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Control of Nexus' financial records handed to forensic accountant

Nexus' Verona headquarters as seen in 2023. The property fell into foreclosure last summer and is now being leased to other businesses.
Randi B. Hagi
Nexus' Verona headquarters as seen in 2023. The property fell into foreclosure last summer and is now being leased to other businesses.

In the ongoing saga of Nexus' legal troubles, a judge gave control of the company's financial records to a forensic accountant last month. Two experts spoke with WMRA’s Randi B. Hagi about how this arrangement works.

Nexus' behavior in the federal courts has landed the company in a limited receivership. That means a forensic accountant, someone trained in investigating financial misconduct, is now in charge of their business records.

Chief U.S. District Judge Michael F. Urbanski ordered the appointment of a receiver in May after several failed attempts to bring the company into compliance with court orders. The case stems from a 2018 lawsuit filed by the RLI Insurance Company, which had been issuing immigration bonds for Nexus clients. They claimed Nexus – formerly headquartered in Verona – violated their business agreement. In 2020, the court ruled that Nexus owed RLI $3.3 million and had to turn over their business records. The case has returned to court many times as RLI says they have not received the money or documents owed.

Urbanski wrote in the recent opinion, "Nexus' years-long pattern of noncompliance and deception, evident most recently in the Subversivo shell game, leaves it no choice but to appoint a limited receiver."

As WMRA previously reported, Subversivo is an LLC set up by a former Nexus executive that's been handling the embattled company's finances as of late.

I spoke with Jim Feinerman and Bruce Shaw from Georgetown Law's Denny Center for Democratic Capitalism about what a receivership is. They did not comment on the Nexus case specifically. Professor Feinerman explained that a receiver could be a lawyer or accountant tasked with cleaning up a bankruptcy case. But when a forensic accountant is put on the job –

Professor Jim Feinerman is the faculty chair of the Denny Center for Democratic Capitalism at Georgetown Law in D.C.
Georgetown Law
Professor Jim Feinerman is the faculty chair of the Denny Center for Democratic Capitalism at Georgetown Law in D.C.

JIM FEINERMAN: That usually indicates a pretty serious question about the company's recordkeeping. … basically, they've lied, they've failed to record things, they've not been keeping fully accurate records. So the forensic accountant, usually, is someone who, unlike an ordinary CPA, has special expertise in trying to find the 'buried bodies,' so to speak, of a corporate enterprise.

Shaw, who in his previous career was a corporate chief financial officer, said he's seen other companies get placed in receiverships.

Bruce R. Shaw is the executive director of the Denny Center.
Georgetown Law
Bruce R. Shaw is the executive director of the Denny Center.

BRUCE SHAW: Whoever was leading or appointed to lead the receivership could sell assets in order to settle up debts that weren't handled correctly. So they could really make all the decisions in running the business, once they unravel where the dollars really are.

If Nexus continues a pattern of withholding documents, its leaders could be charged with contempt and arrested by U.S. Marshals – as was already threatened once in this case. The receiver can also get information directly from financial institutions – for example, records of any transfers made from Nexus accounts to Subversivo.

FEINERMAN: We can start tracing where all the money went, and use court processes to make sure that we, for example, can trace every transaction that the corporations made. We can garnish bank accounts. We can do whatever's necessary to try and figure out where the money went, because there's a lot of experience of companies trying to siphon off money … trying to transfer assets, and those are the classic fraudulent conveyances, which the law treats, actually, as a combination of civil and criminal violations.

The court appointed Brian Burns, who heads up forensic accounting at FORVIS LLP, as the receiver. He's scheduled to report back to the court in mid-September.

A sale and several roadblocks

In another case, Nexus is trying to delay enforcement of the federal court order that it pay $811 million to the U.S. Consumer Financial Protection Bureau and the states of Massachusetts, New York, and Virginia for deceiving and threatening clients in violation of consumer protection laws. They also want a 45-day delay on the orders to create a centralized record keeping system and stop collecting client payments, among other responsibilities.

The justification? CEO Micheal Donovan and Vice President Evan Ajin decided to sell the company for $3.50 – yes, three dollars and 50 cents – to another bail bondsman, and Nexus' attorney argues the court order could hinder that sale and reorganization.

Donovan writes in a court filing, "it became apparent that it would be impossible to comply with the court's ordered relief and to survive."

In response, attorneys for the plaintiffs write "their purported injuries are self-inflicted."

In a hearing on the matter, U.S. District Judge Elizabeth K. Dillon noted that the sale of the companies already went through in April, but she would consider the motion and issue a written decision at a later date.

After the hearing, the government agencies filed a motion for Nexus to be held in contempt for the sale, claiming they violated the court's order by transferring consumer data from and the right to collect on unlawful contracts. Nexus responded that the sale agreement specifically states they will not sell or transfer any asset that violates applicable law. Judge Dillon has not yet responded to these filings.

The person buying Nexus, Vincent J. Smith, has a storied past in Pennsylvania. State records show that Smith surrendered his insurance license in 2004 after being restricted and fined in multiple states for his conduct issuing immigration bonds. In 2012, he applied for a new license, and agreed to 10 years of supervision. The Reading Eagle reports he served jail time in 2015 after pleading guilty to writing fake bail bonds valued at more than $2 million.

In two other cases, Nexus' difficulties in retaining attorneys without conflicts of interest has once again delayed proceedings. Former executive Richard Moore's federal tax evasion trial could still take place this December – Judge Dillon is still making a decision on that, too. Moore himself is currently serving a nine-month jail sentence on a perjury charge. Then, at the end of this month, there's a status hearing in the Augusta County exploitation case, in which Moore and Donovan are accused of stealing the money Zachary Cruz got from his mother's life insurance payout. That case was previously scheduled to go to trial in July. In another twist, Cruz is the brother of the convicted Parkland High School shooter. Moore and Donovan took Zachary in after the highly-publicized shooting.

Randi B. Hagi first joined the WMRA team in 2019 as a freelance reporter. Her writing and photography have been featured in The Harrisonburg Citizen, where she previously served as the assistant editor; as well as The Mennonite; Mennonite World Review; and Eastern Mennonite University's Crossroads magazine.
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  • A federal judge has ordered Nexus, a company formerly based in Verona, to pay more than $811 million in restitution and fines. WMRA's Randi B. Hagi reports.
  • The company Nexus that was formerly headquartered in Verona is once again facing consequences in federal court. WMRA's Randi B. Hagi reports.
  • While the company Nexus has been besieged by local and federal investigations, multi-million dollar lawsuits, and property foreclosures; another strikingly similar business has popped up – Subversivo, LLC. And while Nexus has acknowledged in court that Subversivo is handling their financial transactions because they can't get any banks to work with them, they've dodged questions about whether the two companies are really one and the same. WMRA's Bob Leweke spoke with reporter Randi B. Hagi about this. She’s been following the Nexus saga for more than a year.
  • The leaders of Verona-based company Nexus are fighting multiple cases in the federal and local courts. WMRA's Randi B. Hagi reviewed more than 40 current and former cases, and filed this report. Please note that this story does include brief mentions of reported sexual abuse.