Words, with guest host, author nomi prins. This week this American Life contributor jake halpern and his latest book, bad paper. It tells the story of a former Bank Executive and a former bank robber going into business together to collect unpaid bank debts by often questionable means. The program is about an hour. Host hi and welcome. Im nomi prins here today with jake halpern, the author of the fascinating and horrifying new book, bad paper chasing debt from wall street to the underworld. Jake, welcome. Guest thanks for having me. Host thank you. This book is incredible, and so is your story. And i think the two really mirror each other. This takes place in buffalo, new york, a lot of it. And youre from there, arent you . Guest yeah, thats right. I grew up there. My tad and his wife my dad and his wife still live there, and its how i find my way into this world. Host you talk about a particular and many unsavory characters that are scrabbling to make their own peace with the world and often have prison records and have been drug dealers and so forth. Theres a fellow named jimmy that comes out here that seems to be one of the main characters of this nonfiction store. Guest right. Host can you talk to me a little bit about how you connected with him . Guest yeah. The way this got started was i was talking to my mom a few years back, and she told me she was being hounded by a debt collector. She said i dont owe the money hes saying i owe, but i think im going to pay him so hell stop harassing me. My mom is no witting lily, so i thought this is bizarre. I started googling it and saw there was a lot of this going on, and actually the epicenter of Debt Collections in general in the United States was buffalo, or it was one of the big hubs. So i had it in my head i was going to do a story actually from the collectors perspective, whats it like to collect debt, whats your life like. So i pitched the story ott new yorker just kind of bare bones. What do you think about this, im from buffalo, my editor said, great, 5,000 words, when can you get me copy . I kind of panicked, was i had nothing because i had nothing. I went to buffalo once, no one could talk to me. I went a second time, and i still had nothing. I started to panic because i had nothing for the story, so i went on facebook and sent messages to everyone i went to high school with, everyone my brother went to high school with, and i got one message back from this guy, actually jimmys brother, and i got jimmy on the phone and he said to me, basically, you better get down here quick because my business is struggling, i dont know how many longer ill be how much longer ill be open. But if you can show folks how hard my daytoday life is, ill will satisfied. I showed up, jimmy was immediately one of these incredible characters that was eloquent, im driving around in his car with him, going to church with him, meeting his family, and that becomes my entry point into this world. Host he had a struggle. You got to him through a set of correspondences through facebook and so forth. Guest right. Host tell me about your history in buffalo and just the atmosphere, how its changed from what you knew growing up in your childhood to the kind of place where its one of the capitals, right, of Debt Collection in the United States. How did that finish. Guest yeah. Buffalo was once this Big Industrial powerhouse, it had all this industry, and starting in the late 70s, early 80s, that all starts to fall apart, and unemployment goes through the roof. In place of these Old Industrial jobs, collections kind of fills that void. Someone it would me buffalo so good at collections because even though the country has been in a Great Recession since 2008, buff buffalos been in it since 1979, and people can connect with people who are having hard times. When i was a teenager even, this was kind of starting to take form. But i dont think i really knew about it. And even though i went to high school with jimmy and it was supposed to be an integrated high school, we came from opposite sides of main street, and i didnt have any sense of really what life was like on the east side of buffalo or what jimmy was going through. Even though we could talk about having the same english teacher, it was like we were from a totally different world, and it wasnt until i started reporting the story i learned in high school his father was a heroin addict, he had had become a cocaine dealer, had gone to jail on a gun possession, and our lyes couldnt have lives couldnt have been more key divergent. Host he has something you call the package guest right. Host which seems to be the crux of what youre chasing and what the debt collectors are effectively chasing and involved in in the book. Can you kind of talk about what his relationship what the package is and how this opened up the rest of this amazing story to you. Guest right. So the package is this one piece of debt that i follow through the debt, and its, i think, helpful to understand when i talk about debt thats being bought and sold here, were really just talking about an excel spread sheet. You have the banks or big creditors, and they try for six months to collect on a debt thats been paid, and when they cant, theyll typically sell it off for pennies on the dollar to debt buyers, and then those debt buyers will collect as much as they can, and then sell it to the next and the next and 2 next host what kind of information . Guest yeah. So you look at the spread sheet, itll be debtors name, Social Security number, address, balance, date the account was opened, maybe one or two other fields, but that ice basically thats basically about it. Theyre bought and sold on email, and that is the paper, but thats really all that it is. As you can imagine, it doesnt take much for something to go wrong, for some of the fields to get mixed up, the amounts, the debtors names to get confused or for someone to sell the same excel spread sheet to multiple, unsuspecting buyers who are all collecting on it at once. So in my book i follow the package, this one piece of debt, thats about 48 million in its face value but is bought for pennies on the dollar by this debt buyer in buffalo, aaron siegel. This piece of debt gets stolen. Somehow aaron finds out from his collectors. Aaron, Something Weird is going on with these accounts, it appears that somebody else has access to this information and is collecting the money from the dealters on this package before we the debtors on this package before we get to them. So at that point he called his fixer whos a guy named Brandon Wilson whos kind of his unofficial partner whos a former bank robber whos gotten into this business, helps him buy and sell debt, but also helps him solve these sorts of problems. And its brandon who goes and tracks down the thieves that have gotten ahold of this debt and retrieves it. And we can talk about its a crazy showdown with guns, and they get it back. But the world he must go to to retrieve that debt, thats the world that jimmy inhabits which is this kind of gray area of legality, kind of underworld of buying and selling debts in a sketchy manner that exists in buffalo and other places. Host right. And this underworld has that hierarchy you mentioned, and you have former thugs to a large extent at the bottom level getting some of this paper that is perhaps sold and resold. You also have to talk about how papers been stolen guest yep. Host as well, and then you have the level up through aaron siegel. He seems like an interesting character. Talk about how you got to him through jimmy and also he wasnt a thug. He grew up on the good side of buffalo. Guest thats right. Host he had a wealthy family upbringing, lived in a mansion. Guest right. Host so how did he come into the same business . Guest right. So the story really the way i tell the story in the book, it starts with this guy, aaron siegel, and aaron grew up in a wealthy and well known and well respected family in buffalo. He goes to wall street for a while as a banker, he even does some time in london and decides he wants to come home to be closer to his family. And he ends up working at an office of bank of america in buffalo. But around the time he comes back, whats happening is throughout buffalo entrepreneurs are buying some debt, or theyre buying this paper, these spread sheets, and opening up a shop where they hire collectors to collect on it. This is right before the kind of yeah Great Recession happens. His Profit Margins initially are through the roof. Hes buying up portfolio debt for 30 grand and in three months making 90 grand. So he realizes hes found this amazing niche of the finance world, and the key to much of his success is hes got this supplier whos supplying him with this paper at a really great price, and its really lucrative. The supply or is Brandon Wilson, this form ther averaged robber whos armed robber whos done ten years in prison whos got this kind of genius for finding paper thats very collectible and isnt that expensive to buy. So even though aaron kind of comes from this more rarefied world and has got this kind of banking past, he understands that in this sector of the economy its not unusual to have some kind of shadier connections or some guys that are rough around the edges. So he and brandon form this unlikely friendship and partnership, and thats really the starting point for the book and for the story. Host you talk about how when theyre looking for this paper, aarons looking for it through brandon, he actually also buys a portfolio from his old firm, from bank of america. Guest yeah. Host that you talk about as being not so great a portfolio, but for reasons other than the fact its been stolen and moved around the block many times. Guest right. The irony is aaron is always the key to making a profit margin in this world is getting good paper. Everyones hunting for good paper. And when he buys from his former employer, bank of america, you would think this would be as kind of respectable and dependable as it could be, he feels that bank of america really pulls a fast one on him because he spends all this money, millions of dollars, buying this piece of debt from bank of america, and it turns out theyre almost all Senior Citizens which have the smallest amount of disposable income, and he feels that bank of america failed him, but the former armed robber, brandon, that he does business, kind of comes through for him in a way that his former employer doesnt. Host what does he do . Guest hes really behind the 8 ball when he buys this paper and its all these Senior Citizens. He feels he cant, hes not going to be able to turn a profit because hes invested all this money in them. He goes back to brandon, and brandons specialty is finding what he calls crap. And crap and brandons definition of it is old debt that everyone thinks is worthless because its been around the block a few times, its been bought and sold a bunch, its 1015 years old, but it still pays because maybe it was sitting in a call center in brazil for phi years or maybe for five years. So brandon would find these little deals on this paper. After aaron buys this stuff from bank of america that really puts him behind the 8 ball, he turns to babs done and says, brandon, youve got to help me find these deals on this crap and this other stuff that you find. And then the package, which we talked about before which is this piece of debt that gets stolen, the package is fantastic paper for aaron. Its really good. Its paying off for him and then, of course, it gets stolen, and hes like, all right, brandon, go fix this. Host right. And how did aaron even come up with the money to buy the package . He did okay, he had a banking job, he went back to buffalo. Whos behind sort of funding the initial purchases of these packages at the aaron level . Guest aarons story, hes a banker in new york, comes back to because of low and buffalo, and sets up his own small Collection Agency. With brandons help, hes getting paper that pays huge dividends. He starts thinking, wow, what if i did this on a much larger scale . He makes a few phone calls and finds eight investors who give him 14 million to do a trial run. The thinking is if he can do with this 14 million what hes done with his own money, these 300 returns and what not, then hell do it even bigger for this 14 million. Then hell do a second round with 40 million and bigger and bigger. The problem is that theres several problems, one of which the Great Recession occurs, and people dont have as much money, and he encounters many problems along the way including the theft of some of this paper which, you know, i chronicle in the book. Host so basically before that while thats happening, hes in a hole. Guest yeah. Host hes out some amount of that 14 million. Hes got investor on the other side squeezing him for they want their money back. Guest yeah. Host you visited a coup coup of l of these investors, what was their stake in this, and how much were they pressuring him, and how much was it a portion of their own money . How much did they even care about what happened really . Guest i think its funny because i did want to meet some of aarons investors and get a sense for what their take on this was, and i went out to dinner one night with one of them. This strange sequence of events. The debtors are owing brandon whos collecting on it, brandons getting the money he owes aaron whos organizing the fund, aaron then owes the investors who gave him the money. Everyone is connected by this thing of debt. When aaron goes to one of his investors, a fellow named joseph, hes totally anxious. And it turns out joseph sees this almost as hes just popped him a Million Dollars to see hes also put money into tanning salons and bars and for him aaron said he was hoping it would pay off, but its almost like an amusement. And when were having dinner with joseph, i say do you ever think about, basically, the people whose debts youre buying . And he says, no, why should i . They are, theyve made, you know, bad financial choices. Is it my fault for wanting to profit on it . He makes the analogy to a baseball game. If a pitcher pitches a bad pitch and the batter knocks a triple, you know, is the batter somehow wrong for taking advantage of the bad pitch . And that was josephs feeling about the whole situation. But it was kind of crazy to think, you know, i met some of the debtors, and theyre a poor single woman the living in st. Louis, former armed robber from boston, buffalo scioning, and all of their lives were connected by this chain of debt, but none of them really know one another. That whole aspect fascinated me. Host the way you write about it so clear. Its like were there in your writing. Youre an excellent writer, and you really are an ontheground journalist, and that helps to bring alive these characters and also the locations in which youre meeting some of these people, and you have met the top of the chain, the josephs, down to the bottom of the chain, the individuals that get really hurt and rolled over in this process. Guest yeah. Host you actually talk about some specific individuals or that are just numbers guest right. Host in this package, just represented as numbers. Guest thats right. Host they have real lives, but you spoke with some of them. You mentioned a woman named teresa, a woman named joanna who were taking out credit and paying it, and then things happened. What was that . Guest right. Youre absolutely right. So whats being bought and sold here, its easy to think of it like some sort of commodity because youre just looking at these string of numbers on these sheets, and theres thousands of them, and this one paid and this one didnt pay. You think of this package of several thousand lines op this excel spread sheet are basically several thousand stories of people whose lives for one reason or another have fallen into financial ruin. So i mangled to get ahold of this spread sheet, and i was looking at it and thinking to myself, these are stories here. These names and these numbers represent something thats happened. So i started kind of reaching out to some of these people and explaining im a journalist, im looking into this particular piece of debt that i believe was stolen, and i want to hear your stories. Most people just hung p on me hung up on me, but a few that i profile in the book talked. And what they said, teresa, the woman you mentioned, she was a former marine. She defies whatever stereotypes we have of a debtor. She had worked through high school helping her parents pay off their mortgage. Her life comes apart after she gets out of the marine corps. She finds out her husband is cheating on her, she kicks him out of the house. Shes still on the hook for the vehicle payments and the mortgage, and she falls behind in her bills. And at that point she stops the fees start kicking in on this Washington Mutual card which is the card that was connected to the package. Late fees and overthelimit fees, and eventually she just cant pay anymore. So unbeknownst to her, Washington Mutual sells off this debt to a debt buyer, and it ends up in Aaron Siegels hands in buffalo, and then it ends up being stolen and in the hands of these guys who dont actually own it. So one day teresa, of course, doesnt know about this. So one day she gets a call and says, maam, you owe this money, and you immediate to pay this right now you need to pay this right now, or theres going to be legal repercussions, and the calls get increasingly threatening. Meanwhile, teresas got a job working at border patrol, and if she doesnt have her credit in order, its hard to have a job like that because you can be blackmailed. Teresas thinking, oh, im going to lose this job, what am i going to do . Im just going to pay these guys off. She agrees to pay 2700 off in several install lts. She feels good about it, but when she makes the last payment and shes expecting to get a receipt for what she paid, theres nothing. And when she checks with the Credit Reporting agencies, theres no record of her paying. She assumed she was paying people, why would you assume otherwise . They had all her information. But shes paid people who stole her debt. And these are some of the people that aaron and brandon realize are paying the wrong guy. So youre absolutely right, each one of these names on this package of debt that gets stolen are real people, and the stakes couldnt be much higher for what this means for their lives. Host and it seems lik