Consumer Alert: Suspect uses fake debt collection service to steal millions

It sounded like a legitimate offer, debt collection services offered for a reasonable fee. But it was a scheme that made one man rich, while driving hundreds of others into financial ruin.

"When you're my age, you think you are reasonably street savvy, the answer to that is, no I wasn't," says fraud victim Colby Stafford.

Stafford learned a hard lesson about trust, when his business lost $10,000 in a telemarketing scam.

"At that point in time I was growing so fast, which is a good thing, but you're spending all your cash," says Stafford.

Stafford took out a $50,000 loan to have more money readily available. But that loan left him vulnerable to telemarketers calling with a pitch.

"The telemarketers cold called prospective clients and promised for a fee they would collect their business debts," explains Camille Hammonds, a U.S. Postal Inspector.

The owner of the debt collection agency was neil Madison, who used some strong-arm tactics.

"He threatened to take them into involuntary bankruptcy, to take away their homes their vehicles, and to see that they were criminally charged with fraud," says Hammonds.

When it came to getting the money, Madison was ruthless. Instead of returning it to businesses owners, like promised, he kept it all for himself.

"The funds were used to buy a yacht, numerous luxury vehicles, a house in Laguna Beach CA, occasional prostitutes for top employees," explains Hammonds.

As part of the scheme, Madison created promotional flyers, including something called a "tri-con report," which supposedly shows a debtor's ability to pay.

"In reality, the report was totally bogus and made up. The Tri-con report was an inside joke known to the employees as 'we will try to con the client'," says Hammonds.

The con was successful, for a while. Stafford, along with over 600 other victims lost more than $6 million. Those victims included business owners who thought they had paid off their debts to other companies, along with others who thought the money they were owed had been collected.

"There were numerous small Mom and Pop American businesses who were forced out of business," says Hammond.

Madison was eventually caught. He was sentenced to eight years in prison.

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