New breed of debt collectors grows in Southland
Lawyers use technology to chase down debtors

Los Angeles Business Journal
Week of February 12-18, 1996

Caty Van Housen - Contributing Reporter

While the Southland recession and real estate collapse left many businesses and banks holding bags of bad debt and unpaid loans, they also nurtured the growth of a new breed of debt collectors - aggressive attorneys with the legal and technological know-how to force the hand of even the most begrudging debtor.

No longer content to make a few phone calls and hope for the best, executives with companies large and small are turning to these hired guns, who use legal briefs and computer-generated insider information to strip away layers of complicated corporate structures. They undertake a process like peeling an onion to lay bare the errant bill-payer and any hidden assets that might be used to pay off the debt.

Encino-based Spiwak & Iezza is one of a handful of these L.A. law firms that specialize in collecting overdue accounts receivable. Others include Los Angeles-based Frandzel & Share and Woodland Hills-based Glass, Alper, Goldbert & Cohn. Of course, many legal eagles tout their abilities at getting judgements against people who don't pay their bills, But Spiwak & Iezza and its counterparts specialize not only in getting judgements, but in collecting them as well.

Corporate bookkeepers with a creative bent may not want to cross paths with today's tenacious debt-collecting lawyers. They seem to believe in what they do. "American business was built on people paying their bills, " said Lisa Spiwak. And they also seem to enjoy doing it. "It's like a game, and we enjoy outsmarting the other side, " said Nick Iezza.

Heavyweight clients
The game is not only to extract the maximum amount from a defendant, but also to beat out other creditors in the "collection race," Spiwak added.

Companies enlisting the help of Spiwak & Iezza in the collections race include AT&T Capital Corp., Wells Fargo Bank, Tokai Financial Services, Universal Studios and Sysco Food Services. Unlike many law firms, and like most collection agencies, Spiwak & Iezza bills on a contingency basis, only taking a share of what it actually collects.

The firm's gross revenues have jumped from $350,000 in its first year (1993) to $1 million last year. The two 34-year-old partners credit their success to the latest tools of the trade, used by the partners themselves and by outside investigators they hire, to find hidden bank accounts, overseas assets and corporate structures.

One such investigator is Alfredo Navarro of Malibu-based Sovereign Investigations, who said the first thing he does is find out what companies a debtor is affiliated with, and how those companies are structured. This can be done in minutes by accessing California Secretary of State records by computer - a chore that until recently took weeks to do by mail.

Business loans are fairly easy to track down, as well, by running listings of uniform commercial code filings - documents filed by creditors showing their collateral for loans. This is also a chore that has been sped up considerably by computers.

"The advent of computer technology has made it easier to instantaneously retrieve information about someone's business dealings, but there are drawbacks," Navarro said. "The databases only deal with the present. You can find current assets, but there is not historical perspective to see if assets have been transferred in an attempt to hide them."

That's why Navarro has accumulated historical databases on microfilm showing Los Angeles property ownership over the past several years.

In addition to past property ownership, Navarro said, other information typically difficult to find out about debtors is where they work and where they bank. For these hunts, Navarro relies on inside sources he prefers not to discuss.

"Even credit reports don't tell you enough, and that's why there's still a need for private investigators," Navarro said.

Quick Action

Once Spiwak and Iezza get the information they need from the investigators they hire, they prepare the legal documents to force the debtor to pay. Their computer network can churn out the required documents in minutes. And now that most courts accept fax filing, the partners can close in before a debtor knows they're coming.

"If one of our investigators called in the morning and said they found an account with $100,000 in a certain bank, we could freeze that by noon," Iezza said.

It takes just $21 and the name of the debtor's bank to get a judgement execution for such a bank levy that freezes an account. Other tools of the debt-collection trade include "the keeper," a uniformed sherriff's deputy who stands by the cash register and intercepts all monies: a wage garnishment requiring the debtor's employer to turn over 25 percent of each paychecl: and a "car levy" that will send a sheriff to retrieve and sell the debtor's car, boat or recreational vehicle.

The car levy can cost up to $700, but the keeper and wage garnishment, like the bank levy, each cost only $21.

In a "keeper" twist, Iezza and Spiwak recently retrieved most of a business loan for a Southern California bank from a real estate tycoon who had been unsuccessfully pursued by 15 other commercial creditors. The tycoon had surrounded himself with intricate layers of limited partnerships serving as general partners of corporations.

Spiwak & Iezza discovered that one of his limited partnerships owned a Beverly Hills medical building, so they took down the names of its 30 or so tenants and served them all with motions to force them to pay their monthly rent to the creditor.

"Not only was it devastating to him to lose their rent, but it was also embarrassing to have all the tenants know he was in trouble," spiwak said. "Most attorneys would see all the levels (of interrelated partnerships) and close the file. But we fought harder, and he paid us to get off his back. He indicated we were the only creditor to get paid.

Spiwak advises business owners to watch for the following red flags: a debtor who takes an angry or frustrated stance when contacted about a bill, post-dated checks and frequent management changes.