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$170,000 in fines levied in two cases

May 12, 2011

 

$170,000 in fines levied in two cases

For Immediate Release: Thursday, May 12, 2011

Debt Collector, Collection Agency Lose Licenses; Mortgage Originator Barred from Doing Business in Minnesota

(ST. PAUL, MN) A Minnesota debt collector, his company and a St. Cloud-based mortgage originator are on the hook for a combined $170,000 in the wake of two orders issued by the Minnesota Department of Commerce.

The two, separate cases illustrate the work the department does to protect consumers and to regulate the marketplace. The orders were issued after the cases were heard before an Administrative Law Judge at the Office of Administrative Hearings in St. Paul.

In one case, a Lonsdale-based debt collection company and its owner lost their licenses and must each pay the state $50,000 for violating the Fair Debt Collection Practices Act, the Minnesota Department of Commerce ordered last week.

Khemall Jokhoo and his company, Lonsdale-based First Financial Services violated the Fair Debt Collection Practices Act and Minnesota law by threatening to have consumers arrested, making false statements and engaging in harassing, oppressive and abusive conduct, the department said in an order issued on April 28.

"We have shut down First Financial Services for oppressive debt-collection practices, which were reprehensible," said Commerce Commissioner Mike Rothman. "This company caused consumers considerable loss and aggravation. By revoking their licenses and fining them $100,000, we want to be clear that these practices are not tolerated."

Jokhoo and his company convinced consumers and their credit card companies to transfer thousands of dollars to First Financial's account without authorization. The Lonsdale collector and his firm also wrongly held themselves out as federal investigators and lawyers during the collection process.

In its original statement of charges, filed in January 2010, the department accused Jokhoo of lying on numerous debt collector registration applications, claiming he had never been charged, indicted, pleaded to, or convicted of any crime in state or federal court. However, Jokhoo was charged with attempted aggravated robbery and assault in Hennepin County District Court. The department revoked First Financial's debt collection agency license in November 2009. Jokhoo's individual debt collector licenses lapsed in June 2009.

In a separate case, the department barred Marlon Pratt - a man who has already been sentenced to more than 10 years in prison - from the residential mortgage or servicing business in Minnesota and ordered him to pay a $70,000 civil penalty. The fine is in addition to the $500,000 penalty imposed on him when he was sentenced in Minnesota District Court.

Pratt worked as a loan officer for Universal Mortgage Inc. from January 2003 to October 2007. According to the department, Pratt engaged in a pattern of mortgage fraud, misleading lenders as to the true purchase price on at least 17 properties. Pratt also misrepresented borrowers' assets and liabilities. He fraudulently obtained loans that resulted in illegal kickbacks of more than $693,000 to Pratt from the loan proceeds.

In September 2008, Pratt was charged in Hennepin County District Court with 17 counts of felony theft by swindle. In July 2009, a jury found Pratt guilty of the 17 counts of felony theft by swindle and two counts of felony racketeering. He was sentenced to 120 months in prison (plus another 39-month concurrent sentence) and ordered pay a $500,000 fine.

However, according to the department, Pratt committed mortgage fraud in at least seven additional transactions. The lenders involved in the transactions suffered losses in excess of $650,000.
Said Commissioner Rothman: "For his fraud, we have banned Mr. Pratt from mortgage and loan servicing in Minnesota, which will help promote a healthy mortgage industry and protect our consumers."