers is “extremely difficult,” the Attorney General’s Office said, because “many of these bad actors have already spent the money by the time we obtain a judgment.”
At least 39 debt collectors have been criminally prosecuted in Western New York since 2010, The News determined by searching court records and news reports.
Boyland and 11 co-defendants were prosecuted for grand larceny and other crimes in 2010 by then-Attorney General Andrew M. Cuomo.
Boyland, 44, used guns to threaten some debtors, Cuomo said, and some of Boyland’s employees dressed in fake police uniforms when they made collections. Boyland, who was sentenced to 15 years in state prison, remains incarcerated.
Law enforcement agents from the Erie County Sheriff’s Office and the state Attorney General’s Office arrest Tobias Boyland at his Harvard Place residence in Buffalo on June 23, 2009.
Thomas, 38, was a successful professional poker player who also ran Four Star Resolution, a debt collection firm. In 2017, he was sentenced to eight years and four months in federal prison after pleading guilty to fraud crimes. A judge ordered Thomas to pay $31 million in restitution to victims. Thomas remains in a federal prison in Maryland.
Thirteen people who worked for Thomas were also prosecuted in a case that was handled by federal prosecutors in New York City.
“Travell Thomas was the mastermind behind the largest criminal debt collection scheme ever charged,” a prosecutor said after the sentencing.
A millionaire on Medicaid
The criminal charges against Grand Island businessman Joseph Ciffa went beyond illegal debt collecting.
Debt collector Joseph Ciffa of Grand Island after he won a poker tournament in 2014. Ciffa has pleaded guilty to felony conspiracy to commit wire fraud related to his unlawful debt collection practices. He is awaiting sentencing in U.S. District Court in Buffalo.
Ciffa received Medicaid health insurance – from a program reserved for poor people – for himself, his wife and two children in 2015 while he was making more than $1 million from debt collecting, according to court documents.
Ciffa reported he and his wife’s weekly combined income was $610, which qualified them for Medicaid. But when agents from Homeland Security Investigations obtained a search warrant and seized his computers, they found financial records for 2015 indicating his income was $1,284,951.
In 2018, Ciffa pleaded guilty to felony charges of wire fraud conspiracy and filing a false tax return. The wire fraud includes illegal debt collecting that generated a total of $3 million in revenue over 2015 and 2016, and the illegal $13,011 in Medicaid benefits.
Ciffa, 53, declined to comment on his debt collection crimes, telling a News reporter he doesn’t want to discuss that aspect of his life.
One of his attorneys, Daniel J. Dubois, said Ciffa did not get into debt collections with the intention of defrauding people.
“He saw other people who were making money at it and decided to give it a try,” Dubois said. “It would be an understatement to say this was one of the biggest mistakes of his life.”
Dubois said he did not know why federal prosecutors charged Ciffa criminally when many other debt collectors who made millions were only subjected to civil fines and forfeitures.
U.S. Homeland Security Investigations agents seized a $32,995 pontoon boat from debt collector Joseph Ciffa that Ciffa purchased in his son’s name, according to court records. Ciffa has pleaded guilty to wire fraud conspiracy related to debt collecting and filing a false tax return. Agents also seized $46,505 from Ciffa’s Grand Island home and $193,837 from Ciffa’s bank and MoneyGram accounts.
Homeland Security agent Jeffrey Lyons obtained search warrants that resulted in the confiscation of $46,505 from Ciffa’s Grand Island home and a $32,995 pontoon boat he purchased in his son’s name. The government also seized $193,837 from Ciffa’s bank and MoneyGram accounts.
Three years after he pleaded guilty, Ciffa remains free, awaiting his sentencing, which has been postponed 15 times.
Five of Ciffa’s employees were also charged with felonies related to his debt collections.
Debbie Searight, the manager of one of his offices, was sentenced to 24 months in prison and ordered to pay $847,422 in restitution to 1,046 victims after she pleaded guilty to conspiracy to commit wire fraud.
Searight’s attorney, Eoannou, said at her sentencing that Searight, who dropped out of high school, had worked for another debt collector, Gregory MacKinnon, before authorities shut down MacKinnon’s business for unlawful collecting. Searight was desperate to provide for her three young children when Ciffa offered to pay her $50,000 a year to run his office, he said.
“And what’s significant, too, is not in her wildest dreams did she think that she would end up in federal court, God forbid, talking about federal sentencing guidelines, because Ciffa always told her he’d been through this and it would only be a fine,” Eoannou told a judge. “In the collection business, your honor, the New York State attorney general will bring a civil action, and they will shut it down and restrain you from going into it in the future. And that had been Debbie’s experience with MacKinnon. And Ciffa had always said, don’t worry about it. If anything happens, we’re going to get shut down and I’ll pay the fine.”