COUNTESS PEASE JEFFRIES: Attorney, Jeffries Advocates

A report by accountants Coopers & Lybrand estimated that the federal government could save one in every five dollars it spends--or about $100 billion a year--with improved management. An appealing idea, but is it practical? Since 1988, Countess Pease Jeffries, an Irvine lawyer, has been participating in a pilot program that is designed to streamline one area of government--debt collection--by handing it over to private lawyers. Jeffries, a Harvard Law School graduate, discussed the program with free-lance writer Anne Michaud.

How well is the program of using private lawyers to collect government debts working?

In 1990, private counsel collected from around the country $1.7 million in past-due debts for the government. In 1991, they collected $2.6 million.

My district, the Central District of California, performed the highest. We did $832,224 in collections in fiscal year 1991. Second place was Miami, which had $495,000 collected.

They say the Los Angeles area, which includes everything from Ventura down, except San Diego, has a higher number of debts than any other location in the country.

When this program began, there was an estimated $27.5 million owed the government in non-tax debt. Has that number changed?

I know that the Justice Department found out that the figures on actual collection cases were highly overstated because some of them turned out to be disputed (by the debtor).

But you believe the new program is cost-effective for the government?

I don’t have any figures on that. But they’re only paying us contingency fees, so if we do not collect, we do not get paid. Our costs are reimbursed, but costs are regulated as well. Basically, (the reimbursable costs are) limited to process charges, filing fees, fees to the marshal--our out-of-pocket expenses. The rest is based on a percentage of what we collect.

It’s an interesting case of government privatizing a task. Do you have a sense of whether the government is planning to use this system elsewhere?

They’re moving in the same direction with the Federal Deposit Insurance Corp.-Resolution Trust Corp. bank arrangement, where the RTC (the federal agency responsible for disposing of the assets of failed savings and loans) is farming out its work to private counsel.

There’s a tremendous amount of litigation involved there. We also are applying for RTC work.

I would imagine there would be a great deal of collections and bankruptcy activity involved.

What is it like working with the government?

We’re constantly audited and monitored to make sure we’re following the rules. Our contract is a half-inch thick and our requirements are pretty demanding with respect to compliance.

What kind of debts are these? They’re not tax debts.

No, everything except IRS obligations. These are Veterans Administration home loans, and about 75% of them are student loans.

There are a few strange ones such as overpayments on defense contracts and uncollected fines imposed by the Federal Communications Commission.

Why doesn’t the government simply use a collection agency?

Collections attorneys don’t just collect on promissory notes. We can do prejudgment freezes on accounts, we get appointments of receivers, we make motions in bankruptcy court, we do foreclosure activity.

And, of course, there are trials. Post-judgment, too, there are wage garnishments and bank levies.

Collection agencies are excellent with respect to collection of high-volume, low-dollar-amount debt. They are really better equipped to handle that type of collection than a law firm because they do a lot of telephone work, they do a lot of mailing. But they do not have the power to sue, and they do not have the power to enforce judgments once a judgment is won.

What is the range of government cases, in terms of dollars?

The bulk of the cases are small. The $1,500 to $5,000 range, I would say, is the majority of the cases. But we do get larger claims, too.

What is the biggest case you have won?

A $91,000 claim for a debtor that we cannot locate. He went to medical school in Tennessee, and his home is out here. We can’t find him. As far as I know, he’s not practicing medicine in California or Tennessee.

How many one-woman law firms are there in Orange County?

I think there are more than you know. I see more and more women in court. It’s a business that women are naturally good at, if I might be so bold to say. It requires good verbal skills, good interpersonal relationships, some ability to negotiate and persuade, and good logical skills. And we’re blessed with those.

What should people do when they receive a collection letter?

The best thing to do is to deal with the problem. I know most people lay the bill aside and forget about it; I do it, too, sometimes. But the longer you delay facing an obligation, even if you’re unable to pay it at the time, the worse the situation becomes because more costs accrue.

The next thing you know, the attorney files a lawsuit and things are completely out-of-hand.

If someone calls and tells me, “I haven’t taken a salary in two months and I’m one month behind on my secretaries’ salaries,” there’s no point in me filing a lawsuit. Essentially, they’re trying to survive. The only way they can pay us is if they survive. Very often creditors will forestall debt or let you make very small payments. But if they don’t hear from you, they just think you’re ignoring them.

On fiscal honesty. . . “Most people do pay their bills if they can. That’s the general rule. There are exceptions, and I spot them early.”

On turning over government cases to private lawyers. . . “There is an active effort on the part of the Justice Department to get (the caseload) out to private counsel and to free up the government. They decided that it’s more economical.”

On marketing a small law firm. . . “Even the largest companies are no longer willing to pay outrageous legal bills at $300 an hour. Smaller law firms tend to be just a bit more cost- competitive. We don’t have the overhead; we don’t have the perks and benefits.”

On learning to do one thing really well. . . “A great deal of my referrals come from other attorneys. It’s like doctors now, you need a specialist.”