Litigation Case Study:
Following the Money To Fraud

A national vehicle service administrator faced loss of funds advanced to a call center business, as well as substantial exposure for contract cancellation fees as a result of a fraud scheme.

Our client agreed to advance $1MM to enable a new call center to purchase marketing to grow its business. Shortly after the last marketing draw was funded, the call center closed its doors. The marketing funds vanished into thin air, and the client was potentially on the hook for $4MM in contract cancellation fees. The client engaged Shields Legal to recover the $1MM marketing advance and pursue damages resulting from the cancellation of vehicle service contracts. Shields Legal’s litigation team uncovered the call center owners’ fraud scheme and traced the client’s money. As a result of Shields Legal’s efforts, a favorable settlement was obtained.


Our client administered vehicle service contracts (“VSC”) in a number of states. Typically, VSCs are marketed and sold to consumers by call centers. Consumers often finance the cost of the VSC in monthly installments through a third-party finance company, which distributes the proceeds from the sale to the administrator and call center. Because the risk of customer cancellations or default in payments for VSCs is high, both the administrator and call center retain repayment exposure to the finance company. Should the call center become insolvent and unable to repay its liabilities to the finance company, the administrator ultimately will be financially responsible for the contract cancellation fees.


The administrator client provided $1MM in marketing advances to four young men who represented they had big plans to grow their call center business. Shortly after the client made the last marketing advance, the call center went out of business.  Despite the call center’s early success, Shields Legal discovered that the business was actually a Ponzi scheme. The call center owners used the business as a vehicle to fund their personal real estate investments and lavish lifestyles. The call center business was undercapitalized and lacked reserves to pay the call center’s potential liability for contract cancellation fees. As a result, the administrator’s $1MM was gone, and the administrator faced potential exposure of $4MM for contract cancellation fees caused by the call center’s insolvency. Two of the call center owners filed for bankruptcy the day before a jury trial was set to begin. The administrator client faced the prospect of expensive multi-state litigation with little hope of recovery and ongoing liability exposure for contract cancellation fees.

Shields Legal understood that in order to achieve any recovery for the client in these circumstances, it would be necessary to follow the money and that the opposing parties would fight every step of the way.


Our litigation team developed a three-part plan to maximize the client’s opportunity for a recovery within budget, and we diligently pursued the plan no matter what obstacles we faced.

First, we focused our discovery plan on issuing subpoenas to gather the call center’s bank records and tax returns and deposing the professional assistants and accountants who knew what happened to all the money.

Shields then engaged a forensic accounting firm with a team of experienced testifying fraud experts.  The forensic accounting firm determined that the call center was undercapitalized from inception and further identified the fraudulent transfers made to the call center owners.

Finally, based on the documentation and forensic work, Shields established that the call center owners used the client administrator’s marketing advances and the call center’s funds to purchase real estate for themselves and to fund their lavish lifestyles while the call center was insolvent. This paved the way for Shields to file a notice of lis pendens against real property owned by the call center owners which remained in place until a settlement was completed in the client’s favor.


As a result of Shields Legal’s diligence and tenacity, our client was able to secure recovery in a set of circumstances that initially appeared hopeless. As a nod to our team’s effectiveness, one of the call center owners subsequently referred a case to Shields.