New York Post is beating up on City Councilman Lew Fidler after discovering that he’s involved with a company profiting from police brutality cases.
Fidler serves as the general counsel for LawCash, a company that gives cash advances to people it believes will win a lawsuit, and then takes a hiked-up interest rate after a winning verdict. According to the New York Post, LawCash’s roster of clients includes many high-profile police-brutality suits, including Joseph Guzman, a victim of the hail of bullets that killed Sean Bell, and Abner Louima.
UPDATE (8/24/2010): Fidler contacted Sheepshead Bites with additional information about LawCash and the criticism from a Supreme Court Justice. See his response at the end of the post.
The councilman is well taken care of by the firm, which he said pays him between $60,000 and $80,000 – a nice part-time gig to supplement his $127,500 salary as a council member.
But is it a conflict of interest for a city legislator to be “betting against the city,” as the NY Post labels it? Not according to Fidler.
“There is no contact with the city of New York,” Fidler told the newspaper. “What possible conflict would there be, as I do no business with the city?” Fidler added that he doesn’t have any choice in which plaintiffs to invest in, and that decision is left to the company’s underwriters.
It’s not the first time LawCash has caused a headache for the councilman. Here’s a bit from the Daily Gotham:
New York Supreme Court Justice Ira Warshawsky said that LawCash, which advances money to plaintiffs while their civil lawsuits are pending, charges high usurious rates. The judge blasted LawCash for making a high-interest loan to a poor African-American family. LawCash has charged 50% or more in interest for one of their loans. Fidler’s loan company operates like subprime mortgages in that they both take advantage of the uninformed poor. A representative of LawCash said his firm can charge such high rates because, unlike banks, its money is “advanced,” not lent, to plaintiffs, and this is a high-risk investment.
But the comparison to subprime mortgages is flawed, according to Fidler. He defended the company in 2008, saying that criticism of his involvement with LawCash is based in confusion:
Fidler says this is “utter drivel” and based on a misunderstanding of what LawCash does. In other words, LawCash lends “expensive” money, in his words, but not for mortgages.
“It’s even in our contract,” he said. “‘Make sure you’ve exhausted every other source of money before you come here.’”
“Does the business make money?” Mr. Fidler asked himself. “Yes, the business makes money. But, I mean, God bless America.”
Really, though, it’s easy to see the councilman’s interest in such a business foray. In working with a company that essentially considers odds and then places bets on legal battles, it blends the councilman’s legal profession with his favored hobby of fantasy baseball.
But is it wrong? Does it conflict with his role as a protector of the public and regulator of predatory businesses? Or is LawCash a bonafide and acceptable operation, no different than any of the other jobs a councilmember might hold?
Councilman Lew Fidler contacted us yesterday to explain a bit more about LawCash. Here’s what he had to say:
[After his statement,] Judge Warshawsky later found out that he completely misunderstood the industry. When LawCash went to court on the issue (and LawCash was not before Judge Warshawsky, which is why he made such an egregious error), LawCash was paid in full without a fight.
LawCash also has an agreement going back to Eliot Spitzer’s days as Attorney General as to best business practices in the industry, because the CEO of LawCash heads the industry association that wants to keep the industry clean.
Usury is simply not an issue. These are not loans. They are non-recourse cash advances to people for emergency living expenses. So, if the plaintiff loses his or her case, LawCash gets paid nothing and the client keeps the advance. It is at-risk capital.
There is an old study somewhere that said that 80 percent of the money advanced by the industry goes to keep someone in their home. You cannot get a bank loan pledging your lawsuit as collateral. If you don’t have a credit card or a rich uncle, this is your opportunity to reject the typical low ball offer from a defendant or an insurer and take your claim to maturity.
Finally, also not mentioned in the article that the [New York Post] reporter knows: LawCash has as much as $40 million invested in the FORTY EIGHT states it does business in, the average cash advance being $2,000. Do the math. I am not in the udnerwriting department here – and even if I were, you think I could have my perfect City Council attendance record* and know who the heck this company was giving advances to? Or who the DEFENDANTS are?
* I am listed as having missed one committee meeting this year, but I am sure that I was at the meeting – albeit briefly.