Two Kansas City-area payday lenders long accused of collecting outrageous interest fees now face federal charges — and demands that they forfeit to the government billions of dollars in business proceeds.
The indictments against Richard Moseley Sr., 68, and Scott Tucker, 53, a professional race car driver, were unsealed Wednesday in New York, after both men had been arrested in the Kansas City area.
The men separately operated numerous payday loan businesses that charged high interest rates and misled customers nationwide about how much they would have to repay on the loans, authorities allege.
Tucker alone allegedly exploited more than 4.5 million people while collecting interest payments ranging from 400 percent to 700 percent, the indictment alleges.
A New York grand jury indicted both men as well as Tucker’s business lawyer, Timothy Muir, 44, of Overland Park.
Muir and Tucker allegedly tried to shield Tucker’s companies from prosecution and lawsuits by falsely claiming they were owned by Native American tribes, the indictment alleges. Meanwhile, Tucker actually ran the operation with a 600-employee business in Overland Park, prosecutors say.
Tucker, who lives in Leawood, used the loan business to finance his professional racing career around the world and to cover other expenses, including luxury homes, according to prosecutors. They want Tucker to forfeit $2 billion, six Ferrari race cars, four Porsche automobiles and a Learjet.
Two tribal corporations controlled by the Miami Tribe of Oklahoma have agreed to forfeit $48 million from Tucker’s payday lending enterprise, prosecutors said Wednesday. Those funds are being held in tribal bank accounts.
In 2011, as Colorado and other states were trying to stop Tucker’s business practices, Muir told a Star reporter that Tucker “does not own these companies.”
“There are documents that have been produced to the Colorado attorney general’s office that detail Mr. Tucker’s relationship to the tribal online lending businesses,” Muir said. “Very shortly … I believe that relationship will be clarified.”
Muir responded that Tucker merely was standing up against a bully.
“There are few people across the country with the fortitude and the resources to take on the government,” Muir said at the time. “My client does (have them).”
Tucker and Muir made their first court appearance Wednesday afternoon in U.S. District Court in Kansas City, Kan. They entered the courtroom together in shackles. They were told they had the right to transfer their cases from New York to Kansas if they intended to plead guilty. Both men declined.
Tucker was released on $2 million bond and Muir was released on $400,000 bond. Both men agreed to put their homes, in Leawood and Overland Park respectively, as security for the bonds.
They were each instructed not to communicate with any victims or witnesses in the case, or with each other. But the last instruction was dropped by the government when Tucker’s attorney, Jeffrey Morris, pointed out that Muir is Tucker’s general counsel.
“They have to talk,” Morris said, adding that the issue will be revisited by the court in New York.
Their first court appearance in New York is scheduled for Tuesday.
Moseley, who lives in Kansas City, faces charges that include collection of unlawful debts and wire fraud.
He owned a group of payday lending businesses called Hydra Lenders from about 2004 to late 2014, according to a statement from the U.S. attorney’s office from the Southern District of New York.
According to regulators, he allegedly exploited more than 620,000 poor people by charging interest rates of more than 700 percent.
“Worse, Moseley allegedly also extended loans to many who never even sought them, withdrawing exorbitant financing fees from their bank accounts,” the statement said.
Moseley could not be reached for comment Wednesday.
Hydra Lenders generated about $161 million in revenues over an eight-year period that ended in August 2014, prosecutors said. Moseley allegedly spent millions of dollars obtained from victims on such things as vacation homes in Colorado and Mexico, luxury automobiles and country club membership dues, according to the indictment.
In September 2014, a federal judge froze the assets of Moseley’s payday lending business and installed a receiver to stop allegedly illegal activity at the business. The moves came at the request of the federal Consumer Financial Protection Bureau, which said the Hydra Group was running an illegal “cash-grab scam.”
Moseley was arrested Wednesday morning in Kansas City. He appeared in federal court in Kansas City and was also released on bond.
Tucker faces nine counts, including collection of unlawful debts in violation of racketeering laws for activities that took place from 2003 to 2012.
According to the indictment against Tucker:
Customers generally were told they would pay about $30 in interest on every $100 loaned. So on a $500 loan, they expected to repay about $650. Customers provided the payday business access to their bank accounts so that payments could be automatically withdrawn.
But Tucker’s companies structured the repayments in a way that allowed the payday loan businesses to continually withdraw interest amounts from the customers’ bank accounts without touching the principal balance.
So a customer who borrowed $500 could end up repaying $1,925.
Thousands of customers complained to Tucker’s companies, their banks, consumer protection groups and regulators that the loans were “materially deceptive, misleading and usurious,” the documents said.
“Rather than take steps to comply with state laws or otherwise address” the customers’ complaints, Tucker “entered into a series of sham business relationships to conceal his ownership and control” of the companies, the indictment alleges.
Tucker and Muir created “the sham appearance of tribal ownership and control” of the payday lenders in 2003 and involved three tribes in the deception. He had members of two tribes “press a key on a computer on a daily basis on hundreds or thousands of loans,” to make it appear the tribes were involved in loan approval, the indictment says.
Employees in Overland Park falsely claimed to customers and others on the telephone that they were in Oklahoma or Nebraska, where the Indian tribes were located, “so they could more effectively dupe customers,” the indictment says.
Bloomberg News contributed to this report.