Professional race car driver Scott Tucker has pleaded not guilty in New York to charges in a payday lending scam.
Prosecutors allege that Tucker, who competes on U.S. and European racing circuits, ran a $2 billion enterprise that used phony relationships with Native American tribes to claim immunity from state enforcement actions over its lending practices. He was arrested earlier this month in Kansas City. He’s currently free on $2 million bail.
From 1997 until 2013, Tucker, 53, operated payday lending companies that gave 4.5 million Americans short-term, high-interest loans under "deceitful" circumstances, according to a federal indictment filed in New York City. Prosecutors allege Tucker and his companies charged 700% or more for loans during that time period.
Tucker allegedly earned hundreds of millions of dollars in profits, spending the money on luxury homes, cars, jewelry, a private plane and his professional racing team, Level 5 Motorsports, according to the indictment.
Prosecutors said Tucker cut secret deals with a Native American tribe to make it seem like the tribe owned his companies, thus shielding him from state lawsuits and regulators. The indictment also charged Timothy Muir, a 44-year-old lawyer who worked with Tucker's Overland Park, Kansas-based company, AMG Services Inc., which had 600 employees. Muir also pleaded not guilty.
The enterprise operated by Tucker and Muir, which included 600 employees, ran under names like Ameriloan, Cash Advance, One Click Cash, Preferred Cash Loans, United Cash Loans, U.S. FastCash, 500 FastCash, Advantage Cash Services and Star Cash Processing.
Here's how prosecutors claim it worked: Someone would borrow $500. Tucker's company would slap on a $150 finance charge. Borrowers ended up paying closer to $1,425 in fees and interest because Tucker's company structured the loan to prolong the payback. It automatically tapped into borrowers' bank accounts with every new paycheck - but usually counted payments as entirely or mostly interest.
The Federal Trade Commission sued Tucker in 2012, according to Collections & Credit Risk, and is seeking $1.32 billion from him and his deceased brother's estate. It has obtained $25.5 million in settlements with entities including AMG Services.
The defendants argued that they were exempt from FTC enforcement because of their tribe affiliation. They also claimed immunity from state legal proceedings. The FTC has stated that the connections to tribes often are tenuous. AMG is chartered under the laws of the Miami Tribe of Oklahoma.
One of the main arguments was that the FTC lacked authority to enforce the FTC Act, Truth-in-Lending Act and Electronic Fund Transfer Act against tribes and tribal businesses. U.S Magistrate Judge V. Cam Ferenbach concluded that the FTC Act "gives the FTC the authority to bring suit against Indian Tribes, arms of Indian Tribes and employees and contractors of arms of Indian Tribes,” and likewise found that the FTC had authority to bring its TILA and EFTA claims.
The FTC said AMG and its related entities were controlled by Tucker. It said Tucker, with his brother, Blaine, transferred more than $40 million collected from borrowers to racing team Level 5 Motorsports for sponsorship fees. Blaine Tucker, 48, was found dead in March 2014 at a Leawood, Kan. shopping center. An autopsy confirmed suicide was the cause of death, the Kansas CityStar reported.