A San Diego jury has found loan servicer, Vervent, Inc, formerly First Associates Loan Servicing LLC, legally liable in a broad racketeering enterprise that cost ex-ITT students millions of dollars. The case was brought by former ITT students over a predatory lending scheme on behalf of ITT Education Services Inc. to which Vervent Inc. was the servicer of the PEAKS student loan program. The PEAKS loan portfolio was valued at over $300 million dollars.
Prior to trial, Hon. Dana M. Sabraw, Chief Judge of the United States District Court of Southern California had this to say:
“Triable questions of fact remain, including, among other questions, whether: (1) Defendants knew that PEAKS was a fraudulent scheme, designed as a financial subterfuge for ITT to defraud its investors and DOE; (2) the PEAKS loans lacked consummated loan agreements containing legally required information, such as the high interest rates and fees charged; (3) the PEAKS loan program functioned as an association in fact enterprise that included ITT, the PEAKS Loan Trust, DBTCA, Access Group and Defendants, with each member of the association in fact having an assigned role; and (4) that association in fact was engaged in making fraudulent representations to the DOE, ITT shareholders, and PEAKS Trust investors.”
Hon. Dana M. Sabraw, Chief Judge, United States District Court of Southern California
Those triable questions were answered with a jury verdict in Plaintiffs’ favor which sends a strong message to all student loan servicers nationwide that they cannot overlook federal law in the pursuit of profit. The decision in San Diego federal court comes alongside the recent Supreme Court decision to strike down the Biden administration’s efforts toward student loan forgiveness programs. Currently, student loan debt, including federal and private loans, totals $1.75 trillion.
John J. Grogan, Irv Ackelsberg and David A. Nagdeman of Langer Grogan & Diver PC represented the student borrowers along with co-counsel Tim Blood, James Davis and Paula Brown of Blood, Hurst and O’Reardon and Paul Arons of The Law Office of Paul Arons.
“It’s always a great day when a jury holds fraudsters accountable for the harm they cause consumers. Vervent and its CEO David Johnson will have to pay for their knowing participation in a conspiracy to defraud the federal government and student borrowers by collecting on and attempting to give a legitimate face to an entirely fraudulent student loan program. We look forward to continuing to litigate the remaining claims in this matter to make sure that the ITT students who were harmed receive full reimbursement for the payments they made due to defendants’ fraudulent collection activities.”
This is the first civil RICO jury verdict LGD is aware of where a servicer has been found liable as a conspirator with the primary wrongdoer.