A Costa Mesa-based debt settlement company that illegally charged customers upfront fees was ordered to pay roughly $173 million in restitution and penalties by a federal judge.
Morgan Drexen charged fees to customers who were made to sign contracts for both debt relief and bankruptcy services, when many only sought debt relief services, according to the Consumer Financial Protection Bureau.
The company was founded in 2007 by Walter Ledda and was subsequently sued in 2013 by the CFPB, which alleged the company had misrepresented its services and charged illegal fees in violation of the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In June of last year a permanent injunction was issued against Morgan Drexen, prohibiting the company from collecting any more money from its customers and charging fees. The next day the company filed for bankruptcy.
After the court’s order, two attorneys took over the operations of Morgan Drexen, continuing the company’s illegal practices, according to CFPB. The court found the lawyers violated the injunction and held the attorneys and their law firms in contempt for violating the court’s earlier order.
In Thursday’s judgment against the company and Ledda, a federal judge ordered the company pay about $133 million in restitution and $40 million in civil penalties, although because Morgan Drexen is in bankruptcy any payment will have to go through the bankruptcy process.
Contact the writer: lwilliams@ocregister.com, 714-796-2286
