Judge Enters $120 Million Suspended Judgment against Morgan Drexen CEO (Oct. 28, 2015)
After much legal wrangling that saw Morgan Drexen, the now bankrupt debt settlement services provider, and the CFPB filing lawsuits against each other, a judge last week handed down a suspended judgment against Walter Ledda, the company’s CEO. U.S. District Judge Josephine Staton entered a suspended judgment of $20 million in civil penalties against Ledda, and more than $99 million in monetary relief. The CFPB had accused the Costa Mesa, Calif.-based company of deceiving consumers into believing they would be debt-free after using its debt-relief services.
The CFPB ordered Ledda to pay $582,952 to the CFPB within 10 days and turn over noncash assets to the bankruptcy estate of Morgan Drexen. But if he is found to have misrepresented his financial condition to the CFPB or if testimony he provided to the court is found to contain any material misrepresentation or omission, the CFPB can petition the court to terminate the suspension of the $120 million judgment.
Morgan Drexen, along with fellow plaintiff Connecticut-based attorney Kimberly Pisinski, filed a lawsuit against the CFPB in July 2013 seeking orders declaring the CFPB’s structure and the provisions of the Dodd-Frank Act that created the bureau unconstitutional. A month later, the CFPB countered with its own lawsuit alleging Morgan Drexen illegally deceived consumers into believing they would be debt-free after using the company’s debt-relief services. The lawsuit also alleged that the company violated federal law by charging upfront fees to help consumers resolve their outstanding debts instead of waiting until the debt had been settled or its terms had been altered. The U.S. Court of Appeals for the District of Columbia Circuit rejected Morgan Drexen’s lawsuit earlier this year.
“On June 19, 2015, Morgan Drexen shut down its business after a federal court ordered the company to stop collecting money for debt settlement work,” according to Morgan Drexen’s Website. “The court ruled that Morgan Drexen broke the law. The company is now in bankruptcy.” The Website also includes information for customers now that the company is not doing any more debt settlement work.
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