Court rules on appeal by KC payday loan tycoon who wanted criminal conviction tossed
A federal appeals court has upheld the criminal convictions of Kansas City-area payday loan tycoon Scott Tucker and his attorney, Tim Muir.
The U.S. Court of Appeals for the Second District issued its long-awaited opinion on Tuesday, rejecting arguments by Tucker and Muir that a New York jury was given improper instructions before convicting both men and that the government failed to prove they knew that their lending enterprise was illegal.
Tucker and Muir were convicted in 2017 of 14 counts of racketeering, conspiracy and fraud charges related to their payday lending business in Overland Park, which grew to employ 1,500 workers and made billions in revenue on what federal prosecutors said was the exploitation of 4.5 million borrowers through illegal interest rates and deceptive loan terms.
A federal judge in New York sentenced Tucker, a Leawood resident, to serve 16 years and eight months in prison while ordering Muir to serve seven years. Tucker was also ordered to forfeit $3.5 billion in ill-gotten gains from his lending empire.
Tucker, who rose to prominence in the public eye first as a professional race car driver supported by his fortunes from his less visible business endeavors, started a payday lending business in Kansas City in 1997. Payday loans are advertised as small-dollar, short-term loans meant to tide a borrower over until their next payday.
In practice, the loans are often criticized for trapping borrowers into endless cycles of debt through confusing loan terms, automatic renewals and aggressive collection tactics.
In Tucker’s case, loans were structured in such a way that renewal fees, interest and service charges could require a borrower to pay $975 to settle a $300 loan.
On appeal, attorneys for Tucker and Muir argued that the trial court judge gave jurors an incorrect and prejudicial jury instruction before they began deliberations. The instruction was that federal prosecutors could show that Tucker and Muir willingly broke the law by collecting illegal debts if they “acted deliberately, with knowledge of the actual interest rate charges on the loan.”
Tucker and Muir argued the instruction was not consistent with how willfulness is usually understood in criminal law, which is that defendants know the illegal nature of what they’re doing.
At trial, the defendants said they knew about the interest rates on their loans but believed in good faith that they were legal.
That argument didn’t persuade the appellate court judges, who found that it had no affect on the verdict because the evidence was overwhelming that Tucker and Muir knew what they were doing and engaged in a deception to try and hide it.
The appellate judges said the two men’s efforts to conceal their involvement in the lending operation, particularly the way they set up sham businesses on American Indian tribal land as fronts for the enterprise that existed chiefly in Overland Park, betrayed Tucker’s and Muir’s knowledge that the loans were illegal.
Business entities behind Tucker’s payday loan businesses were set up on tribal lands in Oklahoma and Nebraska because states cannot regulate payday loans on sovereign American Indian property. Little if any of the loan work was done on these tribal lands, prosecutors told jurors during the trial.
And the defendants attempted various schemes to hide the true nature of the lending operation.
“This deception was taken to theatrical lengths: employees in the Kansas office regularly received weather reports for locations of the tribal reservations, so that they could make accurate small talk with borrowers about the weather in Oklahoma or Nebraska,” the appeals court ruling said.
Tucker, 58, is serving time at the federal penitentiary in Leavenworth where he awaits the outcome of a pending criminal case against him and another lawyer for tax fraud in the U.S. District of Kansas.
In that case, Tucker is accused of filing a false tax return in 2008 that left out $42.5 million from payday-related income and another $75 million in 2011.
The Kansas criminal case was largely put on hold while Tucker’s New York conviction was under appeal.
Muir is serving his sentence in a federal prison in Pennsylvania.
This story was originally published June 3, 2020 at 11:20 AM.
