NEW YORK
A federal grand jury indicted professional race car driver Scott Tucker for illegally offering quick cash “payday” loans at very high interest rates to desperate people, federal officials said.
The interest rates were sometimes as high as 700 percent, officials said.
Scott, 53, operated the $2 billion payday loan operation worth for 16 years through the internet. It had about 600 employees and was based in Overland Park, Kansas, according to federal officials.
Wednesday, Tucker, of Leawood, Kansas, and his attorney, Timothy Muir, were named in an unsealed indictment and charged with violations of the Racketeer Influenced and Corrupt Organizations Act or RICO and the Truth in Lending Act for operating a nationwide internet payday lending enterprise that systematically evaded state laws in order to charge illegal interest rates as high as 700% on loans.
The nationwide loan enterprise lasted from 1997 until 2013 and made small, short-term, high-interest unsecured loans, commonly referred to as “payday loans,” through the Internet, according to officials.
Tucker’s lending enterprise did business as Ameriloan, f/k/a Cash Advance; One Click Cash, f/k/a Preferred Cash Loans; United Cash Loans; US FastCash; 500 FastCash; Advantage Cash Services; and Star Cash Processing or the “Tucker Payday Lenders.”
Tucker, working with Muir, an attorney for Tucker’s payday lending businesses since 2006, routinely charged interest rates of 400% or 500%. Sometimes higher than 700%, using deceptive and misleading “disclosures” about the true cost of the loans, officials said.
These loans were issued to more than 4.5 million working people throughout the United States, including hundreds of thousands of people in New York, many of whom were struggling to pay basic living expenses, according to officials.
Many of these loans were issued in states, including New York, with laws that expressly forbid lending at the exorbitant interest rates Tucker charged.
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Both defendants were arrested in Kansas City, Kansas.
Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Scott Tucker and Timothy Muir targeted and exploited millions of struggling, everyday people by charging illegally high interest rates – as much as 700 percent. Tucker and Muir allegedly sought to evade liability by claiming that this $2 billion business was actually owned and operated by Native American tribes.”
The enterprise was allegedly controlled by the Miami Tribe of Oklahoma, a Native American tribe. But this wasn’t true.
As part of a agreement with federal prosecutors, the tribal corporations agree to forfeit $48 million in criminal proceeds from Tucker’s payday lending enterprise that are currently held in tribal bank accounts.
The agreement also acknowledges, among other things, that a tribal representative filed false factual declarations in multiple state court actions.
Tucker and Muir, 44, of Overland Park, Kansas, used these false declarations to defeat numerous state enforcement actions seeking to enjoin the operation of their unlawful business.
Federal laws ensure that credit terms are disclosed to consumers in a clear and meaningful way, both to protect customers against inaccurate and unfair credit practices, and to enable them to compare credit terms readily and knowledgeably.
The Tucker Payday Lenders falsely claimed they informed prospective borrowers, in clear and simple terms, as required by law of the cost of the loan, according to the indicetment.
The Sham Tribal Ownership of the Business, according to Indictment
In response to complaints that the Tucker Payday Lenders were extending abusive loans in violation of their usury laws, several states filed actions to enjoin the Tucker Payday Lenders from operating in their states.
To thwart these state actions, Tucker devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes.
Beginning in 2003, Tucker entered into agreements with several Native American tribes, including the Miami Tribe of Oklahoma. Tribes claimed they owned and operated parts of Tucker’s payday lending enterprise, so that when states sought to enforce laws prohibiting Tucker’s loans, Tucker’s lending businesses would claim to be protected by sovereign immunity.
In return, the Tribes received payments from Tucker, typically one percent of the revenues from the portion of Tucker’s payday lending business that the Tribes purported to own.
In order to create the illusion that the Tribes owned and controlled Tucker’s payday lending business, Tucker and Muir engaged in a series of deceptions.
Among the alleged deceptons were the following:
Muir and other counsel for Tucker prepared false factual declarations from tribal representatives that were submitted to state courts, falsely claiming, among other things, that tribal corporations substantively owned, controlled, and managed the portions of Tucker’s business targeted by state enforcement actions.
Tucker opened bank accounts to operate and receive the profits of the payday lending enterprise, which were nominally held by tribally owned corporations, but which were, in fact, owned and controlled by Tucker.
Tucker’s Alleged Purchases and Weather Reports
Tucker spent over $100 million from these accounts on lavish personal expenses, including racecars, the expenses of a professional auto racing team, a luxury home in Aspen, Colorado, and jewelry.
Employees of Tucker making payday loans over the phone told borrowers that they were operating in Oklahoma and Nebraska, where the Tribes were located, when in fact they were operating at Tucker’s corporate headquarters in Kansas.
These employees were even provided daily weather reports for the Tribes’ reservations, so that the employees could convince customers that the employees actually were calling from those locations when they were in fact in Kansas.
These deceptions succeeded for a time, and several state courts dismissed enforcement actions against Tucker’s payday lending businesses based on claims that they were protected by sovereign immunity.
In reality, the Tribes neither owned nor operated any part of Tucker’s payday lending business.
The Tribes made no payment to Tucker to acquire the portions of the business they purported to own.