Tokyo Joe requested that I re-post this here. The original thread, from which this is excerpted, is here:
http://forums.prosper.com/index.php?s=18b7e7b2c9ca0db0ae76d895b335ad1f&act=ST&f=3&t=18802First, here is ColonelSanders original post:Is my money safe?
Google search reveals:
Allegations of fraud, unlawful business practices and other wrongdoing by people involved in Prosper
I am new to Prosper. I have a jumbo CD coming due next month and I am trying to decide whether to put the money into Prosper instead of rolling it over. I have not yet lent any money. I’ve read a couple good articles in Business Week about Prosper and the founder Chris Larsen but you know, Web2.0 companies come and go all the time.
I did some Google searches about some of the people involved in Prosper. I don’t know what to think anymore. I would like some feedback from people who have more experience than me. I am concerned that my money will be safe and that my personal and credit information will not be compromised.
I understand that once I make a loan, it could be tied up for three years, but I can withdraw my cash at any time. Has anyone yet heard of difficulties withdrawing from their cash balance?
Some of what I found on Google on people associated with Prosper and the companies they do business with is of some concern. I know just because someone has done something bad in the past doesn’t always predict the future but since none of this investment would be FDIC insured or regulated by any governmental agency, I thought I should ask more questions.
Regarding personal info and credit information I give to Prosper to open an account: One principal was the former Chairman and Chief Executive Officer of a company that was charged with improperly disclosing information about its customers to third parties and the company agreed to a monetary settlement of $3.25 million.
Another principal, before he joined Prosper, took $3.5 million from investors and then 6 months later claimed to be bankrupt, and the bankrupt company’s customers no longer had access to their property.
One of the main associated companies doing business with Prosper agreed to a monetary settlement with the United States Department of Justice and the Federal Trade Commission for $1,000,000.
Even some of the lending groups on Prosper were charged with malfeance by the FTC and then terminated by Prosper.
Another person involved with Prosper was the former President of a division of a company that had largest monetary settlement ever [$100,000,000] against a credit card company for alleged widespread unlawful business practices. He was the President of the “Junk Debt Buying Division” of this company. Would there be a conflict of interest as it relates to selling off the defaulted loans which could jeopardize my investment?
Another associate in Prosper was sued five times for securities fraud and eventually signed a settlement agreement and second associate was also sued for securities fraud and eventually signed a settlement agreement and agreed to pay $3.5 million along with two of the other people accused.
I found out this information by doing a simple Google search. If I dug more deeply, I am wondering what would come up. Please let me know about your Prosper experience and your opinion of how they are run.
Then, my reply:One principal was the former Chairman and Chief Executive Officer of a company that was charged with improperly disclosing information about its customers to third parties and the company agreed to a monetary settlement of $3.25 million.
This would be a reference to Paul Hazen, who serves on the board of directors of Prosper. The company involved is Wells Fargo.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.lambvswellsfargo.com%2FAnother person involved with Prosper was the former President of a division of a company that had largest monetary settlement ever [$100,000,000] against a credit card company for alleged widespread unlawful business practices. He was the President of the “Junk Debt Buying Division” of this company.
This would be a reference to Kirk Inglis, Prosper CFO. Inglis was President of Providian's junk debt buyer subsidiary. The litigation involved the parent company's credit card operations:
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.classcounsel.com%2Fsettlements%2Fprovidian.htmlThe colonel missed the larger settlement, with federal agencies:
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.consumeraffairs.com%2Fnews%2Fprovidian_settlement.htmlEven some of the lending groups on Prosper were charged with malfeance by the FTC and then terminated by Prosper.
This of course is a reference to the founder of FAN.
Another principal, before he joined Prosper, took $3.5 million from investors and then 6 months later claimed to be bankrupt, and the bankrupt company’s customers no longer had access to their property.
This is a reference to one of Prosper CTO and co-founder John Witchel's former companies, Red Gorilla.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.reviewjournal.com%2Flvrj_home%2F2000%2FOct-16-Mon-2000%2Fbusiness%2F14603912.html
Another associate in Prosper was sued five times for securities fraud and eventually signed a settlement agreement and second associate was also sued for securities fraud and eventually signed a settlement agreement and agreed to pay $3.5 million along with two of the other people accused.
One more post by me:My take on this is:
For a bank the size of Wells Fargo, $3.25 million is a nuisance-value settlement for a class action lawsuit. The funds were paid to charity, with (I'm sure) a nice cut for the class action attorneys. While I'm sure there are lots of uncomplimentary things that can be said about Wells Fargo, it is hardly a fly-by-night operation. I'd guess that Hazen would be a welcome addition to the board of many Fortune 500 corporations.
I see nothing to suggest that the former Providian employee would have been involved in that company's wrongdoing. While I don't know the full scope of his responsibilities there, it appears that he was primarily involved with a subsidiary not involved in this litigation.
The fact that an Internet start-up went bust in 2000 is hardly surprising.
We all know that Prosper does not screen group leaders in any meaningful way, so it is not surprising that the role has attracted some unsavory elements. I am favorably impressed that Prosper acted swiftly when FAN's history was bought to its attention, though I would have been more impressed if they had figured it out on their own.
And more details from ColonelSanders:I am sorry that I did not give all the details about allegations of fraud, unlawful business practices by people and companies associated with Prosper in the original post, but traveler505 did a pretty good job of filling in the blanks and even digging up some additional information.
I realize that just because someone makes an allegation or sues someone, it does not necessarily make it true. I think we should be entiltled to an explaination so that we can make an informed decision about the kind of people who are involved with this organization.
Here is one that I missed in my original post: NCI
If another entity doing business with Prosper agreed to a monetary settlement with the FTC for $1,000,000. Knowing this information, should Prosper continue a business relationship with this entity?
QUOTE (Prosper Andrew @ Feb-12-2007 02:09 AM)
Collection Agency Shuffle
As of today, we are removing NCI as a collection agency, and replacing them with Firstsource, LLC. All lenders who had NCI chosen as their default collection agency will now have Firstsource set as their default agency. Additionally, all loans in collections with NCI have been transferred to Firstsource.
I guess the answer is NO!
One of Country's Largest Debt Collectors Agrees to Pay Record $1 Million Civil Penalty to Settle Charges of Violating Fair Debt Collection Practices Act;
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.ftc.gov%2Fopa%2F1998%2F10%2Fnationwide.htmDEBT COLLECTOR AGREES TO PAY $100,000
TO SETTLE FTC CHARGES OF HARASSING, THREATENING CONSUMERS
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.ftc.gov%2Fopa%2Fpredawn%2FF93%2Fcreditcla8.htmQUOTE (Quote from Al Gore in a speech about Nationwide Credit @ Inc., one of Prosper’s collection agencies.)
“In October 1998, the Commission announced a settlement in which Nationwide Credit, Inc. ("NCI") agreed to pay a $1 million civil penalty, the largest the Commission has ever obtained in a debt collection case, for widespread FDCPA violations. The complaint alleged that NCI harassed consumers, made false and misleading representations, failed to send required validation notices, failed to verify debts when requested to do so by consumers, and revealed debts to third parties impermissibly. Many of the alleged violations are the same as those addressed in a settlement with the Commission that NCI entered into in 1992; the company paid a civil penalty of $100,000 at that time. As part of the new settlement, NCI is developing a comprehensive consumer complaint and resolution program and is revamping its training program. NCI must submit a draft syllabus and the materials to be used during the training program.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.ftc.gov%2Fos%2Fstatutes%2Ffdcpa%2Fsenate99.pdfOK - Here is the info for all of you who asked me to mention names:
QUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
Regarding personal info and credit information I give to Prosper to open an account: One principal was the former Chairman and Chief Executive Officer of a company that was charged with improperly disclosing information about its customers to third parties and the company agreed to a monetary settlement of $3.25 million.
Paul Hazen, Director
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.lambvswellsfargo.com%2FQUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
Another principal, before he joined Prosper, took $3.5 million from investors and then 6 months later claimed to be bankrupt, and the bankrupt company's customers no longer had access to their property.
John Witchel – co-founder of Prosper
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.reviewjournal.com%2Flvrj_home%2F2000%2FOct-16-Mon-2000%2Fbusiness%2F14603912.htmlQUOTE
Timmons said Red Gorilla Chief Executive John Witchel told him Friday morning that the company was going bankrupt.
Timmons said Witchel told him that efforts were being made to restore the Web site, at least temporarily, within a few days so clients wouldn't lose information completely.
What happened to the company is still unclear.
Just two months ago, Witchel was featured in a New York Times story from the Democratic National Convention about technology executives pushing to be national political players.
The company announced in April that it raised $3.5 million in funding.
"The support of these (investors), and their resources, will help us continue to build an organization that will set new standards for immediacy, quality and reliability of Web-based application," Witchel said in an April news release.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.eweek.com%2Farticle2%2F0%2C1895%2C1238739%2C00.asphttp://forums.prosper.com/redirect/?to=http%3A%2F%2Fnews.com.com%2FRed%2BGorilla%2Bcant%2Bsurvive%2Bcapital-market%2Bjungle%2F2100-1017_3-247212.htmlThe question that I have is, could customers be once again locked out of their accounts? This time if it happend, they would be locked out of their portfolio and any cash in their accounts. What would happen to the loan payments if Prosper pulled a Red Groilla?
If you say it can't happen, think again. Even eBay company PayPal was accused of illegally freezing members' funds and agreed to pay a $9.25 million monetary settlement. I understand that there are several ex-PayPal employees at Prosper. Traveler505 should get an employee list and check out each one of them. Remember, these people all have access to our private personal information. If Prosper has nothing to hide, they should be glad to provide explanations and answers and help us understand why this could not happen at Prosper.
QUOTE
PayPal has notified customers how to apply for a share of a $9.25 million settlement of a case in which it was accused of illegally freezing members' funds.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fnews.com.com%2FRoll%2Bup%2Bfor%2BPayPal%2Bpayout%2F2100-1038_3-5288886.htmlQUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
One of the main associated companies doing business with Prosper agreed to a monetary settlement with the United States Department of Justice and the Federal Trade Commission for $1,000,000.
Experian settled a lawsuit with a Consent Decree for $1,000,000 in January 2000.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.ftc.gov%2Fos%2F2000%2F01%2Fexperianconsent.htm Consent Decree
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.ftc.gov%2Fopa%2F2000%2F01%2Fbusysignal.htm Press Release
QUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
Even some of the lending groups on Prosper were charged with malfeasance by the FTC and then terminated by Prosper.
QUOTE (Prosper Shira Jan-17-2007 06:48 PM )
It has come to our attention that one of the group leaders on Prosper is subject to a Federal Trade Commission (FTC) settlement order that bans him and his related companies from advertising, marketing, promoting, offering for sale, selling any credit-related goods or services, or assisting others engaged in the same activities.
As a result, we have terminated Prosper membership of the leaders of the following groups: FinancialAssistanceNetwork, MinorityAssistance.org, EmergencyAssistance.org, PayItForwardLoans.com, HR-Assistance.com, CreditCardAssistance.org, and FAN-Lenders-Alliance.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fforums.prosper.com%2Findex.php%3Fshowtopic=_17236I have searched on all these groups and I can not find anything from the FTC. Can anyone tell me the name of the group leader of each group and what they were conviced of? There was some mention of some jail time somewhere on the forums. Are all of these group leaders in jail? Can anyone shed some light on this situation?
FinancialAssistanceNetwork
MinorityAssistance.org
EmergencyAssistance.org
PayItForwardLoans.com
HR-Assistance.com
CreditCardAssistance.org
FAN-Lenders-Alliance
QUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
Another person involved with Prosper was the former President of a division of a company that had largest monetary settlement ever [$100,000,000] against a credit card company for alleged widespread unlawful business practices. He was the President of the "Junk Debt Buying Division" of this company. Would there be a conflict of interest as it relates to selling off the defaulted loans which could jeopardize my investment?
Kirk Inglis - Chief Financial Officer
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fsec.edgar-online.com%2F2001%2F03%2F30%2F0000912057-01-505904%2FSection22.aspQUOTE
The Company also recognized $309.3 million of settlement expenses during the year ended December 31, 2000, which are more fully described below.
Kirk Inglis
President, First Select
QUOTE
On November 7, 2001, the Hon. Stuart R. Pollak of the Superior Court of California, the City and County of San Francisco, granted final approval to a settlement agreement in the case, and certified a settlement class. The settlement required Providian to pay over $100 million in cash, credits, and other benefits to the Class, and to stop certain practices that were at issue in the class actions. Combined with an earlier settlement with governmental entities, the award constitutes the largest settlement ever against a credit card company for alleged widespread unlawful business practices.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.answers.com%2Ftopic%2FprovidianMy additional concern is, what role is Mr. Ingles playing in the selling off of the defaulted Prosper loans? Is this process transparent? Are these delaulted loans made available to the lenders? Can we see the bidding results. How can some defaulted loans be sold for $0.00. That is not sold. It is given away. This process needs to be put under a microscope.
QUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
Another associate in Prosper was sued five times for securities fraud and eventually signed a settlement agreement
Chris Larsen - Co-Founder of Prosper
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.iposecuritieslitigation.com%2FELOAN.PDF page 141 Chris Larsen
Chris Larsen had 5 securities fraud lawsuits in which he was a defendant. They were eventually combined into one class action suit and settled in 2004.
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.iposecuritieslitigation.com%2Fpress.php3 Press release.
Chris Larsen was a Defendant in a securities fraud lawsuit that was settled for $1 Billion!
QUOTE (ColonelSanders @ Feb-10-2007 02:03 AM)
a second associate was also sued for securities fraud and eventually signed a settlement agreement and agreed to pay $3.5 million along with two of the other people accused.
My error. It was $3,000.000.
Pierre Omidyar – Venture Capital Investor
http://forums.prosper.com/redirect/?to=http%3A%2F%2Fwww.sfgate.com%2Fcgi-bin%2Farticle.cgi%3Ff=_%2Fc%2Fa%2F2005%2F04%2F29%2FBUGO7CH26G1.DTLQUOTE
Several high-ranking eBay executives -- including CEO Meg Whitman and founder Pierre Omidyar -- have tentatively agreed to pay a total of $3 million to settle a lawsuit alleging that they used special access to dot-com stock offerings for personal, rather than corporate, gain.
I hope that this post answers all of the questions. I would appreciate some feedback from Prosper as well as other Prosper members. My CD is coming due soon and I really want to try out Prosper. I an just trying to do my due dilligence and if people have nothing to hide they should speak up and explain their situation.
