Harry Strausser, one of the most well-known and well-respected professionals in the ARM industry, has filed a lawsuit against the man and the company who bought him out nearly a year ago.
Strausser sold Remit Corp. to Eastern Revenue last May.
Since then, Eastern has “hijacked” Remit’s business, only taking the most profitable clients and “dumping” the rest, according to a published report.
Remit claims to have received $90,000 out of $420,000 in promised payments from Eastern Revenue. The suit names Eastern and its majority shareholder, Kyle Shanahan, as defendants. Strausser and Dwayne Heisler, a former vice president at Remit, are the plaintiffs in the suit, which has been filed in Columbia County, Pennsylvania.
A copy of the complaint, which was filed in January, can be accessed here.
The deal between Remit and Eastern was for $420,000, to be paid out over four years. Called an “earn out,” the amount was based on the percentage of gross commission revenues collected from Remit’s accounts that were transferred to Eastern Revenue. Strausser and Heisler were also hired as independent consultants, helping maintain the relationship with Remit’s former clients. Strausser was to remain a consultant with Eastern for four years, at an annual salary of $65,000 per year.
As part of the purchase agreement between Eastern and Remit, Strausser and Heisler agreed to two-year non-compete clauses.
A month after the deal between the two companies closed, Eastern started terminating relationships with some of Remit’s biggest clients, including Unifund. Then, in November, Strausser was told that his consulting agreement with Eastern was terminated, too. In late December, Shanahan sent Strausser a letter, offering a one-time payment of $25,000 or Eastern would terminate “most of your client base.” If the defendants failed to take the deal, Eastern would seek to have all of the money it had paid Remit returned, according to the complaint.
The defendants “are effectively destroying Mr. Strausser and Mr. Heisler’s reputations and careers in the collections industry,” the complaint alleges.
News of the lawsuit made the front page of the Press-Enterprise newspaper in Remit’s former hometown.
Eastern’s plan was a “scheme” to take over Remit’s portfolio, the lawsuit alleges.
As an example, the lawsuit shared an email from a Unifund auditor, detailing the results of an audit conducted of Eastern Revenue. The audit found issues “that permeate virtually every aspect of Eastern’s operations,” according to the complaint.
Some of the remediation items Unifund identified in its audit were:
- Initiate and maintain annual employee training programs
- Lack of a call monitoring program
- Not following right-party contact standards
- Not conducting criminal background checks on all employees and prospective employees
- Ensuring meaningful attorney involvement
- Not restricting anyone from entering the office suite or payment processing area
The complaint alleges that Eastern delayed the audit that Unifund wished to conduct for as long as possible, knowing “in advance that Eastern could not comply” with the client’s requirements “without incurrent substantial expense.” So, the complaint alleges, Eastern “drained what profit it could from working the Unifund account until Unifund conducted its audit, terminated the account once the audit findings came back, and then used that sequence of events as a pre-text to claim Remit had made ‘misrepresentations’ about Unifund and the ‘profit yield’ of the Unifund account so as to justify termination of the earn out altogether.”
The plaintiffs also claim in the complaint that Eastern is collecting in jurisdictions in which it lacks the necessary licenses and does not have proper physical security protocols.
The complaint lists 13 different counts, including breach of contract, fraudulent inducement, and unjust enrichment. The plaintiffs are seeking damages, attorney’s fees, and the recision of their non-compete clauses. The defendants have filed a number of preliminary objections to the complaint, which have yet to be ruled on.
Shanahan did not immediately return a request for comment.