CFS II, the collection company founded by industry maverick Bill Bartmann, is reviewing three states - Nevada, North Carolina and Illinois - as a potential location for a 40,000-square-foot call center site that eventually could provide 2,000 jobs.
On Tuesday, the Tulsa, Okla.-based firm won approval from the Nevada Commission on Economic Development for more than a half million dollars in sales and business tax abatements, along with $34,000 in sales tax deferrals, as part of an incentive package to attract the business.
CFS II would immediately house 500 employees at the location, with plans to grow to 200,000 square feet and 2,000 jobs within five years. Bartmann, CEO and president of CFS II, expects to make a final decision on where to open the call center by the end of March.
Bartmann's epic rise and fall in the debt-buying industry is a story many thought ended a decade ago but was revived in 2010 when he founded CFS II.
Thirteen years ago Bartmann's Commercial Financial Services, also based in Tulsa, Okla., closed amid a huge fraud scandal,
CFS bid up the price of bad debt and monopolized forward-flow contracts with major banks in the late 1990s. Described at the time as either a genius, a loose cannon or a generous man (employees were treated, with their families, to lavish perks such as all-expense paid vacations), Bartmann was the first to securitize bad debt on Wall Street. This gave him access to huge amounts of capital that none of his competitors enjoyed, an approach that helped him quickly build his CFS into a $3 billion giant.
His peers and rivals questioned Bartmann’s methods from the start, arguing CFS would never be able to sustain the inflated rates he charged for bad debt. Bartmann paid up to twice as much for charge-offs as most of his competitors. Banks at the time were clamoring to sell their bad debts to the company.
But CFS failed in 1999, putting 3,600 employees out of work. The circumstances surrounding the failure led to a federal grand jury indictment of Bartmann. Along with former CFS executive Jay Jones, he was accused of creating a shell company, Dimat Corp., to inflate the performance of CFS.
Bartmann was acquitted. Jones pleaded guilty to a conspiracy charge and was sentenced to five years in prison. Federal Bureau of Prisons records show he was released in 2007.
Last year, with CFS II in place, Bartmann visited several states as part of what he called his "Stop These Criminals" campaign where he testified about collection abuses.
"Consumers go to jail over less than $100. Collectors threaten violence and demand sex for repayment. Abusive language is the status quo. As an industry insider, I’ve seen clear patterns of abusive behavior by other bill collectors and I know how to stop them," Bartmann testified last year at a hearing before Massachusetts Attorney General Martha Coakley. "I’m not afraid to pick a fight with abuse in this $40 billion industry even if I’m all alone. My goal is to shine light on abuse in this barbaric and out-of-control business. I’ve been a debt collector for decades, so I’m just the guy to do it."
In Nevada, CFS II qualified for tax incentives by meeting three statutory requirements by the state - job creation, average wage and capital investment. There was no immediate word on any specific proposed sites in any of the states under consideration.
The company’s application said it will pay $19.87 an hour on average, 2% more than the requirement, and invest $1.7 million, 68% more than required. The 500 jobs created is more than five times the statutory requirement. CFS II needed only two of the three requirements to qualify for tax breaks.
State officials estimated that sales tax, abated to 2% for a year, would cost the state $102,480 and the modified business tax, abated by 50% for four years, would result in $435,626 less going to the state. The company also would get a 60-month deferral on sales tax payments.
The state’s analysis of the benefit to the state is that it would create $11.4 million in new taxes and an economic impact of $666.4 million over 10 years. That’s $1,238 per abated dollar.
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