Inside The Cottage Industry, That’s Fleecing NYC Taxpayers

These firms make it hard not to sue the city.

A finance firm run by Bethenny Frankel’s boyfriend is among a host of companies that cost taxpayers millions of dollars a year by encouraging questionable lawsuits against the Big Apple with the promise of quick cash advances.

And making the proposition even harder to turn down, the money fronted to potential litigants doesn’t have to be paid back if they lose.

“Of course they incentivize people [to sue],” NYU Law Professor Samuel Issacharoff told The Post.

“The loan folks are lending money because they think this is an easy mark and the city won’t fight lawsuits.”

City Comptroller Scott Stringer called the burgeoning “advance-settlement” industry “a business model that could potentially clear the way for bogus claims against the City.”

“Ultimately, fraudulent claims and lawsuits cheat taxpayers and takes precious resources away from critical services,” Stringer said.

“It’s unacceptable for any company to game the system for an easy buck at the expense of everyday New Yorkers.”

Brooklyn-based LawCash — whose CEO, Dennis Shields, reconciled with Frankel last year — and its rivals make money by advancing plaintiffs a portion of their potential proceeds and charging hefty interest fees when it’s repaid.

Court papers allege that LawCash, which boasts of having provided “thousands of clients with lawsuit funding advances,” has charged its clients interest rates as high as 124 percent.

That’s nearly five times the 25 percent limit set by New York state, which outlaws rates any higher under the “criminal usury” law.

But because the money doesn’t have to be paid back if a plaintiff doesn’t win or settle a case, LawCash claims in court papers that it’s not a loan, and is instead “a contingent interest in the potential post-judgment proceeds of the plaintiff’s case.”

Contracts documenting pre-settlement payments don’t have to be filed in court, so there’s no public record of how many people who have sued the city struck deals for up-front cash.

According to the most recent Mayor’s Management Report, the city shelled out $722 million in civil judgments and claims during fiscal 2017, and officials said more than half the payments were the result of settlements of the suits.

If just 1 percent of that money was the result of suits spurred by cash advances it would amount to more than $7 million, said lawyer Michael Hess, who served as the city’s corporation counsel under Mayor Rudy Giuliani.

“If I had to make an educated guess, I’d say it’s maybe 2 or 3 percent,” said Hess, now senior counsel at the Dorf & Nelson law firm.

In one case reviewed by The Post, Bishme Ayers received a $350 advance from LawCash for a suit that claimed he was abused by guards on Rikers Island.

After receiving a $10,000 settlement from the city, he repaid LawCash $4,200.

In another case, LawCash gave Charles Cherry $500 over his claim that he was hurt in a slip-and-fall accident while being brought to court in handcuffs.

Cherry scored $12,000 from the city and repaid LawCash $2,600.

Last year, a total $60,000 advanced by LawCash to a pair of Bronx buddies turned deadly when, sources said, a feud over the advance money led Salim Wilson to shoot Julio Velasquez. Wilson was charged in November with second-degree murder.

Both men had filed civil-rights suits against purported “monster” NYPD cop David Terrell, who’s since filed his own claim against the city for allegedly settling false-arrest and brutality cases rather than aggressively defending its cops.

“These unregulated companies and these financial transactions give incentives for unscrupulous lawyers to file frivolous lawsuits against the city, and the city perpetuates this industry by paying off these frivolous lawsuits,” said Terrell’s lawyer, ex-NYPD cop Eric Sanders.

NYPD sergeants union president Ed Mullins also accused LawCash and similar companies of aiding “those looking to hustle the system for a payday.”

Queens lawyer Andrew Plasse, who formerly worked with LawCash, said it paid advances to 61 of his clients, most of whom were Rikers Island inmates with complaints over their treatment in jail.

Plasse said his clients scored settlements as high as $125,000 each — and LawCash execs wined and dined him to cement their business relationship.

“They took me to a football game at MetLife Stadium, the Hertz suite . . . All the food you can eat, all the beer and liquor you can drink,” Plasse recalled.

“You’re talking about big money: two tickets and parking. It was fantastic.”

But in 2014, Plasse filed a $100 million, class-action against LawCash on behalf of two men who claimed the company charged them illegal, “usurious” interest rates, with one, Clifford Roberts, saying he was put on the hook for $5,600 over a $1,200 advance.

LawCash counter-sued on grounds including defamation, and Plasse withdrew the suit — for no money and with a concession that it had no “legal merit”— after LawCash accused him of having a conflict of interest and dredged up a 2005 ruling in which he was censured for a dozen violations of attorney-conduct rules.

But another Queens lawyer, Andrew Hirschhorn, said he got a favorable settlement after suing LawCash in 2012 over “predatory loans” to his clients that carried interest rates of up to 124 percent on advances against their settlements.

That suit also alleged that LawCash circumvented banking and usury laws in states including Nebraska, Ohio, Maine, Oregon and Texas by “effectively buying their way out of any judicial review” through lobbying and campaign contributions to legislators who enacted “laws which condone such illegal conduct.”

In 2010, LawCash and another firm, Oasis Legal Finance Group — which runs TV commercials featuring former “Grey’s Anatomy” star Isaiah Washington — sued the state of Colorado over new regulations that subjected them to the same rules that limited “payday loans” to just $500 each and capped annual interest rates at 45 percent.

The companies said they couldn’t do business under those restrictions, but the Colorado Supreme Court sided with the government in 2015.

Similar legislation has been pending in New York since 2016, but has been stalled by the Democratic-controlled Assembly.

State Sen. Diane Savino (R-SI) said she favored cracking down on the industry, which she called “a problem for the NYPD or other public-service agencies.”

“This is something we should definitely not allow and if it’s currently legal in New York state, it shouldn’t be,” she said.

Neither LawCash, whose general counsel is former Brooklyn Councilman Lew Fidler, nor Oasis returned requests for comment.