Feds Nab Three More in $10 million Collection Agency Fraud

The United States Attorney for the District of Connecticut Wednesday announced that three more executives of Oxford Collection Agency, Inc., have pleaded guilty in federal court to charges stemming from a $10 million fraud scheme.

In a joint statement from the Justice Department and FBI, officials said that Randall Silver of New Hyde Park, N.Y., pleaded guilty on December 13 to one count of conspiracy to commit wire fraud, bank fraud and money laundering, and one count of wire fraud.  Silver was a VP of Finance and CFO at Oxford. Charles Harris of Babylon, N.Y., and Carlos Novelli, of Vero Beach, Fla., pleaded guilty on December 17 and December 18, respectively, to one count of conspiracy to commit wire fraud and bank bribery.  Harris was an EVP at Oxford and Novelli was the company’s Chief Operations Officer.

The pleas come roughly a week after another of Oxford’s principles, Patrick Pinto, was arrested on charges stemming from the fraud case. Patrick Pinto is the son of Richard Pinto and the brother of Peter Pinto.

On May 11, 2012, Richard Pinto, Oxford’s Chairman, and his son, Peter Pinto, Oxford’s President and CEO, each pleaded guilty to one count of conspiracy to commit wire fraud, bank fraud, and money laundering and one count of wire fraud stemming from a $10 million fraud scheme they executed while executives at Oxford Collection Agency.  They await sentencing.

According to court documents and statements made in court, various businesses and other entities contracted with Oxford to collect debts owed them by consumers. Oxford’s clients included, among others, an educational institution, a laboratory, a computer company and various banks. Oxford collected debts from consumers under the pretense that it would report all such collections to its clients and remit the appropriate amount to the client. However, Silver, Harris, Novelli and other Oxford executives routinely caused Oxford to collect debts that were never remitted to its clients.  The co-conspirators referred to these unremitted collections as a client’s “backlog.” To hide the backlog, co-conspirators would make periodic fraudulent collection reports to certain clients that under-reported the amount of funds collected.

Certain co-conspirators also transferred money from one client trust account to another client account, from Oxford’s operating account to a client account, or from a client account to Oxford’s operating account to cover various shortfalls and backlogs or to improperly use collections to directly fund Oxford’s operations.

Starting in April 2007, Oxford secured a line of credit from Connecticut-based Webster Bank, a bank that received funds through the Troubled Asset Relief Program (TARP), without informing Webster Bank about its significant client backlogs or outstanding payroll taxes.  Oxford executives, including Richard Pinto and Peter Pinto sent falsified financial statements to Webster Bank.  With Silver’s assistance in the fraud scheme, the Webster Bank credit line was increased to $6 million.  Richard Pinto, Peter Pinto, Silver and others also laundered funds from the credit line to promote the ongoing fraud scheme against their clients.  During this same period, the Pintos, Silver and others also solicited millions of dollars in investments from various investors, without ever disclosing to their investors the existence of their backlogs.  Some the investor funds were transferred into Richard Pinto’s personal bank account without investor knowledge.

Victims lost more than $10 million as a result of this scheme.

As part of the scheme, certain co-conspirators also paid kickbacks to employees of one or more financial institutions in order to compensate them for providing Oxford with the bank’s debt collection business.

In pleading guilty to a wire fraud charge unrelated to the conspiracy offenses, Silver admitted that he embezzled $193,963 from Oxford by transferring funds from Oxford’s “Client Payables” account at Webster Bank to an account at a New York bank that he controlled.

The case was investigated by the Internal Revenue Service (IRS), the Federal Bureau of Investigation (FBI), the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Connecticut Securities, Commodities, and Investor Fraud Task Force.