NYC Tax Advocates

My photo
Specializing in IRS and NYS Tax Representation. Workers Compensation Audits, Payroll, Sales and Income Tax representation for Businesses, Individuals, Restaurants and Construction Companies. Civil and Criminal Workers Comp Audit representation includes: NYSIF Examinations, Premium Disputes, Employee Misclassification, Underreporting, Unreported Income, and Failure to Keep Accurate Payroll Records.

Wednesday, December 19, 2018

Another Amazing Article by Jessica Karmasek: Boston financing company accuses debt elimination companies of swindling merchants

BOSTON (Legal Newsline) - A fast-growing small business financing company in Boston has filed a federal lawsuit against two debt elimination companies, alleging they are scamming merchants and commercial businesses and, in turn, have damaged the plaintiff company.
Forward Financing LLC filed its lawsuit in the U.S. District Court for the District of Massachusetts Nov. 28.
The named defendants are Mark D. Guidubaldi & Associates LLC d/b/a Protection Legal Group LLC and Corporate Bailout LLC. Protection Legal Group is based in Schaumburg, Illinois, while Corporate Bailout is based in Somerville, New Jersey.
“In recent years, fraudulent debt elimination and debt settlement schemes have flourished throughout the United States. Promoters of these schemes generally claim that, for an up-front fee, they will eliminate or substantially reduce a party’s debts or other obligations to creditors,” Forward Financing explained in its 13-page complaint. “However, these schemes have no valid basis in law or in fact, and they fail to provide any of the promised relief to consumers or other entities unwittingly enlisted into such schemes.”
The Treasury Department’s Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have warned consumers about such schemes, and several state attorneys general have brought civil actions.
As Forward Financing points out, the Massachusetts Attorney General’s Office is among those that have published warnings about such debt elimination schemes.
“Defendants PLG and Corporate Bailout have carried out their own version of this scheme, aimed not at consumers but at merchants and other commercial businesses,” the company alleges.
According to Forward Financing’s complaint, the defendants scour public records, among other methods, to identify and solicit merchants and other commercial entities to enroll in their debt restructuring programs, promising to reduce the merchants’ debts or other financial obligations.
“In fact, the Defendants’ ‘programs’ are shams, empty promises with no basis in law or fact designed not to assist these merchants but to exploit the merchants’ vulnerabilities and take their money for the Defendants’ own benefit -- at the expense of the merchants’ creditors and business associates,” Forward Financing alleges.
The plaintiff alleges it has fallen victim to the two companies’ fraudulent scheme.
According to its complaint, Forward Financing is a company that provides working capital to merchant businesses in exchange for an interest in a designated portion of the merchants’ future accounts and receivables.
A transaction arising from a Future Receipts Sales Agreement -- in which a merchant agrees to sell a certain amount of its future receipts to a company, like the plaintiff, for an immediate cash payment -- is not considered a loan.
Because of this, many merchants entering into such an agreement agree not to enter into any agreement with a third party that offers debt restructuring services, debt settlement services, debt management services, debt balance reduction services, creditor reduction services, creditor negotiation services, financial mitigation services or similar services, Forward Financing noted.
In addition, the company said it must be notified when a merchant receives such a solicitation.
Forward Financing alleges that “several” merchants have recently stopped making payments to it from the future receipts pursuant to their contracts at the direction of the defendant companies.
Among those contracts PLG and Corporate Bailout have allegedly interfered with: Port City Logistics Inc., of Oswego, New York; BW CPA Group Inc., of Los Angeles; J&J Pool and Beach Services Inc., of Pembroke Pines, Florida; Troupe Eyecare LLC, of Fort Worth, Texas; Scarpinato’s Cucina & Catering, of Blackwood, New Jersey; and Courageous Journeys Counseling Services PC, of Yuma, Arizona.
“Each of these merchants received cash advances from Plaintiff in amounts ranging from $10,000 to $100,000, and subsequently ceased making payments to Plaintiff within 90 days of receiving the cash advances -- and after being solicited to enroll in a Defendant’s ‘Debt Restructure Program,’” Forward Financing alleges.
The company continued, “The Defendants promised these merchants that they could erase their debts and otherwise alleviate their financial problems by convincing creditors -- or, in the case of Plaintiff, purchasers of receivables -- to accept a significantly reduced amount as payment in full for their clients’ debts or financial obligations, irrespective of the fact that the Defendants’ actions and the merchants they purportedly advise have no legal basis.”
For their services, the defendant companies receive fees of 25 percent or more of the debts or other obligations placed in their programs, plus a monthly retainer fee and administration fees, according to the Forward Financing complaint.
“As a result of the Defendants’ misconduct, the merchants have received nothing of value -- and Plaintiff has been injured,” the company wrote.
Forward Financing is seeking permanent injunctive relief against the defendants; damages against the companies in excess of $75,000; double or treble damages; attorneys’ fees and costs; and interest award.
Boston law firm Combies Hanson and Miami firm Coffey Burlington PL are representing the plaintiff company.
According to the docket, District Judge Leo T. Sorokin has been assigned to the case.
Protection Legal Group, according to its website, was founded “with the singular goal of helping businesses survive complex financial situations intact.”
Corporate Bailout, on its website, states it works “tirelessly to help companies resolve their fiscal obligations without resorting to extreme measures.”
“Instead of leaving the potential business leaders of tomorrow resigned to options like bankruptcy, we give them hope by identifying clearer paths to effective resolution. By dealing with creditors, suppliers and stakeholders on your behalf, we make it easier to lower your monthly payments and come out of debt stronger than you were when you entered it,” its website states.
Neither Protection Legal Group nor Corporate Bailout could be immediately reached for comment on the lawsuit.
From Legal Newsline: Reach Jessica Karmasek by email at

No comments:

Post a Comment

COVID-19 Corporate Debt Restructuring vs. Bankruptcy

Corporate debt restructuring  a/k/a  "business debt restructuring" may be preferable to bankruptcy, as explained in Investopedi...