Three states seeking roughly $600 million from Nexus Services Inc. in lawsuit
HARRISONBURG — The states of Virginia, New York and Massachusetts, along with their respective attorney generals, are looking to bring the hammer down on Nexus Services Inc. by demanding roughly $600 million from the Verona company and its three owners in a two-year legal battle, court records show.
In May, a federal judge found the company's owners in civil contempt for noncompliance in a 2021 lawsuit filed by the Consumer Financial Protection Bureau, and said default judgements will be entered against majority owner Mike Donovan, Executive Vice President Richard Moore and Director Evan Ajin.
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. The company, through its subsidiary, Libre by Nexus, helps people secure their release from the custody of United States Immigration and Customs Enforcement (ICE).
"In substance, Libre acts as an intermediary between the detainees and sureties and their bond agents. Libre requires detainees and their co-signers to execute agreements with certain obligations and, in exchange, Libre agrees to indemnify the sureties and their bond agents for any losses in connection with immigration bonds. The sureties then post and issue immigration bonds to ensure the consumers’ release from detention," said a memorandum filed last week.
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 the owners of Nexus.
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 saw a nearly 70% drop in revenue, according to court records.
Last week, the CFPB said it will seek $555 million ($111 million per defendant) from the three owners, Nexus Services Inc, and Libre by Nexus, along with another $24.3 million for violations of state statutes. The states will also seek refunds for Nexus clients as well but the amount being sought was redacted in the initial court filing.
"And Defendants should be prevented from introducing evidence that they failed to produce in discovery to belatedly attempt to avoid or reduce their liability for their unlawful conduct," the memorandum said.
In a text to The News Leader, Donovan, president of Nexus Services Inc., said he plans on appealing the default judgement.
"Obviously, we will contest the CFPB's ridiculous proposed damages award," Donovan said.
Court records state that despite not being certified to issue surety bonds or being licensed as a bail-bond agent in any state, Libre, a subsidiary of Nexus, touts itself as an affordable way to secure release from federal custody.
"Libre makes these representations despite knowing that they are false and misleading, that consumers routinely do not understand the core terms of its program, and that Libre’s own records indicate that consumers cannot afford Libre’s large fees," court records allege.
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.
"This amounted to tens of thousands of dollars for released detainees whose cases remained pending for years," the memorandum said in support of evidentiary sanctions and injunctive relief.
The lawsuit contends that around 2018, Nexus revised its written client agreement to not require monthly lease payments for a GPS device, but did include a monthly program fee.
"These fees vary from $250 to $475 per month for a term of 22 to 60 months, depending on the size of the released detainee’s bond, and are also non-refundable. Consumers who successfully make all of their scheduled payment fees continue to be charged a monthly maintenance fee of $50 until their bond is canceled," the memorandum said.
The lawsuit said clients with a $10,000 bond whose immigration case took three years to resolve could expect to make non-refundable payments to Libre in excess of $17,000. Court statistics show the company had thousands of clients.
Between 2014 and 2020, the lawsuit said three companies Nexus contracted with for the ankle monitors terminated the contracts because the Verona company quit paying for the equipment. "Rather than inform consumers that their GPS devices were no longer functional, Libre misrepresented to consumers that the devices were active, admonished them to continue to charge the devices, and continued to charge fees for the now-useless devices," the memorandum states. The original contract wouldn't let consumers remove the device for injuries, pregnancies or illness, but the new agreement does allow for removal but at the sole discretion of Nexus, the filing said.
The company's call center employees were accused of being inadequately trained, not provided with scripts or talking points, and gave clients inaccurate information. "At the same time, Libre’s financial rewards and policy of requiring employees to handle four intake calls each hour incentivized its employees to rush through the approval process without explaining the terms of Libre’s agreements," the court filing said.
The company reportedly made false and misleading threats to its clients and co-signers, court filings allege. Some clients were reportedly threatened with re-arrest, detention or deportation "despite the fact that Libre had no legal or contractual authority to negatively impact the outcome of immigration cases or cause any person to be detained or deported."
Donovan said Nexus continues to operate and remains committed to serving its clients. He also maintains that the CFPB's funding method — which is being challenged in the federal courts — is illegal.
"This case underscores the urgent need for greater transparency, accountability, and due process in our regulatory institutions, which goes beyond Nexus, as many have suffered under the weight of an agency operating with dubious funding and a politically charged agenda," Donovan said.
The U.S. Court of Appeals for the Second Circuit and the Fifth Circuit have spilt on the issue, with the Second Circuit ruling the CFPB's funding is constitutional, and the Fifth Circuit ruling it's not. The U.S. Supreme Court is expected to weigh in on the issue later this year.
The New York Times reported more than a dozen companies, citing the Fifth Circuit ruling, are looking to have lawsuits or penalties by the CFPB tossed. Donovan said Nexus has filed motions to challenge the funding mechanism, and said the Fifth Circuit ruling could bring an end to the lawsuit.
"Essentially, it could nullify any action executed through unconstitutional or illegal funding, thereby facilitating an appropriate resolution to our case," he said.
In February, the National Consumer Law Center said the Fifth Circuit's ruling could threaten 11 years of work by the CFPB. “The Fifth Circuit’s holding that the method of funding the CFPB authorized by Congress violates the Appropriations Clause is radical and unprecedented," said Lauren Saunders, associate director of the National Consumer Law Center, in a press release.
Donovan said he believes the Supreme Court will ultimately rule against the CFPB's funding process.
A two-day hearing for damages in the CFPB's federal lawsuit against Nexus is slated to begin Aug. 15 in Harrisonburg, court records show.
The CFPB lawsuit is not the only legal hurdle Donavan and Moore, who are married, are facing. The couple, along with a third Nexus employee, has been 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, and 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: Lawsuit: Roughly $600 million being sought from Nexus Services Inc.
