A Costa Mesa-based debt settlement company that illegally charged clients an upfront fee was ordered to pay around $ 173 million in restitution and penalties by a federal judge.
Morgan Drexen charged fees to clients who were forced to sign contracts for debt relief and bankruptcy services, when many were only looking for debt relief services, according to the Consumer Financial Protection Bureau.
The company was founded in 2007 by Walter Ledda and was then sued in 2013 by the CFPB, which alleged that the company misrepresented its services and charged illegal fees in violation of the Telemarketing Selling Rule and the Dodd Law. -Frank on Wall Street Reform and Consumer Protection. .
In June last year, a permanent injunction was issued against Morgan Drexen, prohibiting the company from raising more money from its customers and charging fees. The next day, the company filed for bankruptcy.
After the court order, two lawyers took over Morgan Drexen’s operations, continuing the company’s illegal practices, according to CFPB. The court found that the lawyers had violated the injunction and found the lawyers and their law firms in contempt for violating the previous court order.
In Thursday’s judgment against the company and Ledda, a federal judge ordered the company to pay about $ 133 million in restitution and $ 40 million in civil penalties, although Morgan Drexen is bankrupt, any payment will have to go through the bankruptcy process.
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