$UE YORK CITY
How cottage industry fleeces taxpayers
It’s the safest bet in town — sue New York and get paid. With more than $700 million doled out annually to plaintiffs, lawsuits have become such a sure moneymaker that people who have a case against NYC are fronted cash by finance firms that then take a percentage of the winnings.
These companies make it hard
not to sue the city. A finance firm run by Bethenny Frankel’s boyfriend is among a host of companies that cost taxpayers millions of dollars a year by encouraging questionable lawsuits against the Big Apple with the promise of quick cash advances.
And making the proposition even harder to turn down, the money fronted to potential litigants doesn’t have to be paid back if they lose.
“Of course they incentivize people [to sue],” NYU Law Professor Samuel Issacharoff told The Post.
“The loan folks are lending money because they think this is an easy mark and the city won’t fight lawsuits.”
City Comptroller Scott Stringer called the burgeoning “advance-settlement” industry “a business model that could potentially clear the way for bogus claims against the city.”
“Ultimately, fraudulent claims and lawsuits cheat taxpayers and takes precious resources away from critical services,” Stringer said.
“It’s unacceptable for any company to game the system for an easy buck at the expense of everyday New Yorkers.”
Brooklyn-based LawCash — whose CEO, Dennis Shields, reconciled with Frankel last year — and its rivals make money by advancing plaintiffs a portion of their potential proceeds and charging hefty interest fees when it’s repaid.
Court papers allege that LawCash, which boasts of having provided “thousands of clients with lawsuit funding advances,” has charged its clients interest rates as high as 124 percent.
That’s nearly five times the 25 percent limit set by New York state, which outlaws rates any higher under the “criminal usury” law.
But because the money doesn’t have to be paid back if a plaintiff doesn’t win or settle a case, LawCash claims in court papers that it’s not a loan and is instead “a contingent interest in the potential post-judgment proceeds of the plaintiff ’s case.”
Contracts documenting presettlement payments don’t have to be filed in court, so there’s no public record of how many people who have sued the city struck deals for upfront cash.
According to the most recent Mayor’s Management Report, the city shelled out $722 million in civil judgments and claims during fiscal 2017, and officials said more than half the payments were the result of settlements of the suits.
If just 1 percent of that money was the result of suits spurred by cash advances, it would amount to more than $7 million, said lawyer Michael Hess, who served as the city’s corporation counsel under Mayor Rudy Giuliani.
“If I had to make an educated guess, I’d say it’s maybe 2 or 3 percent,” said Hess, now senior counsel at the Dorf & Nelson law firm.
In one case reviewed by The Post, Bishme Ayers received a $350 advance from LawCash for a suit that claimed he was abused by guards on Rikers Island.
After receiving a $10,000 settlement from the city, he repaid LawCash $4,200.
In another case, LawCash gave Charles Cherry $500 for his claim that he was hurt in a slip-and-fall accident while being brought to court in handcuffs.
Cherry scored $12,000 from the city and repaid LawCash $2,600.
In an interview last year with the Web site YieldStreet, LawCash President and co-founder Harvey Hirschfeld said the firm limits its advances to 10 percent of a suit’s potential value, due to analysis showing that 90 percent of cases result in settlements and the belief that more money might lead a client to “decide to go to trial.”
“Our job here is not to make somebody rich but just give them enough money to wait until their case is settled,” Hirschfeld said.
He also said LawCash funds only about half the cases it’s offered, and doesn’t deal with “any shades-of-gray cases, like employment law, where there’s different sides of the story.”
Last year, a total $60,000 advanced by LawCash to two Bronx
buddies turned deadly when, sources said, a feud over the advance money allegedly led Salim Wilson to shoot Julio Velasquez. Wilson was charged in November with second-degree murder.
Both men had filed civil-rights suits against NYPD cop David Terrell, who has since filed his own claim against the city for allegedly settling false-arrest and brutality cases rather than aggressively defending its officers.
“These unregulated companies and these financial transactions give incentives for unscrupulous lawyers to file frivolous lawsuits against the city, and the city perpetuates this industry by paying off these frivolous lawsuits,” said Terrell’s lawyer, ex-NYPD cop Eric Sanders.
NYPD sergeants-union President Ed Mullins also accused LawCash and similar companies of aiding “those looking to hustle the system for a payday.”
Queens lawyer Andrew Plasse, who formerly worked with LawCash, said it paid advances to 61 of his clients, most of whom were Rikers Island inmates with complaints about their treatment in jail.
Plasse said his clients scored settlements as high as $125,000 — and Law- Cash execs wined and dined him to cement their business relationship.
“They took me to a football game at MetLife Stadium, the Hertz suite . . . All the food you can eat, all the beer and liquor you can drink,” Plasse recalled. “You’re talking about big money: two tickets and parking. It was fantastic.”
But in 2014, Plasse filed a $100 million class-action against LawCash on behalf of two men who claimed the company charged them illegal, “usurious” interest rates, with one, Clifford Roberts, saying he was put on the hook for $5,600 over a $1,200 advance.
LawCash countersued on grounds including defamation, and Plasse withdrew the suit — for no money and with a concession that it had no “legal merit”— after LawCash accused him of having a conflict of interest and dredged up a 2005 ruling in which he was censured for a dozen violations of attorney-conduct rules.
But another Queens lawyer, Andrew Hirschhorn, said he got a favorable settlement after suing LawCash in 2012 over “predatory loans” to his clients that carried interest rates of up to 124 percent on advances against their settlements.
That suit also alleged that LawCash circumvented banking and usury laws in states including Nebraska, Ohio, Maine, Oregon and Texas by “effectively buying their way out of any judicial review” through lobbying and campaign contributions to legislators who enacted “laws which condone such illegal conduct.”
In 2010, LawCash and another firm, Oasis Legal Finance Group — which runs TV commercials featuring former “Grey’s Anatomy” star Isaiah Washington — sued Colorado over new regulations that subjected them to the same rules that limited “payday loans” to just $500 each and capped annual interest rates at 45 percent.
The companies said they couldn’t do business under those restrictions, but the Colorado Supreme Court sided with the government in 2015.
Similar legislation has been pending in New York state since 2016, but has been stalled by the Democratic-controlled Assembly.
Neither LawCash, whose general counsel is former Brooklyn Councilman Lew Fidler, nor Oasis returned requests for comment.