In January, government regulators pounced.
After an investigation that started more than four years ago, the Consumer Financial Protection Bureau — along with the attorneys general of New York, Colorado, Delaware, Illinois, Minnesota, North Carolina and Wisconsin — sued Strategic and its operators, including Mr. Sasson, on civil fraud charges. They asked a Federal District Court judge in Buffalo to immediately freeze the company’s assets and hand over its operations to a receiver. Citing the case’s strength — the government prosecutors are “likely to prevail on the merits of this action,” the judge wrote — he granted their request within 24 hours.
Strategic has asked the court to reverse that decision. “We continue to believe this case is really targeting the law firms,” said Dennis Vacco, a lawyer representing Strategic. “They don’t have authority over the law firms so they are squeezing their administrative service provider.”
Strategic took in hundreds of millions of dollars in fees from clients in the last seven years, according to the regulators’ January complaint. The company transferred at least $72 million to private companies controlled by Mr. Sasson and his business partners, prosecutors said. Another $36 million flowed from the network of Strategic-affiliated law firms to the private family trust of Mr. Sasson’s longtime business associate, Jason Blust.
As federal regulators closed in on his business, a yacht Mr. Sasson co-owns went up for sale: the $2.6 million “Strategic Dreams.”
Former clients highlight the financial and psychological toll that the program took on them. More than 40 percent drop out before their debts are resolved, according to Strategic’s own legal filings. In one-third of the client cases examined by the suing regulators, customers paid Strategic’s affiliated law firms but never received any debt relief. In other cases, the debts eliminated were eclipsed by the fees they paid.