A federal judge in New York has ordered Kansas City law firm McDowell Rice Smith & Buchanan to give prosecutors client records associated with a case it handled on behalf of Leawood payday lending businessman Scott Tucker.
In an order issued Tuesday, Southern District of New York Judge Kevin Castel found that federal prosecutors “comfortably made a showing of probable cause” that the firm’s records associated with a 2010 lawsuit in Wyandotte County where it represented Tucker may have involved crime or fraud.
Castel, who determined that he didn’t need to first review the records himself, has ordered McDowell Rice to produce the documents to federal prosecutors in 14 days.
Records between attorneys and their clients are in almost all instances off limits to any outsiders; an exception is if there’s reason to believe that the attorney-client privilege conceals criminal or fraudulent conduct.
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“The Court expresses no view as to whether McDowell Rice or any of its attorneys were complicit in any crime or fraud committed by their client,” Castel’s ruling said.
R. Pete Smith, chairman of McDowell Rice, was Tucker’s attorney in the Wyandotte County case.
“We have been advised by our former client’s attorney who does not intend to pursue any further challenge and, therefore, we will be producing the Tucker vs. AMG file within the next two weeks, the time frame authorized,” Thomas Buchanan, a partner for McDowell Rice, said in an email to The Star.
“We note the Court specifically declined to criticize any McDowell Rice attorney or find any impropriety by the law firm in handling the matter. McDowell Rice continues to believe the matter was handled consistently with existing Kansas law in effect at the time.”
Tom Bath, an attorney representing Tim Muir, Tucker’s co-defendant in the upcoming trial, said he wasn’t troubled by Castel’s ruling.
“The ruling doesn’t bother us,” Bath said. “We have nothing to hide.”
Prosecutors earlier this year argued that the 2010 Wyandotte County lawsuit involving Tucker resulted in what it called a “sham merger” between two companies associated with a payday lending operation that became the basis for Tucker’s criminal indictment in 2016.
A grand jury charged Tucker and Overland Park attorney Tim Muir in February 2016 of running a $2 billion payday lending operation that extended loans with misleading terms and charged usurious interest rates. Tucker and Muir have denied wrongdoing and entered not guilty pleas. The criminal trial is scheduled for September. Attorneys for Tucker and Muir have asked for an extension of the trial date, arguing that prosecutors recently provided 80 gigabytes of evidence that the defense team has to review.
Bath said the defendants are looking forward to a trial.
“We are confident that when this case finally gets tried, Tim and Scott will be acquitted,” Bath said.
Tucker, who raced cars professionally, is also subject to a $1.3 billion civil penalty in a separate case brought by the Federal Trade Commission that made similar claims about his payday lending business.
Tucker’s indictment alleges that he and others nominally established their payday lending businesses on tribal reservations in an effort to shield the companies from state regulations on consumer loan interest rates, when much of the business’s operations were in Overland Park.
American Indian tribal reservations are generally not affected by state laws, and there is no federal law that speaks to payday loan interest rates.
Federal prosecutors believe that the Wyandotte County proceedings between Tucker and AMG Services Inc., a tribal company central to the payday lending operation, constituted a “sham lawsuit” meant to invoke tribal immunity for CLK Management, a Kansas payday loan servicing company owned by Tucker before it merged into AMG in 2008.
At that time, CLK was facing investigations by state law enforcement agencies, including the Colorado Attorney General’s Office.
Tucker sued AMG in 2010, alleging that the company never recorded the merger with the Kansas Secretary of State’s Office to confirm the 2008 transaction. AMG never responded to the lawsuit, and a subsequent judgment gave Tucker the result he sought, including a certificate of merger backdated to 2008.
While AMG held itself out as a company owned by the Miami Tribe of Oklahoma, prosecutors said Tucker had control of the company.
Prosecutors alleged that the proceedings were masterminded by Muir, general counsel to the payday lending operation, to frustrate investigations into Tucker’s businesses. To support their claims, prosecutors introduced emails between Muir and Tucker and others showing that they gloated about the result of the Wyandotte County case.
Attorneys for Muir and Tucker had denied the government’s claims and said that the CLK-AMG merger was a legitimate business transaction.