Credit-Repair Firm Faces Theft Charges

The Los Angeles city attorney has filed grand theft charges against the operators of a Reseda-based credit-repair firm for allegedly failing to carry out their promises to remove negative information from clients’ credit histories.

Eric Dean Phillips, 37, of Sherman Oaks; Bill Nelson, 49, of Simi Valley, and Cheryl Lee Pagliaro, 46, of Hollywood, were named in a criminal complaint filed in Los Angeles Municipal Court. They are to be arraigned Sept. 14, said Deputy City Atty. Fay Chu.

As operators of Data Mortgage Services Inc., the defendants are accused of failing to clean up the credit records of at least 22 Los Angeles County residents who had paid the company as much as $6,000 for their services, Chu said.

“We’re concerned because these are recessionary times when a lot of people are trying to get credit,” Chu said. “In a lot of instances these were people trying to buy homes, but in order to get a loan they had to have their credit history taken care of.”

City Atty. James K. Hahn said in a statement that credit-repair swindles “are becoming a major problem in our troubled economic times” because people are “desperate to get bad-credit ratings removed from their records.”

In some cases, the defendants told clients they would improve their credit by removing federal tax liens or by resolving disputes with individual creditors, Chu said.

But, instead, the defendants allegedly forged documents that indicated the problems had been resolved. Credit reporting bureaus then refused to remove derogatory information from Data Mortgage clients’ histories because they suspected that documents such as credit clearance records, court stipulations and IRS tax liens stamped to indicate they’d been filed erroneously were actually false.

One such credit reporting firm, Equifax Credit Information Service, reported its suspicions to the state attorney general’s office and clients who believed they’d been defrauded notified the U.S. Justice Department. Investigators from the state attorney’s general’s office and the IRS conducted a search of the company’s offices last November and discovered fraudulent and forged documents in the files of many clients, said city attorney spokesman Ted Goldstein.

Rubber stamps and cut-and-paste letterheads from major department stores used to make the bogus documents meant to indicate that credit problems had been resolved also were discovered, Chu said.

Philips and Nelson were each charged with 22 counts of grand theft, two counts of unlawfully receiving money prior to the performance of credit services, one count of failing to pay city business taxes and conspiracy to violate state laws regulating credit services, Chu said. Pagliaro faces one count of conspiracy and unlawfully receiving money prior to the performance of credit services, Chu said.

Each count of grand theft is punishable by up to a year in jail and a $1,000 fine, Chu said. The other charges are punishable by six months in jail and a $1,000 fine, she said.