Nexus Services Inc. owners found in contempt as sanctions loom in federal court case
HARRISONBURG — Sanctions and default judgements are coming against the owners of Nexus Services Inc. in a 2021 federal lawsuit spearheaded by the Consumer Financial Protection Bureau (CFPB) that alleges deceptive practices by the Verona-based company.
The lawsuit — which includes the states of Virginia, New York and Massachusetts — seeks millions of dollars in restitution, and appears to be coming to a conclusion.
On Thursday, a federal judge found the Verona company's owners in civil contempt for noncompliance and said default judgements will be entered against majority owner Mike Donovan, Executive Vice President Richard Moore and Director Evan Ajin, according to court documents filed in the United States District Court in Harrisonburg. Donovan said last year that Moore, also his spouse, was no longer the vice president.
The 17-count lawsuit alleges the three businessmen and Nexus violated the Consumer Financial Protection Act, the Virginia Consumer Protection Act, and Massachusetts and New York consumer protection laws.
Nexus, along with its subsidiaries, helps post bond through third-party licensed bondsmen with federally-approved insurance companies for people being held in immigration detention centers while they await court cases. The customer is required to pay 20 percent of the bond upfront, make a $420 advance payment, pay a $460 activation fee and then make monthly payments of $420 to lease a GPS ankle monitor, the lawsuit says.
The fees — which can drag on for years as cases wind their way through the courts — are never refunded like a fully-paid bond, according to the lawsuit. The CFPB said an immigrant with a $10,000 bond could expect to pay $17,000 to Nexus over three years. Once clients sign written agreements, efforts to collect monthly payments by Nexus include making false threats to take legal action, selling accounts into collection, and reporting consumers to credit bureaus, the lawsuit claims. Nexus also allegedly threatened to re-detain or deport clients for nonpayment, but the lawsuit said the company has no legal or contractual authority to cause any person to be deported or to negatively impact the outcome of an immigration case.
The CFPB lawsuit does not mention a specific dollar amount when discussing damages. But when filed in 2021, New York Attorney General Letitia James said the lawsuit was seeking to put an end to Nexus' alleged illegal practices, "obtain millions of dollars in restitution for the thousands of victims," and to impose penalties on the Verona company.
In 2017, The Washington Post reported Nexus' annual revenue at $30 million. Four years later in 2021, CBS News said court filings showed the Verona company's profits had doubled to $60 million. However, Nexus contends that since the start of the pandemic the company has seen a nearly 70% drop in revenue, according to court records. The company also has trouble retaining attorneys.
In June 2022, the owners of Nexus were ordered to provide the court with certain recordings, transcripts, exhibits, database files and other documents in a discovery request in the CFPB case, according to court filings. When Nexus failed to do so, the plaintiffs filed a motion for sanctions and for an order to show cause why the Nexus defendants shouldn't be held in contempt.
The delays by the defendants have harmed the CFPB and other plaintiffs in their ability to prepare the case, leaving them "without meaningful discovery and without a trial date" more than two years after the lawsuit was filed, court documents state.
On Thursday, U.S. District Judge Elizabeth K. Dillon said Nexus and its owners were in civil contempt after the defendants defied the show cause order, showed a pattern of noncompliance with other court orders, and even failed to attend a recent telephone conference in March.
"Moreover, if default judgment is to ever be warranted as a sanction for discovery abuses, it is emphatically so in this case," Dillon said in her opinion.
Claiming financial difficulties, the Nexus owners are on their third set of lawyers in the case.
"Notably, defendants’ former counsel admitted that, despite repeated efforts, he was unable to compel his clients to comply with the June 8 order and could not identify a sanction that would coerce their compliance," Judge Dillon said in her opinion. "As new counsel for defendants has admitted, defendants are in 'a financial situation which has made retention and payment of counsel difficult if not impossible, which leads to loss of counsel, which compounds procedural difficulties, which makes it more difficult to find counsel.'"
The judge said Nexus and its owners have not provided the court with any indication the company's financial situation has changed. While Dillon said she understands the difficulties that an attorney might face when a client is in dire legal straits, she added "that can no longer excuse the party’s manifest refusal to comply with court mandates and the discovery process."
Dillon entered default judgements against Donovan, Moore and Ajin. The CFPB and the other plaintiffs have until June 1 to file an opening brief for remedies and damages, the judge said in her order. Nexus was given until June 15 to respond.
Nexus is being held in civil contempt in two other unrelated court cases.
Donovan and Moore are also facing criminal charges in Virginia. In October, they were indicted in Augusta County on single felony charges of obtaining money by false pretenses and conspiracy to commit a felony, as well as two charges of financial exploitation of a vulnerable adult. Donovan and Moore are accused of stealing $426,000 from Zachary Cruz — the brother of the convicted Florida school shooter Nikolas Cruz — after befriending him following the 2018 mass shooting and moving him to Virginia.
Moore is already facing 10 federal counts of employment tax fraud after being accused in 2021 by government authorities of not paying the IRS more than $1.5 million during a six-year period while at Nexus.
Moore has pending perjury charges in the counties of Augusta and Louisa as well.
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: Nexus Services Inc. owners found in contempt as federal sanctions loom
