CFS Co-founder Target of $2.3 million Collection Effort

The co-founder of defunct debt purchaser and collector Commercial Financial Services, Inc. (CFS) finds himself in the crosshairs of a collection agency looking to recover some $2.3 million in incomes taxes and penalties and interest dating back to 1997, according to a story last week in the Tulsa World newspaper.

Jay Jones, who founded CFS with Bill Bartmann in 1986, was the target of a petition last week filed by collection agency GC Services which is attempting to force Jones to appear at an asset hearing and face possible wage garnishment action to settle the debt. GC Services was contracted by the Oklahoma Tax Commission to collect the debt.

Jones pleaded guilty in 2002 to conspiracy to commit mail fraud, wire fraud, bank fraud and money laundering in connection with CFS’ bankruptcy and was sentenced to five years in prison.

“The government has already taken all of my assets,” Jones told insideARM. “Maybe they’ll be able to get a couple hundred dollars a month from me in garnishment.” Jones went on to explain that he currently lives with his daughter – his wife died while he was in prison – and he makes a little money doing odd jobs for a law firm in Tulsa, Okla.

The debt stems from a 1997 tax bill from the state of Oklahoma, the last year before CFS was embroiled in a bond rating scandal that ultimately led to its demise. The tax comes from Jones’ exposure as one of two shareholders of CFS. The Tax Commission claims it is owed $941,144 in taxes and another $1.4 million in penalties, interest, and fees. The Commission claims it originally tried to collect the debt in 2001.

“All of that interest and penalty accrued while I was in prison,” said Jones.

As a part of his plea, Jones testified against his partner, Bartmann.

Bartmann was acquitted of 57 counts of conspiracy, fraud and money laundering in December 2003 (“Bill Bartmann Acquitted on All Counts,” Dec. 4, 2003).

Jones, Bartmann, and other CFS executives were accused by the government of engaging in fraud in the sale of corporate bonds backed by assets of distressed debt it had purchased in the early-to-mid 1990s. The firm’s leaders were accused of funneling money to hide the company’s poor performance from bond investors.

When bond raters received an anonymous tip in 1998 accusing the company of cooking the books, CFS bonds were either severely downgraded or unrated altogether, leading to the company’s bankruptcy. When CFS went bankrupt, bond investors lost around $1.6 billion. At its height, CFS employed some 3,900 people in Oklahoma City and Tulsa, Okla.