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Michael Colombo is in the collections business. Mostly, though,
he uses gentle persuasion to recover funds from wayward
brokers and delinquent clients for Wall Street firms.
Michael
Colombo doesn't think of himself as a repo man. You won't find
him outfitted in intimidating black leather, hauling off cars
or breaking kneecaps under the cover of darkness.
Still,
it's a hard label to escape for “an Italian kid from
Brooklyn whose name is Colombo who's a collector,” he
acknowledges. “But that's not what this business is
about.”
The
business is Wall Street collections. Colombo hunts down errant
brokers and deadbeat clients for brokerage firms. He recovers
money from reps who have left firms without paying back
upfront “loans” and also from margined-to-the-hilt
clients. “This business is about mitigating a firm's losses,
recovering a firm's debt portfolio and doing it amicably,”
he says.
As
amicably as possible. When brokers don't settle up, they face
NASD arbitration. Or worse. Colombo has seen people lose their
licenses and have their pay garnished. In some cases, bank
accounts and property are seized. But not by Colombo. He does
the detective work — and the persuasion.
For
his work, Colombo is paid a percentage of what he collects. He
won't disclose how much. But, in the 20 years he's been in the
business, he's recovered more than $45 million. About a year
ago he started up his own firm, StreetWide Asset Recovery
Group, with backing from Firebrand Financial, which owns
financial services firm GKN (née GKN Securities) his former
employer.
Colombo
has “turned a written-off sort of thing into an asset,”
says Robert Gladstone, GKN president. Gladstone says that
before Colombo joined GKN, the firm didn't seriously try to
get ex-employees to pay up. Creating an in-house collections
department, headed by Colombo, led to the recovery of about $5
million for GKN and lightened the in-house counsel's load.
Colombo's
business thrives in a recession and the plunging markets of
2000 and 2001 have produced a brisk business in collections
from clients who couldn't make their margin calls. “Margin
has been used at historic levels,” he says. “And since the
market has turned, a lot of debt that we collect, or attempt
to collect, is a result of companies having unsecured client
accounts.”
What
astounds Colombo is the amount of debt on the Street that
firms don't realize is recoverable. “We're talking about
eight figures of unsecured debt on Wall Street,” he says. In
addition to debt from former employees and clients, the total
includes unpaid judgments.
Until
now, most firms have had the debt collected by their legal
departments. “For all the respect I have for lawyers, they
did not go to law school to do collection work,” Colombo
says. “So a lot of cases get put on the back burner.”
Sometimes
paralegals are assigned to recover the money, and that's not
always efficient, he says. “We take all that work off the
lawyers' plates.”
“Gets Results”
Colombo
knows how Wall Street firms work. He started as a clerk in UBS
PaineWebber's then-new collections department, working his way
up to assistant vice president. After 23 years, he left to
start a collections department at Gruntal & Co. Then GKN
recruited him to do the same.
Though
GKN is out of the retail business, Gladstone says Colombo is
still collecting on delinquent accounts that haven't exceeded
their statute of limitations.
“He
gets results,” Gladstone says.
Jim
Siegel, general counsel at Joseph Stevens, an investment
banking firm, hired Colombo after a recommendation from a
satisfied customer. “Let's just say we're on the positive
side as opposed to the negative thanks to Mike,” he says.
Before
Colombo came on board to help, Siegel says he spent all of his
time filing claims and calling brokers who owed the firm
money. With Colombo taking over those tasks, Siegel can devote
that time to other matters. And as for the expense: “It's
more than made up by the fact Mike collects debts we were
unable to collect before.”
The
idea to start StreetWide came about after Colombo received
requests from different firms for help or advice concerning
debt recovery.
“Contractually,
I couldn't do it, but the demand was there,” he says. “I
presented an idea to the [Firebrand] board of directors, and
they thought it was great, so we created StreetWide Asset
Recovery.”
For
the most part, Colombo says it just takes a few calls to
settle matters. But if that doesn't work, the complaint is
referred to the governing body of the NASD for arbitration.
The process takes even longer if someone is out of the
industry and/or not working.
Arbitration
cases, monthly payments and pending cases are all closely
monitored by Colombo and his assistant Anna Degiglio, who also
trained at PaineWebber's collections department.
He
says his job can be tough, especially when he has to collect
from struggling brokers. But “there are also some brokers I
have no sympathy for,” he says. “They work for a lot of
different firms and take the upfront forgivable loan and just
refuse to pay it back.”
In
some cases, the broker has been wronged. And they can argue
their case. “Brokers have the luxury of having their say in
arbitration, and I really don't have a problem with an
ex-broker who wants to go to arbitration,” he says. “But
there are rules that the NASD has created, and the decisions
rendered by the NASD are binding. The broker has to know that
he must abide by those rules.”
Colombo
says, “I only go after things that are legitimately due.”
And
he continues to fight the repo man stereotype. With a penchant
for Mozart and van Gogh, the elegantly dressed Colombo refuses
to be pigeonholed. His dream? He hopes to open up his own
restaurant. He already makes his own wine.
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