Child Support Payments Scam in Virginia Busted

According to a report earlier in the Associated Press, over 1,000 Virginia families should soon be seeing their share of a $913,866 settlement between the state and a bankrupt child support collection company.

Attorneys for the state filed a motion in Richmond Circuit Court earlier this month, seeking an order to allow the Virginia Division of Child Support Enforcement (DCSE) to begin writing checks to the needy families. First, a judge must sign an order authorizing distribution of the funds. Thomas M. Wolf, a private attorney who represented the state in the case against the now Texas-based Supportkids Inc., told the AP that he expects “the unopposed motion to be granted soon.”

According to court documents obtained by the AP, victims of the organization’s misdeeds will recoup 55 percent of the money that Supportkids was accused of illegally skimming from their child-support checks. Individual payments will range from $1.53 for a family in Norfolk, Va. to $12,637 for a family in Scottsville, Ky., according to an exhibit attached to the motion.

“I think it’s a great outcome,” Wolf said.

The lawsuit was filed in 2008 and claimed that Supportkids illegally used misleading “withholding orders” that appeared to be government-issued to get child support payments withheld from noncustodial parents’ paychecks. The company allegedly extracted fees often exceeding 35 percent from those paychecks.

“They were getting the custodial parent to assign child support payments to the company, and that’s not legal or enforceable in Virginia,” Wolf told the AP. “Child support belongs to the child, not the custodial parent, so the custodial parent can’t assign it to someone else.”

Supportkinds filed for bankruptcy soon after the lawsuit was filed. Fortress Value Recovery Fund, a New York-based hedge fund that had invested money in Supportkids, seized many of the company’s collection contracts and accounts on the eve of the bankruptcy. Fortress later entered a consent decree with the state of Virginia. Supportkids and the law firm representing it returned $913,866 to the state.

John A. Burlingame, an attorney for Fortress, declined to comment on resolution of the case.

Curiously enough, another private child support collection company from Texas bought Supportkids’ remaining assets and assumed the name Supportkids Services Inc. The successor company signed a legal agreement not to engage in illegal collection activities in Virginia. Texas Attorney General Greg Abbott has been charged of misrepresenting child support enforcement statistics by political rivals, in efforts they claim to skew the Lone Star State’s performance statistics into a positive and misleading light.

Wolf praised the state attorney general’s office and the Division of Child Support Enforcement for pursuing the case, saying it will deter other companies from engaging in similar conduct, and help make the system more helpful to noncustodial parents just scraping by.

“Any actions that impede the Commonwealth’s efforts to lawfully and fairly collect child support must be addressed,” Virginia Governor Timothy M. Kaine said at the onset of the lawsuit in 2008.

The lawsuit charged that Supportkids interfered with “the orderly enforcement of support obligations” and “tracking of support payments” in three major ways:

• Supportkids, Inc. sent wage-withholding notices to employers of noncustodial parents, referring to itself as “Child Support Enforcement,” a name easily confused with Virginia’s “Division of Child Support Enforcement.”
• Supportkids, Inc. unlawfully directed the employer to send payments directly to the company’s office in Texas, rather than to Virginia’s DCSE.
• Supportkids, Inc charged the custodial parent a 34 percent fee before forwarding the remainder of the payment to the custodial parent, regardless of whether it has undertaken any work on behalf of the parent to collect such payments.

Virginia Attorney General Bob McDonnell said SupportKids’ practice disrupted DCSE’s coordinated system for enforcing child support. “There are noncustodial parents who are not being credited for the support they pay to their children,” he told WSHV-TV. “Some noncustodial parents were improperly having wages withheld by two withholding orders: one obtained through the DCSE and one through Supportkids, Inc.”

For the 1,000 plus families duped in the scandal, finally, justice will be served. Along with their checks.