Damages hearing nixed in Nexus case, company already owes millions
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HARRISONBURG — Just how much money is Nexus Services Inc. going to be ordered to pay in a federal lawsuit that is seeking more than $800 million from the company?
A scheduled damages hearing Wednesday in U.S. District Court in Harrisonburg that could have provided the answer was instead canceled following recent court filings.
As of mid-Friday afternoon, no ruling had been made on the amount.
The Consumer Financial Protection Bureau (CFPB), along with the states of Virginia, New York, Massachusetts and their attorney generals, have demanded $811 million from Nexus Services Inc., its subsidiary Libre by Nexus, and its three owners following a two-year legal battle, according to court records. In May, a federal judge found the company's owners in civil contempt for noncompliance in the 2021 lawsuit and ordered default judgements be entered at the damages hearing against majority owner Mike Donovan, his spouse and Executive Vice President Richard Moore, and Director Evan Ajin.
The CFPB is seeking more than $111 million each from all five defendants listed in the lawsuit, plus an additional $230,996,995 for clients impacted by Nexus, with another $24,390,000 tacked on for violations of state statutes, according to court documents.
The company, through Libre by Nexus, helps people secure their release from the custody of U.S. Immigration and Customs Enforcement (ICE). The federal lawsuit claims the trio's "illegal conduct" has impacted tens of thousands of consumers, and said Nexus uses deceptive, abusive, and unfair practices to induce clients to sign contracts and pay thousands of dollars.
Virginia Attorney General Jason S. Miyares, Commonwealth of Massachusetts Attorney General Andrea Campbell, and New York Attorney General Letitia James are also part of the lawsuit against Nexus. When filed two years ago, in a press release, James said the lawsuit was seeking to put an end to the company's "illegal practices" while obtaining millions of dollars in restitution for the victims.
Despite not being certified to issue surety bonds or being licensed as a bail-bond agent in any state, Libre by Nexus touts itself as an affordable way to secure release from federal custody. The lawsuit said the claims made by Libre are "false and misleading."
The company is accused of creating the impression that it pays cash for the immigration bonds and that repayment from consumers was for the debt; presenting contracts in English for its mainly Spanish-speaking consumers; threatening clients, and using deceptive and abusive terms in its contracts, according to the lawsuit. For a few years, clients were also made to wear and pay for GPS ankle monitors.
In a recent stipulation entered Tuesday that was agreed upon by all parties in the lawsuit, it showed Nexus received just shy of $231 million from consumers between December 2013 and June 2022. Those records were obtained from a Nexus database that was produced in 2022, the stipulation said.
Also on Tuesday, the Fourth Circuit Court of Appeals shot down a motion by the defendants for a stay or injunction in the case.
After a recent exhibit list offered by the defendants contained 17 exhibits for the proposed damages hearing, last week the judge ruled they would be prohibited, along with a witness list of 12 people presented by the defendants that was whittled down to just one by the judge. Following those actions, along with the stipulation, Wednesday's hearing was canceled with the agreement of all the parties, court records show.
Salaries of owners, Nexus debt, made public
Another case taking place simultaneously in the federal courts involves Nexus and the RLI Insurance Co., an Illinois-based firm that filed a 2018 complaint seeking an injunction to an indemnity agreement. The complaint said Nexus failed in several instances to pay bond claims, "exposing RLI to additional interest and penalties in excess of the bond’s penal sums."
Debt records in the RLI case show Nexus owes $4.4 million in various judgements, including a recent decision where a Waynesboro law firm was awarded $1.1 million in Augusta County Circuit Court; owes $5.5 million to a handful of companies for bond breaches; owes its current federal attorney $85,000 and a former attorney roughly $41,000.
RLI asked that Nexus be placed in receivership — which would allow RLI access to its books and records — and said the company refuses to answer discovery in the case.
"Defendants have undertaken a wide range of activities to hide their assets and transfers," said a notice filed Tuesday.
Nexus maintains it has produced all the documents in the RLI case and will continue to make all of its records available.
Although Nexus collected nearly a quarter-of-a-billion dollars between 2013 and 2022, lawyers in the RLI case don't know where the cash went. "One of the key questions in post-judgment discovery has been where did all the revenue go that was earned by Defendants and Entities?" a court filing said.
Since 2018, Donovan has collected $1.5 million in salary, court records show. Moore took in $1.1 million. In 2018, Donovan's salary was slightly more than $500,000 per year and Moore's was a little over $400,000. However, in 2020 their salaries took a considerable hit and they were being paid substantially less than before. So far in 2023, the two have collected under $50,000 combined, according to court filings produced by Ajin.
Donovan owns 90% of Nexus and Ajin owns 10%, court files show. Up until February 2022, Moore had 39% ownership before transferring his interest to Donovan.
Last month, Nexus had its Verona campus sold off at a public auction for $3.4 million after the property was foreclosed.
Donovan, Moore and another company vice president, Timothy Shipe, face criminal charges as well in Augusta County in an unrelated embezzlement case.
Moore is also charged in federal court with tax fraud.
Brad Zinn is the cops, courts and breaking news reporter at The News Leader. Have a news tip? Or something that needs investigating? You can email reporter Brad Zinn (he/him) at bzinn@newsleader.com. You can also follow him on Twitter.
This article originally appeared on Staunton News Leader: Damages hearing nixed in Nexus case, company already owes millions
