Diversion firm owner chosen by county attorney associated with past sanctions

The owner of a Red Wing firm chosen by Hennepin County Attorney Mike Freeman to provide diversion programs for first-time offenders has been involved with companies sanctioned by the state for deceptive and illegal practice.

Diversion Solutions is set to replace the nonprofit Operation de Novo to provide the service after offering a $200,000 annual bid. Freeman said hiring the for-profit company instead of De Novo, which worked with the county for 46 years, could save up to $500,000 a year. The contract must be approved by the County Board of Commissioners, who have not yet scheduled a vote.

But some aspects of the for-profit Diversion Solutions have raised concern among advocates. While the staff of de Novo is composed of college educated professionals trained in behavioral sciences, Diversion Solutions CEO Scott Adkisson and his staff have little formal training in diversion programs. Further, companies Adkisson has been involved in were sanctioned by the state Department of Commerce and Attorney General for operating without a license and misrepresenting themselves as law enforcement or a prosecutor while improperly collecting fees.

Hennepin County attorney's office spokesman Chuck Laszewski declined to say whether the office was aware of the sanctions when they agreed to contract with Diversion Solutions.

"Our evaluation of Diversion Solutions is in its final stages and we have been investigating all allegations against the company and its principals," Laszewski said.

Diversion Solutions is one of three interrelated companies, along with Financial Crimes Services and Check Diversion Program, that are under the Adkisson's umbrella, with the latter two sanctioned by the state. They office out of the same address in Red Wing.

Adkisson said on Friday that the two sanctions should not disqualify his company from holding the Hennepin County contract. "We didn't commit any crimes," he said, and he added that if they had, state authorities would have shut his operation down. In both cases, he said, his companies worked with officials to rectify the problem so his business could continue to operate.

The company falsely claimed to be a law enforcement entity when it attempted to recover debts from consumers and extracted fees after the statute of limitations expired, the attorney general's office said. The company paid $30,000 in restitution without admitting culpability.

Pete Barry, a nationally known consumer rights attorney who sues debt collectors, said Diversion Solutions' past should be called into question. "Any company that engages in illegal and unlicensed collection activity, should not be getting fat government contracts from our county attorney. This is especially true given that the company is supposed to be teaching how to obey the law."

Adkisson's companies are interrelated. Financial Crimes Technology Services was formed in 1998 with the Check Diversion Program as its primary service, according to a company website. It changed its name to Financial Crimes Services in 2001 and now has two divisions, one of which is Diversion Solutions, the website says.

In 2013, the Commerce Department conducted an investigation of Adkisson's Check Diversion Program, which operated diversion programs for people who wrote bad checks. The Department issued a cease-and-desist order, saying the company was operating without a debt collector's license. Three years earlier, based on information the company provided, the department concluded it was not a debt collector and needed no license.

Check diversion programs have subsided because fewer retailers accept checks, but in years past, they represented a national problem, experts say.

Cox said the companies can scare people into believing they are the district attorney or, in the Minnesota case, the county attorney, and that the consumer must pay for the education program or face prosecution.

"Its scaring people into believing something that is not true," Cox said.

In selecting Diversion Solutions, Freeman rejected Operation De Novo's bid. De Novo offered to do work for $600,000 to $700,000. Spokesmen for Freeman said that the county would save money by switching to Diversion Solutions and get just as good a program.

Because of the violations, the company's background merits more scrutiny, said Mark Osler, a law professor at the University of St. Thomas and a former prosecutor.

"Low bid justice comes at a risk," he said.

In 2010, the state Attorney General conducted an investigation of Financial Crimes Services (FCS).

On March 22, 2010, Ramsey District Court Judge Dale Lindman approved an injunction submitted by Deputy Attorney General David Voigt, filed against FCS for its check diversion work, finding it was not only collecting debts, but misrepresenting itself.

"The Attorney General has reason to believe that FCS has committed violations of one or more consumer protection statutes ... in its efforts to collect debt and other fees from Minnesota citizens as part of the pretrial diversion program it administers," a document said.

It found the notices used by FCS "often misrepresented the company as a law enforcement agency or a prosecutor" and the notices to check writers "generally failed to disclose ... the voluntary nature of such diversion programs and the right of the individual to contest whether they wrote the check or owed the debt."

It said FCS collected fees even though the criminal statute of limitations had expired.

In an interview Friday, Adkisson said, that his company did not misrepresent itself to consumers. He said he put the persons alleged to have written bad checks on a long term repayment schedule that went beyond the statute of limitations.

"We did not know we could not go beyond the statute of limitations with the payment plan," he said. "We were trying to help the offender out and make the victim and the offender, the check writer, whole."

The firm was ordered by the attorney general to tell participating consumers that its program was voluntary and a fee was not required if they did not participate.

FCS was also ordered to make restitution payments of $30,000 to reimburse consumers who paid a diversion fee after the statute of limitations ran out. If FCS violated the agreement, it faced a financial penalty of $100,000. Adkisson signed the agreement.

FCS paid back $22,000.09 to consumers. The remaining $7,999.01 was transferred to the state general fund, as required by law, said attorney general spokesman Ben Wogsland.

Adkisson contacted the Commerce Department. The company maintained it was not a debt collector and in an e-mail exchange the department asked for a description of its work. Provided the information, the department concluded Adkisson's business did not require a license.

Three years later, however, the department issued a "consent cease and desist order," declaring Adkisson's Check Diversion Program was "engaged in the business of collecting claims for others without having first obtained a collection agency license."

Ross Corson, a spokesman for the department, said in a statement that the department conducted an investigation in 2013 and decided to reverse itself, concluding Adkisson's company was engaged in debt collection and operating without the required state license.

"We immediately went and acquired a collection license and the commerce department expedited our request to help us get it and we have been licensed ever since," Adkisson said in an interview.

Some legal experts contend Diversion Solutions' past should be called into question before it runs Hennepin County's diversion program.

Daly, who has taught legal ethics, added. "I question the ethics, judgment and ability of the company to achieve the objectives of the diversion program as an alternative to prosecuting criminal cases in Hennepin County."

Randy Furst • 612-673-4224