05/15/2012 04:18 pm ET Updated Dec 06, 2017

Debt Collectors Confess To Defrauding Bank That Received TARP Funds

Apparently debt collection agencies aren't only making things difficult for debtors.

Executives at Oxford Collection Agency have pled guilty to committing wire fraud, bank fraud and money laundering in connection with a $10 million scam, the government's bailout watchdog announced Tuesday. As part of the scam, Richard and Peter Pinto, executives at Oxford, bilked multiple banks out of millions of dollars.

"Any kind of criminal activity that threatens taxpayers’ investment in those TARP banks is going to be met with swift justice by SIGTARP," Christy Romero, the Special Inspector General for the Troubled Asset Relief Program told The Huffington Post. "That's an important part of what we do, protecting the taxpayer investment."

Various companies, including banks, an educational institution and a laboratory, hired Oxford to secure its debts, but the company allegedly collected the money and never handed it over to the clients, instead using the cash for their own purposes. The company then used false documents to secure a line of credit from Connecticut-based Webster bank -- a bank that received TARP funds -- and used that credit line to continue defrauding clients.

"It's really just unscrupulous individuals that we’re finding who seek to exploit this program and we’re just not going to allow that to happen," Romero said.

This is the first time that SIGTARP has handled a case involving debt collection agencies, Romero said, as the bailout watchdog's inquiries generally focus on mortgage modification scams, bank fraud, fraud committed against banks receiving TARP money and securities fraud like Ponzi schemes.

Cases in which banks struggle with debt collection agencies may be few and far between, but that's not the case for many ordinary Americans. Approximately one in seven Americans has had some kind of encounter with a debt collector, according to the blog Naked Capitalism. And their tactics have gotten more abusive and severe, a recent study found.

Though the case against a debt collector may be relatively unique for TARP, Romero has made clear that making sure government money doesn’t get misused is a high priority.

At the height of the financial crisis, the federal government government provided $700 billion to banking and other institutions in an aim to prevent further fallout. The Treasury Department has repeatedly claimed that taxpayers will break even on the bailout, while Romero claims taxpayers are still owed $118.5 billion.

UPDATE: This post has been updated to include comment from Christy Romero.

Check out the complaint against the Pintos below:

PINTO Richard _ Peter information -