Todd Wolfe admits he has many faults.
But when it comes to his business practices, he maintains he is a man of ethics, even in the scrutinized industry of debt collection.
“I’m not a saint. I’ve got more sin in my life than most.”
On the other hand, when it comes to trying to get money from people behind on bills, “you treat that consumer like your mother,” said a tweed-jacket-clad Wolfe as he leaned back in a conference-room chair and relaxed his elbows on the arms.
An attorney sat on each side of him.
The 41-year-old founder of Deca Financial Services in Fishers is at the center of a legal feud with Educational Credit Management Corp., an Oakdale, Minn., not-for-profit that insures $35 billion in federal student loans.
ECMC also owns a for-profit company that Wolfe and partner David Hoeft started in 1999, Indianapolis-based Premiere Credit North America.
ECMC acquired a majority stake in Premiere in 2007. Wolfe departed in 2009, and shortly thereafter ECMC paid him $8.3 million for his remaining stake in Premiere. Wolfe had to sign a non-compete agreement as part of his buyout.
ECMC sued Wolfe in 2011 in a Marion County court, saying he violated his contract by “poaching” Premiere’s staff and pursuing business with clients he wasn’t allowed to approach. The lawsuit also named more than a dozen of Wolfe’s employees who ECMC says violated their Premiere employment contracts by going to work at Deca.
Wolfe fired back on July 31 with a federal antitrust lawsuit claiming the contract was fraudulent and ECMC is trying to illegally hold down a competitor, among other accusations.
“We’re not alleging tough competition,” said Barnes and Thornburg attorney Hamish Cohen, whose specialties include antitrust laws. “What we’re alleging is conduct that is anticompetitive—unreasonable conduct—that affects not just Mr. Wolfe and Deca, but the market.”
A spokeswoman for ECMC said the organization does not comment on pending litigation.
Each lawsuit is seeking unspecified damages.
Before the buyout
Hundreds of pages of legal documents paint pictures of conspiracies that each side accuses the other of committing.
Wolfe’s credibility and ethics as a businessman are common themes in both cases.
When asked about his career, he described a rags-to-riches story in which he grew up as a poor widow’s son who dropped out of college so he could support a family that lived in a trailer.
Then he landed a $40,000-a-year job as a debt collector.
He met Hoeft during a Bible study group, he said, and they hit it off—enough so that they eventually went into business together.
Premiere began with government-issued student loan debt at the core of its business model.
Collecting back taxes for the state of Indiana was the No. 2 source of revenue for the company, which grew to about 250 employees managing a portfolio of $1 billion by the time Wolfe left, he said.
He has received recognition for his work at both companies. He made IBJ’s “40 Under 40” list in 2004. More recently, the Indiana Economic Development Corp. in July named Deca as a “Company to Watch.”
There are also critics.
The Better Business Bureau graded Deca with a C- and lists 26 complaints filed in the past year.
Student debt’s big dollars
It took until 2004—five years after launching—for Premiere to snag one U.S. Department of Education contract.
“It is a very, very lucrative contract, one that everyone in the industry wishes they had,” said Patrick Lunsford, editor of insideARM, a trade publication for accounts receivable management.
The Consumer Finance Protection Bureau estimates student debt totaled $1.2 trillion as of May, with close to $900 billion coming from federal aid. About 8 percent of government borrowers are in default.
Premiere’s pursuit of Department of Education contracts first caught the attention of NelNet Inc., a debt collector based in Lincoln, Neb., that acquired 50 percent of Premiere in 2004. That left Wolfe and Hoeft each with 25 percent.
NelNet in 2007 sold its stake to ECMC. The two founders each sold 5 percent of the company, which gave ECMC 60 percent of Premiere. It was enough for a controlling stake.
From there, the stories divide, based on what each lawsuit alleges.
Premiere’s board, controlled by ECMC, called Wolfe into a meeting in July 2009.
Afterward, he walked out for the last time.
As one document in ECMC’s lawsuit frames it, “Mr. Wolfe resigned as President and COO of Premiere Credit in mid-summer 2009. After achieving many significant milestones for a company he founded in 1999, Mr. Wolfe left Premiere to pursue other business opportunities.”
Wolfe claims ECMC forced him out before a new Department of Education contract that he negotiated hit his company’s bottom line, boosting its overall value.
The firm is paid commissions on defaulted loans it collects.
After terminating his contract, ECMC offered to buy out Wolfe’s remaining 20 percent of the company for $8.3 million.
Part of the buyout meant signing a non-compete agreement in which he would neither solicit business from Premiere’s customers, which are listed in the contract, nor recruit Premiere’s employees.
He and ECMC also set up provisions that they would not disparage each other or do anything to tarnish the other’s image.
ECMC and Premiere sued Wolfe, saying he broke that agreement by starting Deca in 2009 and “surreptitiously” trying to pull in business from Premiere’s clients and luring away its employees.
Wolfe denied he ever approached any companies on the list.
Regarding the employees who moved jobs, “They came to me,” he said.
He and his attorneys say the list was fraudulent in the first place because it included companies that weren’t actually current clients.
“What they did was, they represented to Mr. Wolfe that that was a list of their current clients,” said Deca’s general counsel, Paul Jefferson. “What they actually did was, they went out and said, ‘I want to know every client we’ve had in the last two or three years. We want to know every prospective client.’”
Wolfe could not check client records before signing the agreement because ECMC threatened to arrest him if he went to Premiere’s office, Jefferson continued.
Wolfe’s case continues to assert that Premiere and ECMC executives began telling others in their industry that Premiere was “non-compliant,” which violated the non-disparagement part of their contract.
ECMC had not filed a response to Wolfe’s claims as of IBJ’s deadline. The court has not scheduled any appearances.
A jury is scheduled to hear ECMC’s lawsuit against Wolfe in March 2014. A summary judgment in April dismissed the claims filed against Deca’s employees.•