Collection Agency Head Indicted for Alleged Theft of $2.7 Million From City of Boston
The head of a collection agency in Massachusetts was indicted yesterday after officials say he stole $2.7 million in money that was supposed to be remitted to the City of Boston over a five year period.
A Grand Jury in Suffolk County, Mass. yesterday returned indictments against the president of a collection agency for allegedly stealing millions of dollars worth of excise taxes from the City of Boston.
Stephen Colahan, of Beverly, Mass. is charged with Larceny over $250 by Continuous Scheme and Procurement Fraud. Prosecutors allege that Colahan, over the course of five years, transferred more than $2.7 million from a City of Boston bank account to his own company’s account.
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According to a press release from the Massachusetts Attorney General, from 1995 until June 2007 Colahan’s company, Walker Associates, Inc., was under contract with the City of Boston to collect delinquent motor vehicle excise taxes from Boston residents. Under the terms of the contract, Walker was required to pay over to the city 100 percent of the taxes and statutory fees collected; the city would then pay Walker Associates a percentage of the fees the company had collected. Each week, Walker Associates was required to pay over to the city the amount of the previous week’s cash payments and cleared checks, and to provide a paper and electronic report detailing the amounts collected from each taxpayer and the date of collection.
Beginning in June 2001, Colahan allegedly began taking money out of the bank account into which his company deposited all of the city’s tax and fee collections, and using that money to cover Walker’s business expenses. Authorities allege that for the next five years, Colahan repeatedly stole from the city’s account. From June 2001 through August 2006, authorities allege that Colahan transferred over $2.7 million to his own company account.
In October 2007, the state’s attorney general’s office began an investigation after the matter had been referred by the Boston Police Department and the City of Boston.
A Suffolk Grand Jury returned indictments against Colahan Tuesday. He is scheduled for arraignment on May 12, 2009, in Suffolk Superior Court.
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Comments
Comment from John Kenny - Receivables Management Mohawk, NY on May 6, 2009 at 11:29AM EST
I'm going to hazard a guess that the city of Boston was slow to pay the percentages promised. Having counted on the payments agreed to in their municipal contract, Walker Associates decided to expedite things by paying themselves with the city's money. Assuming this to be true (and I've worked many government contracts) both parties are in the wrong. This will be a story to follow.
Comment from Anonymous on May 6, 2009 at 11:43AM EST
Not too many years ago, having run an agency operation, I discovered that a trusted attorney had accumulated BIG money from 'acquiring' the funds of non-cashed forwarded checks to creditors. This discovery was made two weeks before his death. Go know!
Comment from Anonymous on May 6, 2009 at 11:55AM EST
Being in the industry and having clients with the same rules, I would guess he was paying out weekly as promised and the City was months behind on paying him his fees. He probably dipped into the trust account so he could keep his company running while he waited for the City to pay up.
Comment from Hamilton on May 6, 2009 at 11:56AM EST
In reply to the first comment that "There are many collection agencies that are doing the same thing this agency did...", I couldn't disagree more strongly. I've been in this business for a long time as a regulator and as a collector and have seen only a few (again, over a long period of time) acting like that. Colahan will get what he deserves. And it's no justification if the client was slow to pay: If you raid the trust fund you're in trouble.
Comment from Collection on May 6, 2009 at 12:02PM EST
No matter why or how the agnecy did it; NOT SMART!
Can't understand how they didn't see this coming.
Comment from Tom Hyberger on May 6, 2009 at 12:02PM EST
The question here is simple. Did his contract allow for this in the event Boston didn't pay in a timely fashion. Most collection contracts allow for an offset of sorts and if this is the case it's not an issue. The return of an indictment would mean that portion of the contract didn't apply. Thus, shame on the collection firm.
Comment from uconnmike on May 6, 2009 at 12:41PM EST
I have plenty of gross clients who don't exactly pay their invoices when they are due. That makes it okay for me to steal and embezzle from them? You've got to be kidding! Municipalities in general are slow payers so you've got to take that into account when you enter into agreements with them. My A/R days are higher than I'd like and I'm sure many of my counterparts are in the same boat but to use that as justification for stealing is ludicrous. One thing I don't understand is why the City of Boston would give an outside vendor the ability to make withdrawals from their accounts unless that was being done in a fraudently manner as well.
Comment from Dean Richardson on May 6, 2009 at 12:42PM EST
Sounds like he went from a gross remit process to a net remit process. I think that the account they are referring to is a trust account which he obviously has control over. There are lots of pieces to the puzzle missing here. Doubtful that you could steal $2.7 million over a five year period, without someone noticing.
Comment from DONALD DALY on May 6, 2009 at 6:38PM EST
2001 ~ 2007, $2.7 MILLION - It's good that the City of Boston was on their toes and nipped this crook and his actions "in the bud". This is the type of person who does so much irreparible damage to this industry and the honest players. The punishment should be lenghty prison time and monetary. Hang em high!
Comment from LoveHate on May 6, 2009 at 6:50PM EST
Both parties are in the wrong. Hilarious. And we wonder why we are always having to defend our reputation. Let's be clear: stealing=crime. Not getting your fees on time=a pain in the ass.
Comment from Anonymous on May 7, 2009 at 3:27AM EST
My initial impression was like several of you in which he was likely transferring amounts that he was OWED by a client that demanded gross remit but was extremely late in paying the agency. However, bear in mind that a grand jury indicted him. That's a pretty strong indication that that he was definitely involved in some nefarious activity with the trust account. However, if that is the case, I cannot understand how he could have the brass to unjustly withdraw what amounts to about $50,000 per month without it being noticed for 5 years.
Comment from Anonymous on May 7, 2009 at 8:19AM EST
Sounds like the owner was acting like a desperate person. Let's wait to pass judgement until the full story comes out.
Comment from Anonymous on May 7, 2009 at 12:10PM EST
I agree with the above post, no one knows what the story is until it comes out. Much of the money was put back, and it was used to keep the company working on their clients behalf (pay roll, full payment of insurance premium at 100% company paid health ins for employees, rent on space) per the full articles in Boston papers. We, more than anyone else, should know not to assume right out of the gate.
Comment from Anonymous on May 7, 2009 at 6:51PM EST
As a credit manager, I hate to receive the collected amount from the debt collector, minus the commission owed. It causes so much extra administration work with journals and reconciliations.
However, I do understand the debt collector's concerns. If they pay the full amount up front but have to wait for the customer's payment, this causes a cashflow issue.
My suggestion to my debt collectors has always been, send me an advice listing the total amount you collected plus the customers' details and your invoice detailing your charges.
On receipt of this information I will organise your payment. On receipt of the customers' payment, you forward the total dollars collected.
A win -win for both parties, and I would suggest less administration work for both parties.
This process also removes some of the temptations and issues which this legal case has revealed.
Business is always best when you keep it simple
Comment from Karen Hutchinson-- Long time family friend on May 15, 2009 at 11:59PM EST
Again, let me reiterate-- I have known the Colahan Family all my life. They are good people--lets wait to hear the full story.Everyone is innocent until proven guilty!!! In the meantime lets stop speculating!!!!