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Overview
The Federal Trade Commission receives more complaints about rogue debt collecting than about any activity besides identity theft. Dramatically and entertainingly, Bad Paper reveals why. It tells the story of Aaron Siegel, a former banking executive, and Brandon Wilson, a former armed robber, who become partners and go in quest of "paper"—the uncollected debts that are sold off by banks for pennies on the dollar. As Aaron and Brandon learn, the world of consumer debt collection is an unregulated shadowland where operators often make unwarranted threats and even collect debts that are not theirs.
Introducing an unforgettable cast of strivers and rogues, Jake Halpern chronicles their lives as they manage high-pressure call centers, hunt for paper in Las Vegas casinos, and meet in parked cars to sell the social security numbers and account information of unsuspecting consumers. He also tracks a "package" of debt that is stolen by unscrupulous collectors, leading to a dramatic showdown with guns in a Buffalo corner store. Along the way, he reveals the human cost of a system that compounds the troubles of hardworking Americans and permits banks to ignore their former customers. The result is a vital exposé that is also a bravura feat of storytelling.
Product Details
| ISBN-13: | 9780374711245 |
|---|---|
| Publisher: | Farrar, Straus and Giroux |
| Publication date: | 10/14/2014 |
| Sold by: | Macmillan |
| Format: | eBook |
| Pages: | 256 |
| File size: | 292 KB |
About the Author
Jake Halpern is the author of Bad Paper, an Amazon Best Book of 2014, and Nightfall, one of a number of young adult novels. His journalism has appeared in the New Yorker, the New York Times, the Wall Street Journal, and the Atlantic, among many other publications. He is also a contributor to NPR’s All Things Considered and This American Life and teaches journalism at Yale University in New Haven, where he lives.
Read an Excerpt
Bad Paper
Chasing Debt from Wall Street to the Underworld
By Jake Halpern
Farrar, Straus and Giroux
Copyright © 2014 Jake HalpernAll rights reserved.
ISBN: 978-0-374-71124-5
CHAPTER 1
THE $14 MILLION GAMBLE
In 2005, when he was thirty-one years old, Aaron Siegel decided to leave his job on Wall Street and move back to his hometown. He was drawn to Buffalo—the self-proclaimed "city of no illusions"—because of its modest scale, its historic neighborhoods, and its general lack of pretension. After so much time in Manhattan and London, something about Buffalo was refreshingly real. What's more, the Siegel family name meant something there and it lent Aaron not just credibility or prestige, but a sense that he belonged—that he mattered. Aaron returned to Buffalo, along with his wife, who was also from upstate New York, and he took a job at a local division of Bank of America specializing in private wealth management. He resolved to stay there until he could figure something else out. The only problem was that he had almost no work to do. "I spent my days spinning around in a chair and throwing pencils at the ceiling," Aaron said. "There was nothing to do. There's very little private wealth to manage here."
There weren't a great many banking opportunities in Buffalo; in truth, there weren't all that many professional opportunities at all. At least one industry, however, was booming: debt collection. Buffalo is a major hub for debt collection and is sometimes even called the industry's capital. This is in large part because one of the biggest collection agencies in the nation, known as Great Lakes Collection Bureau, was once based there. GE Capital purchased Great Lakes in 1997, and soon afterward, many of the company's managers were laid off and opted to strike out on their own. Their companies thrived and expanded. In the greater Buffalo area, more than five thousand people now earn a living as debt collectors. That's more than the number of taxi drivers, bakers, butchers, steelworkers, roofers, crane operators, hotel clerks, and brick masons combined.
As a former banker, Aaron was intrigued that so many people in his midst were toiling to collect on debts that his employer—the bank—had given up on and sold to debt buyers at huge discounts. He sensed an opportunity and, in the fall of 2005, he started his own collection agency. He used $125,000 from his personal savings, bought some "paper," and threw himself—rather blindly—into the world of collections. His plan was to continue working at Bank of America by day and run the collection agency after hours.
When it came to hiring collectors, Buffalo proved to be an auspicious locale, both because there were so many veteran collectors to hire and because so many of the city's other residents were so eager to find paying work. Buffalo remains among the poorest cities in the nation. Almost one-third of the people within its limits live in poverty—double the national average. Growing up in a very affluent family, Aaron says that he rarely interacted with the city's poorer residents. "I knew they existed," he told me. "These were folks that you bumped into going to the store, but there wasn't a whole lot of interaction because Buffalo is very stratified." Yet when Aaron launched his own collection agency, these were precisely the sorts of people who applied for work—and their ranks included ex-cons, drug addicts, twenty-somethings without high school diplomas, and a variety of other hard-luck cases.
"Oh my God, they were like thugs," recalled Aaron. "Everybody had their hustle and flow or whatever the hell it was—why they were the best, the greatest." He quickly came to realize, however, that the more clean-cut types simply wouldn't get the job done. As he put it: "You realize that you're sitting on an investment and you've hired a bunch of boy scouts who can't turn any money." What he needed were telephone hustlers. The problem with the hustlers, explained Aaron, was that they hustled not just the debtors, but him as well. One of the first truly great collectors that Aaron hired—an overweight, womanizing, aspiring bodybuilder—robbed him of several thousand dollars by counterfeiting the firm's checks.
Eventually, Aaron hired a floor manager—a young, handsome guy in his mid-twenties, who asked to be identified by his middle name, Rob. Rob understood collectors. He took it as a given, for example, that many of his collectors either used or sold drugs. In one of his stints as a manager, Rob bought his team "three cases of whippets"—steel cartridges filled with nitrous oxide—for hitting their goal. "You have to have a little hustle in you to collect," he explained. "Certainly, if you are selling bags of pot to college kids, you have that natural ability." One day, Rob had to help break up a fight that began when a collector overcharged his co-worker for a bag of cocaine. Their punishment, recalls Rob, was simply being sent home for the day. Above all, says Rob, the collectors needed "someone they could relate to"—someone who could be a "bridge" to Aaron. "I was that bridge."
Rob's biggest challenge was making sure that one of the agency's best collectors made it to work each day. On many occasions, Rob confiscated his car keys and insisted that he spend the night with Rob at his house. "He was a very intelligent guy, but he was also your average stoner who didn't think of the day ahead until that morning," recalled Rob. "He was extremely lazy and smoked a massive amount of pot. At the time, he was twenty-three and he didn't understand the whole concept of work responsibility." When he did show up, however, he was masterful at the "talk-off"—the spiel given to debtors in order to encourage, shame, and intimidate them into paying. This particular collector was a "killer" and a "beast" on the phone, Rob said.
To this day, Rob recalls his talk-off with great admiration: "He would ask a question, which he knew the answer to, but when he got the debtor's response, he flipped it on them. For example, maybe the debtor bought a dishwasher for a thousand dollars from Sears. The debtor would say, 'I didn't have a job at the time.' Then he would say, 'But I have paperwork right here saying that you worked at Rich Stadium at the time, and now I would like a statement from you because I am going to have to explain to the banks that you were lying.' He'd get them into a trap. He'd get them to lie, then he'd call them on it, and then—in five minutes—they were writing a check." According to Aaron, his star employee collected as much as $20,000 a month.
Aaron took it as a given that some of his collectors, the good and bad alike, might quit at a moment's notice. The industry was famous for employing "hoppers," who simply stopped coming to work one day and "hopped" to another agency where they thought they might do better for themselves. One of the most famous hoppers in Buffalo was a man of exceedingly short stature known as "Matt the Midget." "He had these extended pedals on his car so his feet could reach," Aaron said. When he showed up for an interview at Aaron's agency, Matt the Midget delighted Aaron's employees by leaping into the air and tapping his forehead with his own feet. Aaron's agency offered him a job, but unfortunately, Matt the Midget never showed up for work. Not even once.
What made it all worth it for Aaron was that he was making money. When he purchased an especially good portfolio of debt, the profits were astronomical. For example, he obtained one portfolio for $28,526, collected more than $90,000 on it in just six weeks, and then sold the remaining, uncollected accounts for $31,000. On that portfolio, he made a whopping net return of 199 percent. Aaron bought another portfolio of debt for $33,387, collected more than $147,000 on it in four months, and then sold the remaining accounts for $33,123. On this portfolio, his net return was 264 percent. Of course, not all of his deals proved to be this wildly profitable; but, on the whole, he was doing well with almost all of the paper that he purchased. This was in no small part because in 2006 he had begun buying paper from a debt broker named Brandon Wilson. Initially, at least, Aaron knew very little about Brandon. A business associate had recommended him, and right away, Brandon began to prove his worth—supplying good paper, with "plenty of meat on the bone" as they say in the business. "The paper that I bought from him performed wonderfully," recalled Aaron.
During the day, while he toiled away at Bank of America, Aaron began spending more time with one of his co-workers: a beautiful young brunette named Andrea. Andrea grew up in an Italian-American family in the nearby town of Batavia, worked for a few years as a teacher, and then took a job with Bank of America at its corporate headquarters in Charlotte, North Carolina. She returned home to western New York and arrived at the Bank of America offices in Buffalo with a sense of deflation that mirrored Aaron's. "There were like nine people in our office and they were all like six days from dying," she told me.
Then she saw Aaron.
"I was standing at the receptionist desk, and he walks by, and I remember in my mind remarking, 'He's got a nice suit on. Okay, maybe this isn't so bad.'" On one of their next encounters, Andrea was stranded in the parking lot with a flat tire, and Aaron came to her rescue. The only problem was that he didn't know how to change a tire properly and he ended up damaging her car. Somehow he managed to make light of the debacle, and his own ineptitude, which Andrea found strangely endearing. They were soon spending more time together and, eventually, started having an affair. "I don't think I was emotionally ready to be married in the first place, but—up until then—I was doing a very good job of faking it," Aaron told me. "Really, it was just terrible judgment."
To this day, Andrea isn't sure what Aaron was thinking at the time. "I don't really know what the draw was—not wanting to be with his wonderful blond wife that everyone loved in order to date a crazy Italian. Who does that? Nobody." Aaron ultimately decided to leave his wife and, on top of that, his job at Bank of America as well. "He basically put his life in a jar and shook the shit out of it," said Andrea. Looking back, Aaron's father, Herb, says that Andrea—whom he calls a "femme fatale"—was a very bad influence on his son. "She's very attractive and very seductive," he warned me.
Aaron's younger sister, Shana, puzzled over her brother's transformation from Wall Street banker to owner and operator of a small collection agency in Buffalo. She would stop by his agency and wonder what her brother had gotten himself into. "I'd be in his office, seeing the people that were coming in, and I was like: What the hell? What do you got going on here? It felt shady." She viewed all of it as being a far cry from the high hopes that her family had for Aaron. Shana recalls that Aaron had nice artwork on the walls of his personal office but that elsewhere in the agency the carpet was ratty, the railings were rickety, and the employees seemed sketchy. "It was like he was trying to put gold rims on a dilapidated car," she said. "It was like he was trying to make my father's office out of something that was not as nice."
Aaron's father, Herb Siegel, was a legend in Buffalo. He was a successful divorce lawyer and the founder of Siegel, Kelleher & Kahn—a hugely profitable law firm that handled divorces and personal-injury cases. In the early 1990s, The Buffalo News ran a lengthy profile on Herb, describing his "Gatsby-esque parties" and his lavish lifestyle. The article depicted Herb at work in his "two spectacularly renovated Victorian mansions" under the soft glow of chandeliers. "He enjoys the perks that come from sitting atop his law firm: The respectful associates whose offices were once the sitting rooms and servants' bedrooms of the 19th century mansion ... Clients can't help noticing the glamour, the elegance ... [especially] the women who come to him at the most difficult time of their lives and tearfully whisper revealing details about their most personal encounters in their marriages. He is someone who can solve their problems. He has the power to make it better. They adore him."
Herb's own marriages were tumultuous. He married and divorced three times, though not all of his separations were bitter. His second wife, for example, subsequently took a job as his bookkeeper. His third wife, Aaron's mother—Joyce Siegel—actually started off as a client. When she first met Herb, she was in the midst of a divorce, and Herb's office was representing her. Initially, Joyce was working with another lawyer at the firm, but when she broke down in tears, the lawyer summoned Herb for help. This was Herb's specialty—he knew how to handle even the most distraught of clients. He walked in, told her to stop crying, and took over her case. "Herb usurped the client in more ways than one," Joyce recalled.
Joyce says that she was initially drawn to Herb because he had the aura of a "man about town." "You know how women are. They like power and money, and, in the situation I was in, I didn't have any of that." They eventually married, but Joyce says it was rocky from the start because Herb would stay out late, leaving her at home, worrying—and then simmering. "I reached a point where I wouldn't even leave the porch light on for him. I was really hoping, secretly, that he'd fall and break his neck or crash on the way home. Then he would come home, he'd [usually] been drinking—I'm sure he'd been with women—and he would go into the bedroom to wake up Aaron." At the time, Aaron was an infant and Joyce says she would plead with her husband, unsuccessfully, to let Aaron sleep. "I'd hear Ari"—her nickname for Aaron—"in there, tossing and turning, trying to get back to sleep. He was such a good little boy. He wasn't a crier."
As his law firm continued to prosper, Herb began looking for a new, grander home for his family within the city's historic district around the Albright-Knox Art Gallery. One day, he and Joyce went to see a gorgeous old mansion on Soldiers Place, one of the city's most prestigious addresses. The house, situated kitty-corner from a mansion designed by Frank Lloyd Wright, was a stately edifice built in 1905. It boasted seven bedrooms, five bathrooms, and more than five thousand square feet of floor space. During their initial tour of the house, Joyce was unconvinced: "I remember being up in the room on the third floor, in what was like a pool room, and I was thinking, 'God, I don't know, this is so big.'" Then, without consulting his wife, Herb said to the agent, "We'll take it."
Aaron speculates that his father purchased the mansion with the intention of flipping it whenever the opportunity arose. "I think he probably put it on the market as soon as he bought it," says Aaron. "No sentimental attachments there—that's how he is." When Herb finally did sell the house, more than two decades later, the buyer was the Canadian government, which wanted a suitable home for the head of its consulate. Herb sold the house for an enormous profit. When he inked the deal with the Canadians, Herb was amused to see that the contract bore the seal of the British Crown. "He ripped off the Queen of England," said Aaron. "That doesn't happen every day."
As the years passed, Joyce became increasingly unhappy with her marriage and the family dynamics at Soldiers Place. She eventually ended the marriage and moved out of Soldiers Place, leaving Aaron and Shana—who wanted to stay in their childhood home—behind. The house was never the same after that. What ensued was the much-idealized scenario that many an American teenager has dreamed of: a mansion stocked with food and liquor, a permissive father, and an open-door policy for friends and classmates. Shana recalls this time in her life with great nostalgia: "I would say to my dad, 'I'm having thirty couples here before the date dance, and I expect you not to come home for the whole night.' And he'd be like, 'Okay.'" It was a dream come true for Shana: "We're fifteen years old and we're all sitting around drinking champagne in this grand house."
As permissive as Herb could be, he was—in other, important ways—quite overbearing. According to Shana, Herb "had grandiose ideas of what my brother would be" and this weighed on Aaron "terribly." Aaron understood his father's expectations implicitly. In Herb's view, says Aaron, people were either "losers" or "very successful"—and it was always based on how much money they made. Herb's hopes may have weighed heavily on his son, but Herb shrugged this off as inevitable. As Herb told me, "Look, when you come from a family like ours, you're always going to be striving. You're going to want to do something better than your father. I think that goes with the territory."
For Aaron, the collections industry offered both financial reward and voyeuristic access to the city's seedier side. According to Rob, Aaron's floor manager at the agency, his boss was both fascinated and repulsed by the business: "Where Aaron came from, with a private high school and prestigious family, that was a different world. He liked this scene, in a way. You know how opposites attract? You know, you have the good girl dating the bad biker dude—she is intrigued. Maybe he was like that." Even so, Rob added, "when he had a chance not to get his hands dirty anymore, he took that route."
(Continues...)
Excerpted from Bad Paper by Jake Halpern. Copyright © 2014 Jake Halpern. Excerpted by permission of Farrar, Straus and Giroux.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Contents
TITLE PAGE,COPYRIGHT NOTICE,
DEDICATION,
EPIGRAPH,
INTRODUCTION,
PART ONE: STOLEN NUMBERS,
1. THE $14 MILLION GAMBLE,
2. THE KING OF CRAP,
3. THE PACKAGE,
4. BAD PAPER,
PART TWO: PAPER HUNTERS,
5. AARON'S PROBLEM,
6. BRANDON'S PEOPLE,
7. SCORING IN VEGAS,
PART THREE: THE LAST COLLECTORS,
8. TAKING CONTROL OF ASSETS,
9. THE WHITE MAN'S DOPE,
10. GEORGIA,
EPILOGUE,
A NOTE ON METHODOLOGY,
NOTES,
ACKNOWLEDGMENTS,
ALSO BY JAKE HALPERN,
A NOTE ABOUT THE AUTHOR,
COPYRIGHT,