Once called a “kingpin” of Buffalo's debt collectors, Douglas MacKinnon has not paid anything toward the $60 million settlement he entered into with federal and state officials in 2019, according to federal court records.
Now government lawyers want to seize the six-bedroom, seven-bathroom home in Clarence where they say he lives. They see the $1.6 million home on the 3.6-acre lot as a way to recover part of what he agreed to pay to resolve allegations of illegal debt-collection tactics against him and two of his businesses.
But taking the home may not prove so simple.
In April 2015, MacKinnon transferred ownership of the home to his wife and daughter for $1 after learning of the investigation into his companies by the Consumer Financial Protection Bureau, according to a federal lawsuit filed last week by the bureau and the state Attorney General's Office. Three weeks after the transfer, a $900,000 mortgage was put on the property by the wife through her husband's brother. The transactions were made with the intent to make it appear the home was encumbered and not a potential source of recovery for the government, according to the lawsuit.
People are also reading…
The state and federal agencies want the court to void the transfer of the house at 6575 Meghan Rose Way.
The state and federal governments in 2016 sued MacKinnon and his companies Northern Resolution Group and Enhanced Acquisitions, accusing them of harassing, threatening and deceiving millions of consumers across the nation into paying inflated debts or amounts they did not owe. The collection tactics included using “spoofed” phone numbers to pretend to be calling from a court or government agency, and the collectors also sent threatening messages to consumers to frighten them into paying, according to the lawsuit. MacKinnon and his companies were permanently banned from the debt collection industry.
Of the $60 million judgment against MacKinnon, $40 million was to be set aside to pay restitution to consumers and $20 million was a civil penalty. The $40 million was the estimated net proceeds he brought in from his operations, officials said at the time of the settlement.
“Douglas MacKinnon operated a brazen scheme, fraudulently inflating consumers’ debts, and he was equally brazen in trying to fraudulently conceal his own assets,” said acting Director Dave Uejio of the Consumer Financial Protection Bureau, a federal agency, in a statement last week.
State Attorney General Letitia James, who referred to MacKinnon as a "kingpin" of Buffalo debt collectors when she announced the settlement in 2019, said "trying to illegally transfer assets demonstrates a complete disregard for the authority of the government to bring violators of the law to justice."
Issue of timing
Attorney Joseph G. Makowski represents MacKinnon but has not talked to him since the government lawyers filed the court document seeking to seize the home. The government's case raises timing issues among other legal questions, Makowski said.
"The Consumer Financial Protection Bureau and the attorney general are going to have to be able to demonstrate that he actually knew of these investigations – not just that they were commenced – but that he himself knew," Makowski said. "I don’t know one way or the other if that’s the case."
What's more, the transfer happened a year before the government sued MacKinnon and more than three years before his settlement with them.
"It was a matter of public record," Makowski said of the transfer. If they considered the transfer fraudulent, "why was no effort made in 2015, 2016, 2017, 2018, 2019 and 2020 by the Consumer Financial Protection Bureau or the attorney general? There are legal issues as to whether commencement of a civil demand or civil investigation is enough when one is trying to claim a fraudulent conveyance."
Makowski called it routine for spouses to transfer property to other spouses, and also to add another family member to the deed.
"This could be part of estate planning," he said. "This could be part of financial planning."
Trying to collect
Collecting on a settlement, of course, is harder than announcing one.
"I think it’s pretty interesting actually that the attorney general is going after his personal assets – a personal asset that he clearly moved out of his own name into a family member’s name," said Ira Rheingold, executive director of the National Association of Consumer Advocates. "It’s a challenge. But I'm glad that the attorney general is aggressively attempting to seize what they can."
Often after announcing big settlements, "the attorneys general try to get the money, federal regulators try to get the money, and then it's sort of a game of cat and mouse," Rheingold said. "And depending who the (debt collector) is and how sophisticated they are, and how well they were able to hide the money, sometimes it's very difficult to collect."
"The first part of the case is holding them accountable, stopping them from doing business, and then trying to get money out of them," he said. "It's not an easy part for the attorney general to do."
The standard process with those who enter into settlements is not to take an account of their assets until a judgment goes unpaid, said Sofia Quintanar, the attorney general's deputy press secretary.
"This was first an investigation that turned into a lawsuit, and then it settled out of court," Quintanar said. "We basically got what we wanted out of the lawsuit had we gone to trial. There is a judgment against MacKinnon, and he is barred from the debt collection industry in New York State.
"And so what's happening now is we're trying to collect on this," she said. "We're trying to make this guy make good on what he promised. And it takes time. It doesn't happen quickly. When someone settles, you give them some time to make good on their promise. We've given MacKinnon enough time."
Seeking 'coercive incarceration'
It's not only money MacKinnon has withheld from the government. He hasn't complied with a court order to answer the government's questions and discovery requests, according to a Feb. 2 court filing.
Information subpoenas to his family members and business associates sent last May also went unanswered, according to the filing.
Most of the information sought by the government relates to the transfer of assets from MacKinnon and his businesses to his family members and their companies, according to the filing.
The government agencies asked the court to fine the family members and business associates $1,000 for every day they refuse to comply with the information subpoenas.
But if MacKinnon doesn't turn over the information, he should face "coercive incarceration," according to the filing.
A monetary contempt penalty would be ineffective for someone who has a $60 million judgment against him, according to the filing.
In their filing, the government lawyers said they "believe that he has transferred and concealed his assets and stonewalled discovery efforts to avoid collection efforts."
Adding a few thousand dollars in civil penalties is unlikely to compel MacKinnon to comply, they said in the filing.
Makowski has filed court papers opposing the subpoenas.
As for MacKinnon making good on the $60 million judgment, "I’m really not in a position to comment on his intentions one way or another, other than to say he has the right to oppose enforcement proceedings," Makowski said.