How much should a racketeering conviction cost a man who for years flouted Pennsylvania laws and attacked cash-strapped Americans to build one of the nation’s largest illegal payday lending empires ?
Over $ 491 million, if the government wants what it wants.
That’s the money federal prosecutors in Philadelphia hope to recover next month from Charles M. Hallinan, the so-called godfather of payday loans, in one of the region’s largest criminal forfeiture proceedings.
In addition to cash from 18 bank accounts – including more than $ 484,000 from Hallinan’s personal coffers – the government has put together a staggering wishlist of additional items to lose.
Among them: the $ 2.75 million Hallinan lakefront condo in Boca Raton, Florida; the $ 1.8 million, 8,000 square foot family home in Villanova; and a small fleet of luxury vehicles, including a $ 142,000 Bentley Flying Spur.
But a month after a federal jury convicted the 76-year-old former investment banker and Wharton School graduate on 17 counts, including conspiracy, international money laundering and fraud, the Hallinan’s attorney said it is prosecutors who are now motivated by greed.
Defense attorney Edwin Jacobs is expected to argue in forfeiture proceedings before U.S. District Judge Eduardo Robreno that a more appropriate figure, given Hallinan’s professional expenses, would be closer to $ 9.5 million ,
“A forfeiture judgment that exceeds $ 450 million would be … grossly disproportionate to the offense committed,” Jacobs wrote in a court filing in December.
Federal law requires prosecutors to seek confiscation in racketeering cases like Hallinan’s to financially penalize wrongdoers and to reduce the economic power of organized crime. The forfeiture statutes of the Racketeer and Corrupt Organizations Act allow the government to seize any money or property directly or indirectly from a criminal enterprise.
Usually these laws have been used to counter the financial weight of the Mafia or large drug trafficking organizations.
But Hallinan’s case is one of the few presented by the Justice Department in recent years to apply the same thinking to large-scale payday lending operations. Prosecutors have successfully argued that there is little difference between the exorbitant fees charged by crooks money lenders and the annual interest rates approaching the 800% which is the norm in much of the lending industry. on salary.
“When crimes are motivated by the desire to earn money, the criminal who commits these crimes must be deprived of the proceeds of his crimes,” Deputy US Prosecutors Sarah L. Grieb and Maria M. Carrillo wrote in documents judicial.
In Hallinan’s case, jurors concluded in November that he had made millions of dollars illegally offering low-cost, high-interest loans to financially desperate borrowers with limited access to more traditional lines of credit. The interest rates on many loans he issued were well above the rate caps set by states in which borrowers lived, such as Pennsylvania, which has an annual limit of 6%.
Hallinan entered the industry in the 1990s with $ 120 million after selling a landfill business offering payday loans by phone and fax. He quickly built an empire of dozens of companies offering fast cash under names such as “Tele-Ca $ h”, “Instant Cash USA” and “Your Fast Payday” and launched numerous strategies to dodge regulations that have been widely copied across the industry.
As lawmakers in dozens of states sought to crack down on the exorbitant fees charged by payday lenders, Hallinan instituted fictitious partnerships with licensed banks and Native American tribes to be the front of his businesses.
In total, prosecutors concluded, Hallinan’s lending empire grossed more than $ 491 million between 2008 and 2013, the period covered by his indictment.
They are now saying that they are entitled to every penny.
Hallinan “collected hundreds of millions of dollars in illegal debt … knowing that these businesses were illegal, and while devising schemes to evade the law,” wrote Grieb and Carrillo.
But Jacobs maintains that the government deliberately misinterpreted the workings of Hallinan’s business confiscation and racketeering laws. While he does not dispute the gross income generated by his client’s businesses, the attorney argues that the vast majority of that total was Hallinan’s money that was returned to him after he was loaned out.
Confiscation laws, he argued in a recent court case, allow prosecutors to seize only the financial gains that a convicted racketeer has made through criminal acts – a figure which, in the case of Hallinan, Jacobs is valued at just under $ 69 million.
When legitimate business expenses such as advertising, promotion, and lead generation are factored in, Hallinan’s profit was closer to $ 9.5 million, Jacobs wrote. Further, he argued, the government did not consider that many of the loans issued by Hallinan were entirely legitimate and made to borrowers in states without the usury laws that prosecutors used to condemn.
“The central question before the court is whether the direct expenses are properly deductible for the purposes of calculating the (criminal) proceeds,” Jacobs wrote, “or whether the court should adopt the government figure … without considering any expense. . “
Yet the $ 491 million the government wants to raise from Hallinan is not even close to the highest sum that Justice Department attorneys seek to confiscate in other cases against payday lenders. The accolade is part of the $ 2 billion New York prosecutors hope to secure from Scott Tucker, a professional racing car driver and former Hallinan business partner, convicted in October on a similar racketeering indictment.
Others convicted of payday loan cases face substantial potential penalties. Jenkintown lender Adrian Rubin, a former Hallinan partner who pleaded guilty to racketeering charges in Philadelphia in 2015, faces potential forfeiture of $ 7.5 million. Prosecutors are hoping to take $ 161 million from Richard Moseley Sr., a convicted Manhattan lender.
And Hallinan’s longtime attorney, Wheeler K. Neff – who was tried alongside him and convicted of devising many flawed legal strategies that kept Hallinan’s businesses continuing to rake in profits – faces to a potential forfeiture bill of over $ 360,000.
Like Hallinan, Neff and the other lenders could be ordered to pay additional penalties in the form of fines and court-ordered restitution to victims.
Hallinan faces a decade or more in prison at a sentencing hearing scheduled for April.