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Meanwhile, the letters kept coming, threatening her with arrest. She eventually became part of a class-action lawsuit filed by Arons, the civil-rights lawyer, 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 amassed $47 million in fees over the previous four years.
A few months later, it was back in business, re-formed as CorrectiveSolutions and "free and clear" of all liability, according to court records. And today, it's the biggest bad-check collector of them all.
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Mike Wilhelms is president and CEO of CorrectiveSolutions. His LinkedIn profile boasts a photo of a fresh-faced surfer in charge of more than 200 employees. His biggest customers are the DAs of Los Angeles, San Bernardino, Riverside and Orange counties, the latter of which signed a two-year contract in 2011. All are within driving distance of his palm-tree-lined headquarters in San Clemente, where it's clear 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 CorrectiveSolutions website does its best to imply it's an arm of law enforcement. A slideshow 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 CorrectiveSolutions' services. Instead, the company pays them to run 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."
Between 2005 and 2008, Los Angeles County raked in more than $1 million. Miami-Dade made more than $375,000.
When asked whether Miami-Dade's program was little more than a moneymaking scheme, Toussaint balks. "Diverting such cases out of the criminal-justice system gives an individual with no prior record an opportunity to avoid having a criminal record," she says. "It makes the victim receiver of the worthless check whole, and it is done with no cost to the taxpaying citizens of our community. Pretrial diversion programs also allow the courts to focus on other types of criminal activity."
But while prosecutors claim they use collection agencies to decrease caseloads, some companies actually promise to expand them—for the sole purpose of generating more money.
Take BounceBack, the industry's second-largest player. It owns Check Connection and makes no bones that generating fees is mission one.
"Is your program suffering from diminishing checks?" asks the company's website. "Visit Check Connection to learn how you can substantially increase the number of checks in your bad-check program."
The site offers examples from places such as Palm Beach County, Florida, which switched to BounceBack in 2006 after "merchants and other victims were complaining that they felt intimidated by the people administering the program. Check writers complained of strong-arm collection tactics."
Since then, Palm Beach has "passed the $1.5 million mark."
BounceBack won't discuss its business practices, believing it has been unfairly vilified by the media. "The press usually doesn't take anything we say seriously, so we've begun to decline to make comments," says company vice president Gale Krieg.
Still, prosecutors eagerly rise to the industry's defense.
"They're not just some debt-collection company," Louis Alvarez, head of the Los Angeles County DA's check program, says of CorrectiveSolutions. "What they are doing is trying to help us recoup money for victims."
The real victims, at least in Alvarez's mind, aren't math-challenged consumers, but merchants who lose more than $120 billion annually to bad checks, according to the Federal Reserve. He argues that CorrectiveSolutions is simply helping his overburdened and underfunded office get restitution—while "rehabilitating" check writers who are likely guilty of fraud.
"We do get people who made a mistake, he says, "but a good majority of the students who take our class say they just procrastinated and didn't intend to pay until they saw the mail from the DA's office."
Yet once again, internal records dispel any notion of rampant criminality. In 2011, CorrectiveSolutions sent out 33,202 letters on behalf of LA County. Fewer than 1 percent of those cases were actually recommended for prosecution. "They've prosecuted more glue sniffers than bad-check writers in a lot of these counties," Arons says. "This is not an overwhelming problem. The feds keep stats on this, and only one in every 200 checks doesn't clear. And of those, about half clear on redeposit, so we're talking about 0.5 percent of all checks written."