Feds: Sonoma County finance executive had $3,000 cash, company checks when arrested at SFO

Nine days ago, Sonoma County native Brandon Frere was notified that a federal judge in Oakland was poised to make a decision on whether to strip him of control of his financial empire and turn it over to a court-appointed manager.

Frere acted quickly to make one final withdrawal from his companies' coffers: He transferred $400,000 from his student loan debt relief businesses. He deposited about $179,000 in his personal bank account, $30,000 in a family account and the rest was sent to his lawyers, FBI agent Christopher Bognanno said in a sworn affidavit attached to the criminal complaint filed this week against Frere and his cadre of companies.

Less than an hour later, U.S. District Judge Saundra Brown Armstrong issued a Nov. 29 order placing his Rohnert Park student loan debt relief company, Ameritech Financial, and two affiliated firms he ran as CEO, under the control of an outside manager.

FBI agents arrested Frere six days later at San Francisco International Airport, stopping him Wednesday as he prepared to board a flight to Cancun.

When they searched him, they found $3,000 cash and a number of blank checks from his student loan servicing companies.

With the arrest, Frere became the first person swept up in a 2-year-old federal crackdown on student loan debt relief companies to face a criminal charge related to his business practices, Federal Trade Commission officials said Friday.

Charged with fraud

Prosecutors allege that Frere and his companies bilked student loan borrowers nationwide out of at least $28 million since 2014. They accused him of transferring millions of dollars to himself and his family members - including more than $9 million to his personal bank accounts in Luxembourg and Andorra - from borrowers' funds held by Ameritech and two other related businesses Frere founded.

He was charged with a single count of wire fraud and remained in federal custody Friday pending a detention hearing Monday morning in U.S. District Court in San Francisco.

In a separate civil case, the Federal Trade Commission claimed that Frere, Ameritech and its sister companies had deceived tens of thousands of student loan borrowers into paying up to $60 million in fees and other charges for purported loan debt relief services.

The Nov. 29 preliminary injunction issued by Armstrong prohibits his company from providing any financial services and any of its executives from taking any assets from the company. She concluded the FTC was likely to prevail in its assertion that Frere and his companies had engaged in “deceptive and abusive business practices.”

An attorney representing Frere in the FTC civil case Friday declined to comment. His criminal defense attorney could not be reached for comment.

Ameritech, and sister firms Financial Education Benefits Center and American Financial Benefits Center, were sued by the FTC in February as part of the agency's “Operation Game of Loans,” a nationwide joint federal and state law enforcement action targeting deceptive student loan debt relief scams.

The sector is ripe for abuse as more than 42 million Americans have student debt that totals more than $1.4 trillion. It is the second-largest category of debt for Americans behind home mortgages.

Denies allegations

While most companies targeted by the FTC have negotiated settlements, agency officials said, Frere and his cadre of companies denied the allegations. In court documents, they asserted that “at all times, the acts and statements Defendants have made were fair and reasonable, and performed in good faith based on all relevant facts known to Defendants.”

His primary company, Ameritech, was launched in 2015 and housed in a nondescript office park on State Farm Drive in Rohnert Park. On Friday morning, it was dark and nobody was working. The court-appointed manager shuttered operations last week, a former employee said by phone. The firm wasn't known in local business circles and wasn't a member of the Rohnert Park Chamber of Commerce, said Lisa Orloff, the chamber's executive director.

Some of its employees described the company as a soul-crushing place to work because they were under the gun to make sales quotas or be fired. About 200 to 300 people worked there and at a second Ameritech office northeast of Sacramento - though turnover was constant.

The companies specialized in targeting vulnerable student loan borrowers to sign up for federal programs that provide debt relief, former employees said. One program allows public-sector employees to have a portion of their college loans forgiven after making timely payments for at least 10 years. The other helps borrowers shrink their monthly loan payments based on a percentage of their discretionary monthly income.

In 2015, U.S. Navy veteran Milton Marshall, 60, of Las Vegas, found Frere's American Financial Benefits Center online while looking for a firm to help him reduce his monthly student loan payments. In an interview Friday, Marshall said the website seemed professional and he initially had no reason to suspect any problems with the company.

11 dependents

Marshall paid a $1,200 registration fee to sign up with AFBC and continued to send them monthly payments. It wasn't until a year later when his student loan contract came up for renewal that he realized all of his money had been going to AFBC and not to pay off his student loans. He said AFBC had told his loan-servicing company he had 11 dependents, which brought his monthly loan payments down to zero, even though he did not have any dependents.

“When I was up for renewal, I kind of like saw what they were doing. They didn't pressure me, but they suggested that I do it again. And I told them, ‘I can't do that, this is illegal,'?” he said. “It angered me.”

When he learned that the company had falsely represented that he had 11 dependents, Marshall contacted the FTC. He said he was interviewed by an investigator for the agency earlier this year, but does not know if he will ever be paid back the money he gave to Frere's company. FTC officials said affected borrowers should contact their student loan servicer.

“I don't have any information, (the FTC) just told me it's going to be settled,” Marshall said. “I would like some monetary compensation for being hoodwinked.”

What borrowers like Marshall apparently didn't realize was they could have enrolled in the federal government's loan relief programs on their own and for free. They didn't need assistance from Ameritech, AFBC or any of Frere's businesses, but federal officials said the companies engaged in a scheme to confuse debtors into thinking they needed help managing their student loan debts.

Cold calls, mailers

The firms would send people unsolicited mailers, including one from the “Student Loan Payment Reduction Dept.” that led some customers to believe it was from a federal government department.

Typically, Ameritech sales employees would make cold calls from a list of student loan borrowers, using a script the company provided, said Roger DeBeers, who worked at the Rohnert Park office from 2016 to 2017. It was his first full-time job at the age of 17 and he was recruited online via Craigslist. He lasted eight months before going to Santa Rosa Junior College.

DeBeers said in an interview Friday he was ill-equipped to deal with the job, but was told by a supervisor to find the one specific worry of the borrower - such as making their rent payment - and zero in on that topic.

“The goal was to find that distress point and make it seem like the program was solving it for them,” he said.

Ameritech and it sister companies would charge $600 to $800 to submit documents to sign up for those free student loan relief programs, according to federal court documents. Also, they would charge “financial education membership” enrollment fees of $100 to $1,200 and monthly fees of $49 to $99 for things unrelated to their debts. Examples were courses like “Key Ring & Luggage Protection” and “Auto Buying Service and Maintenance Discounts.”

“It got to point where people would call me a scammer and I wouldn't be able to refute that,” DeBeers said.

The worst was when he was on the phone with a nearly 90-year-old woman from the South who had cancer and was subsisting on Social Security payments. She told him her student loan payments were crushing her. DeBeers was relieved when he couldn't sell her any products, though his supervisor wanted to upsell her.

“It just got to the point where it was so sleazy,” DeBeers said. “It was a house of cards that should have fallen a long time ago.”

Brianna Meads, who worked in Ameritech's retention department and would field complaints from customers, said Friday the most common complaint she received was from customers who didn't know why the company was taking money from their bank accounts.

“They just didn't know why they were being drafted because they didn't feel like anything was being done,” she said.

Some customers relayed their complaints to the Better Business Bureau of Northern California and to the FTC.

In the company's defense, Meads said, the sales representatives were clear with customers that money would be drafted every month from their bank accounts to make their monthly student loan payments, and the customers had willingly turned over their bank account information.

“It was astonishing how many people still had no idea that draft would be coming out at that date. … I don't know if that reflects more on the company, or the people,” she said. “We were doing a real service, just for a very, very expensive fee.”

Staff Writer Will Schmitt contributed to this story.