Government agencies to split $666,113 from sale of onetime 'kingpin' debt collector's former Clarence home (2024)

After five years, federal and state consumer watchdog agencies stand to receive their first dollars from a former debt collector who agreed to pay $60 million to settle a civil case against him.

U.S. District Judge Frank P. Geraci Jr. ordered $666,113 to be split between the U.S. Consumer Financial Protection Bureau and the New York State Office of Attorney General. The amount – one-half of the sale proceeds from Douglas MacKinnon’s former home in Clarence – is about 1% of what he owes the agencies.

But even getting that money proved difficult.

And the court fight over it might not be finished.

Attorney Joseph G. Makowski, who represents MacKinnon, declined to comment on Geraci’s ruling, saying “there may be further proceedings in this matter.”

Government agencies to split $666,113 from sale of onetime 'kingpin' debt collector's former Clarence home (1)

Here’s how the six-bedroom, seven-bathroom house at 6575 Meghan Rose Way ended up in federal court.

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In April 2015, MacKinnon transferred ownership of the $1.7 million home to his wife and daughter for $1. That transfer happened a year before the government agencies sued MacKinnon and more than three years before his settlement with them. But the transfer came after he learned of the investigation into his companies by the Consumer Financial Protection Bureau, according to a federal lawsuit filed 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.

Makowski put a different spin on the transfer.

“This is not a scenario where MacKinnon became aware that he was subject to an investigation, or to a large judgment, and immediately transferred property out of his name for no consideration in an attempt to prevent creditors from seizing the property,” Makowski wrote in a court filling. “Rather, the evidence establishes that the real estate transaction at issue took place years before any lawsuit was ever filed against defendant, let alone years before any judgment was ever taken against defendant.”

In the spring of 2015, MacKinnon was concerned about his health because he was experiencing chest pains, had lost his own father to an early death and had children of his own to care for, Makowski said. So MacKinnon and his wife, Amy, who have since divorced, decided that for estate planning purposes MacKinnon would transfer his interest in the home to his adult daughter for $1.

The purpose of the transfer was to ensure that if anything happened to MacKinnon and his wife, the home would pass to their daughter, who would assume responsibility for raising the minor children in the home, according to Makowski’s court filing.

MacKinnon and his then-wife told their daughter about the plan one week before the property transfer. But to transfer the home on the 3.6-acre lot, the MacKinnons had to pay off the outstanding mortgage, about $900,000.

Without the money to do that, MacKinnon asked one of his brothers to lend Amy MacKinnon $900,000 and hold a mortgage on the home.

The illegal debt collections lawsuit against Douglas MacKinnon was filed in November 2016, some 17 months after the April 2015 property transfer. When announcing the $60 million settlement with him in August 2019, state Attorney General Letitia James referred to MacKinnon as a “kingpin” of Buffalo debt collectors.

Afterward, MacKinnon did not make any payments toward the settlement, so the government agencies sued in 2021 to take possession of the Clarence home.

Lawyers for the government agencies say MacKinnon learned in 2014 that the companies he controlled were under investigation when the bureau served civil investigative demand notices on them. They called the transfer of his ownership to his daughter a ploy to keep him from losing the home.

“Transferring the residence and granting the mortgage served only one purpose: to attempt to protect the property from eventual government seizure, first by distancing Douglas from it and then by further encumbering it,” said Jacob Schunk, a senior litigation counsel for the bureau, and Assistant Attorney General Christopher L. Boyd in a court filing last October. “Because the transfer is fraudulent and the mortgage is both fraudulent and legally invalid,” the government agencies are entitled to the entirety of the proceeds remaining after the property’s sale, the government lawyers said.

The Clarence home later sold for $1.7 million in a foreclosure sale. After taxes and home sale costs, slightly more than $1.33 million was left and has been held in escrow. So the court fight narrowed to a dispute among the sides over who could keep the escrowed proceeds.

The government lawyers wanted the judge to split the $1.33 million between the agencies, awarding $666,113 to the Consumer Financial Protection Bureau and the same amount to New York State.

The judge noted Douglas MacKinnon started operating his debt-collection enterprises in 2001. His operations peaked in 2015, with two of his entities, Enhanced Acquisitions Group LLC and Northern Resolution Group LLC, each collecting debts worth $1.2 million to $1.5 million a month.

In his ruling, Geraci said a reasonable person in MacKinnon’s situation at the time of the home transfer would have believed he would incur debts beyond his ability to pay, were he engaging in unlawful debt-collection activities, facing personal liability vastly exceeding his net worth and with governmental agencies investigating his debt-collection activities.

“Though Douglas denies that at the time of the transfer he had any actual knowledge that he might be later named as a defendant in any legal action, his actual knowledge is irrelevant,” Geraci said. “The question is whether he reasonably should have believed that he would incur debts beyond his ability to pay.”

So Geraci granted the two government agencies part of what they asked for, voiding the transfer of Douglas MacKinnon’s interest in the home to his daughter and giving the agencies his portion of the proceeds from the home sale.

But Amy MacKinnon, now Douglas MacKinnon’s ex-wife, can keep half of the proceeds, the judge ruled.

Even before the disputed transfer, the judge said, Douglas’ creditors could have encumbered only his interest in the property. His then-wife’s interest would have remained out of reach of the government agencies. And her share remains out of reach, Geraci said. Her interest in the proceeds of the property’s sale is not an asset of Douglas that the government can take, he ruled.

“It is certainly a well-reasoned decision, and while it was not all we had hoped for, it does provide my client Amy MacKinnon with the opportunity to be justly entitled to significant monies which we believe she deserves,” said her attorney Charles J. Marchese.

Geraci’s ruling doesn’t account for the $666,113 he did not award to the government agencies. He emphasized he is taking no position as to whether Amy or her ex-husband’s brother, or anyone else, is entitled to the rest of the escrowed proceeds.

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.

Patrick Lakamp can be reached at plakamp@buffnews.com

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Government agencies to split $666,113 from sale of onetime 'kingpin' debt collector's former Clarence home (2024)
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