One way to rein in some of the abuses — see this CNN story — would be to curb arbitrary impositions of “interest” at far higher than actual market interest rates. Very similarly, requiring the use of realistic rather than inflated interest rates would be one way to restrain tax-farming “probation” firms and other abusive privatization of law enforcement, much in the news lately, and also excessive damage awards in civil litigation (where “prejudgment” and “postjudgment” interest is often set at notional and absurdly generous levels.)
Posts Tagged ‘law enforcement for profit’
Tales of contingent-fee tax collection
A St. Louis lawyer has won big in contingency-fee tax collection by teaming up with class action firm Korein Tillery to challenge cellphone companies’ claims not to be subject to municipal taxes on landline telephone providers. At the same time he’s been town attorney for the suburban community of University City, which now finds itself in the position (with many other Missouri municipalities) of paying its share of $65 million in proposed fees. [Paul Hampel and Margaret Gillerman, “U.City lawyer wins big in class-action case”, St. Louis Post-Dispatch, Jul. 23]
Child support collection, for a percentage
Once again, the combination of contingency fees and law enforcement spells trouble: an article by Tresa Baldas in the National Law Journal reports that controversy is mounting over the activities of private firms that go after noncustodial parents’ child support obligations in exchange for a percentage share of the bounty (“Suits collecting around child support collectors”, Sept. 17, no free link). “Critics of the industry — many of them lawyers — claim that private collectors of child support are engaging in predatory practices, such as charging excessive contingency fees as high as 50%, and using aggressive collection tactics that run afoul of federal laws.” The private agencies escape the scrutiny of federal debt collection laws and have been operating effectively without regulation, but state lawmakers are now moving to fill the gap, with 13 states having passed laws intended to protect the services’ clients (if not always their adversaries) by capping fees, prohibiting the agencies from collaring state-directed payments, and giving clients more leeway to withdraw from contracts.
Contingent-fee tax collection in Mississippi, cont’d
Mississippi state auditor Phil Bryant “has issued a demand letter for recovery of the $14 million in legal fees paid by MCI to two law firms in the wake of the state’s $110 million settlement with MCI in a 2005 tax fraud case.” The Langston and Lundy & Davis law firms “were hired as outside counsel to represent the state by current Attorney General [Jim] Hood. Langston has been identified as one of Hood’s largest campaign contributors, a reality that Langston doesn’t deny.” The two firms were then cut into the $14 million as part of the negotiated settlement, but Bryant says the money belonged to the public and should have gone through the appropriations process. The twist: to enforce the state’s rights in the matter, Bryant will apparently have to call on legal support from the office of AG Hood himself, and you have to wonder how cooperative he’ll be. (Sid Salter, “Langston: State asks recovery of legal fees”, Jackson Clarion-Ledger, Sept. 23; “State parties bring smack down”, Biloxi Sun-Herald, Sept. 23). More on the furor: Point of Law, May 13 and May 23, 2005.
Small claims collections
Boston Globe has a big investigative package on questionable methods used by debt collectors pursuing consumers in small claims court. Among recurring problems: default judgments against debtors who never were alerted to proceedings because notice was mailed to the wrong address, or who were told by creditors that they “might not” have to attend the court date because they had volunteered a payment schedule. Also in the spotlight: a now-disbarred lawyer named Daniel Goldstone who buys up low-quality debt to collect by way of hardball methods, and who appears to be no gem; his conduct provoked liberal U.S. District Judge Nancy Gertner into applying Rule 11 sanctions, something she told the Globe she had never felt compelled to do in any other case in her twelve years on the bench (“Debtors’ Hell”, series home; Francie Latour, “For bare-knuckled collector, some harsh judicial reviews”, Jul. 29).