Chattanooga Payday Loan King’s Syndicate Sidelined by New York Prosecutors

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Ron Beaver, chief operating officer of the wages union, has his handcuffs removed as he appears in Manhattan Supreme Court on Monday. Photo: Jefferson Siegel / New York Daily News

CRIMINAL DEFENDANTS IN THE PAY UNION

• Carey Vaughn Brown – founder of the payday empire

• Ronald Beaver – Chief Operating Officer

• Joanna Temple – legal advisor

PAY UNION DEFENDANTS

• Account benefits

• Federal ACH

• Zone 203

• Cloudswell / Terenin / Basenin

• Credit payment services

• Credit protection deposit

• Envision Management Group

• Millennium Financial Concepts

• MonCashNow.com

• PaydayMax.com

• DiscountAdvances.com

• Owl nest

• Scenic City Legal Group

• Support Seven

Source: New York Supreme Court

CHARGES AGAINST THE DEFENDANTS

• Fourth degree conspiracy, one count, a class E felony

• First degree criminal usury, 38 counts, a class C felony

Source: New York County District Attorney


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Carey Brown
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Money was only a means to an end. Former used car dealer Carey Vaughn Brown wanted to save souls, and money was the easiest way to reach the underdog of the world.

But it was how he made his money – $ 150 million in loan fees and interest in 2012 alone – that brought the payday lending king of Chattanooga to his knees and trapped two. of its closest collaborators and a dozen of its now closed. shell companies in what New York State prosecutors call a criminal conspiracy.

Brown, along with attorney Joanna Temple and COO Ron Beaver, each face 38 counts of criminal usury and one count of conspiracy for what Manhattan District Attorney Cyrus Vance has said. described as “operating practices – including exorbitant interest rates and automatic payments from borrowers’ bank accounts” which, according to the prosecutor, are “sadly typical of this industry as a whole”.

Loans made by MyCashNow.com, PayDayMax.com and DiscountAdvances.com often carried annual interest rates of 350% to 650% per annum, and sometimes over 1,000% annual rates, attracting some complaints from consumers who have alerted New York State officials. the existence of the union.

Investigators found that in 2012 alone, more than $ 500 million passed through a syndicate of more than a dozen companies that conspired to market, make and collect payday loans across the United States, while companies have knowingly violated usury laws in New York and other states. .

The crackdown on Brown’s defunct company is part of a larger battle in progress by state and federal authorities across the country to combat increasingly creative methods by payday lenders circumvent laws that restrict interest rates. Such methods include create companies on Indian reserves, remote tropical islands and even Canada, as well as inventing layers of shell societies to disguise their common ownership and functioning.

“I think the most important thing that is happening is this growing general concern about the harms of the payday loan debt trap, regardless of whether they are offered in a store or online,” said Diane Standaert, legislative advisor to the Center for Responsible Lending. .

Until prosecutors cracked down on his methods, Brown’s union regularly used the legal system to set up its own. attacks on employees who questioned Brown’s methods. Workers were regularly required to sign multiple nondisclosure, non-competition and non-denigration agreements, with severe and rigorously enforced penalties.

Brown’s legal team claimed his project was immune from state law because the conglomerate was operating on the internet and, on paper at least, from foreign shores. Those claims by Temple – which prosecutors said was now “false advice” – met warnings from New York officials, as well as cease and desist orders from other state attorneys general.

Brown, Temple and Beaver plan to challenge the New York charges. Beaver pleaded not guilty on Monday, Brown pleaded not guilty on Tuesday, and an attorney for Temple, who will be brought to trial on Thursday, called her client “a former prosecutor herself, a former judge and a well-respected member of the legal community.” .

“We believe that the advice she has given here is legally correct, fully appropriate, and does not violate New York law or any law,” said attorney Priya Chaudhry.

In fact, the “false opinion” portion of the indictment is a rather unusual legal concept, designed to suppress the defense that Brown was simply acting on the advice of his attorney, according to the defendants.

By indicting Temple and seizing what would generally be considered privileged correspondence between a lawyer and her client, prosecutors may suggest that her role was at the heart of any conspiracy and that she was much more than legal counsel.

Behind the scenes, the three defendants wrestled with whether they should obey New York laws and stop making loans well in excess of the legal maximum of 25% per year, given the risks of being at risk. taken with the powerful prosecutors who oversee the most important in the country. financial center.

According to documents obtained by New York investigators, the trio met in 2009 to “decide what to do in sensitive states,” including New York.

Temple advised Brown’s businesses to “continue to run the collections in New York with children’s gloves on and we’ll see where it goes,” although she has repeatedly worried whether prosecutors will eventually be able to. connect the dots to Brown.

She advised letting a borrower off the hook who complained to the New York State Attorney General because there was “no need to pinch anyone’s nose in a case where [we] got most of the money. “

In another instance, Temple advised others to stop having contact with a borrower because “there are currently two complaints with the New York attorney general for MyCashNow… again.”

But in the end, they did.

Brown’s business model was simple: Consumers would go to one of Brown’s websites, enter their bank account information, and with the click of a button, a small loan would be credited to their checking account. When the loan matured, usually every two weeks, Brown’s companies would automatically withdraw the required fees.

With the help of Temple and Beaver, Brown created a network of seemingly separate shell companies based in Bermuda, Canada, and elsewhere that actually functioned as a single unit to avoid state regulations and taxes.

The tangled web of relationships that linked its companies to each other, which a Times Free Press survey unveiled in 2011, has baffled state prosecutors for years.

In Tennessee, although he was told in 2011 that Brown was charging payday loan fees above the legal limit, neither the Tennessee Department of Financial Institutions nor Attorney General Bob Cooper ever took any public action to censor Brown.

Brown worked to rehabilitate his image in 2012, committing to donate $ 1 billion through its Covenant Values ​​foundation to fight teenage pregnancy, feed the homeless and care for AIDS victims. He supported the Chattanooga Area Chamber of Commerce, invested in local schools, and repaired homes in distress.

He has worked directly with major Christian charities such as Focus on the Family, Precept Ministries and the Dawson McAllister Foundation. He has appeared publicly with renowned philanthropist Hugh O. Maclellan, served on the board of trustees of Tennessee Temple University, and has personally traveled to help orphans in Africa.

Its websites were well designed, easy to use, and popular with consumers. Research by reporters found few complaints in Tennessee, and many customers expressed their displeasure when it was forced by banks under pressure from New York regulators to shut down in 2013.

Contact editor Ellis Smith at 423-757-6315 or [email protected] with advice and materials.



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