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.
